Housing is the single biggest expense for most people. Many spend more than 30% of their income on renting, and the impact may be greater if you live alone or in a major city, spending 36% to 50% of your earnings.
Unfortunately, prospects suggest that housing costs will continue to increase due to sustained low inventory and high demand. So, how is the average person supposed to afford a roof over their head? It’s not a new concept, but smaller housing is an effective strategy to reduce expenses.
The American Dream is a Big Expense
American homes are among the largest in the world, averaging 50% to 75% bigger than units in other countries. Here’s how the average American home at 2,000 to 2,400 square feet compares:
- In Denmark, homes are approximately 1,475 square feet, which is amongst the largest in Europe.
- In Japan, many live in homes that are just over 1,000 square feet.
- In the UK, new builds are around 800 to 850 square feet.
- In China, the average home is less than 650 square feet.
- In Sweden, a 452-square-foot home is typical. No wonder IKEA specializes in small space living.
Only Australians, Canadians, and New Zealanders compare with the US in having slightly larger homes. This is, in part, due to high land availability in these countries. However, the bigger component is the cultural preference for large, detached family homes.
The Hidden Costs of Extra Space
Bigger homes cost more, obviously. But what may not be so obvious are the unseen expenses of bigger spaces.
Utilities, for one, are higher. Electricity, heating, and cooling all increase with square footage. Double the size usually means double the price, but it may be even more than a 100% increase depending on your fuel type and insulation.
Maintenance costs are also higher for bigger homes. The common rule is to budget $1 per square foot annually. Also, upgrading appliances, such as an HVAC system, will cost more to supply a bigger home.
Property taxes correspond with the home’s assessed value, and bigger homes are often appraised at higher values.
Another aspect to consider is the psychological desire to fill the empty spaces. When you upgrade to a larger home, you may see half-filled rooms as bare or unsettling, so you buy more furniture and decoration. And consequently, you fill a room, and then you think you need more space. It becomes a never-ending cycle.
The Financial Freedom of Scaling Down
The general guideline is to spend less than 30% of your gross income on housing, which includes rent or mortgage, utilities, and related costs (like property taxes and maintenance fees). If you can stick to no more than 30%, then you should have money left over (about 10% to 20%) to crush debt and build savings.
Here’s what that looks like based on your annual salary:
- $25,000 = $625
- $50,000 = $1,250
- $75,000 = $1,875
- $100,000 = $2,500
Opting for a smaller space for a few years may mean paying off student, auto, or vehicle loans while your career (and income) starts to increase. Having a smaller home may also encourage less spending since you have less space for impulse items.
If you don’t have debt (lucky) and already have earnings for saving and investing, a cheaper place gives you flexibility for a different lifestyle. Instead of spending more on having a bigger home, those funds could go toward travel, dining out, and interesting hobbies.
Assessing Your True Square Footage Needs
Housing needs change with each generation. How we live is different from how our parents lived, which is different from how their parents lived. Some examples:
- Hybrid and remote work have made home offices more desirable.
- Nowadays, “living room kids,” those who play and spend most of their time in shared spaces, are the norm, even though their parents were “bedroom kids,” who stayed in their designated room.
- Long gone are the days of formal living rooms and dining rooms that no one utilized until guests came over.
- Children’s bedrooms are in flux. A couple of generations ago, it was common for siblings to share rooms, then separate bedrooms became standard, and now modern parents (especially those with young kids) are turning primary bedrooms into family sleeping rooms.
Assess how you actually use your home. Does everyone in your household need their own room or do they spend most of their time in common areas? Would an outdoor space make up for a smaller interior, particularly if you live in an area with great weather? Do you actually need a guest room, or would an air mattress work in a pinch for the one or two times a year when your in-laws visit?
Creative Smaller Living Strategies
Saving money by living in a smaller home sounds great when you’re budgeting, but how will it feel when your new place is 10%, 20%, or even 50% tinier than your last one? Here are a few tips on how to maximize your home:
- Reclaim the Vertical Space – Most people leave the top 30% of their walls completely empty. Draw the eye upward with floor-to-ceiling shelving. It makes the ceiling feel higher and provides massive storage for items you don’t use daily (like seasonal decor or extra linens). Get the TV, speakers, and even lamps off the floor and onto the walls to keep your walking paths clear.
- Invest in Transformer Furniture – Get a sturdy storage ottoman that acts as a footrest, extra seating for guests, a coffee table (with a tray on top), and a bin for blankets. If you work from home but don’t want a desk staring at you during dinner, a wall-mounted fold-down desk can vanish in seconds.
- Edit Your Visual Noise – In a small space, visual clutter creates mental claustrophobia. For every new item that enters the home, one must leave. This prevents the slow creep of belongings that eventually swallows a small room. Using similar tones for your walls, large furniture, and curtains prevents the space from feeling chopped up. Monochromatic or light-neutral schemes help boundaries disappear.
- Create Zones Without Walls – You don’t need a wall to have a separate office or bedroom. Use different area rugs to define areas. Use a bright task lamp for your workspace and warm, dimmable floor lamps for your relaxation area. Switching the lights changes the room’s purpose instantly.
By Admin –
