As the festivities of the holidays fade away, and credit card bills come due, you may realize that 2016 needs to be a year of saving or dramatically reducing spending.You may have important expenses to save up for, like a wedding or new house, or you may want to buckle down and invest for your retirement.
However, many of your biggest expenses are likely fixed: rent/mortgage, transportation, utilities. Not a lot of wiggle room on those, or is there? If you’ve been paying any attention to the Tiny House movement, you might consider downsizing into a tiny house to save a significant amount of money.
I admit, there was an HGTV Tiny House marathon on TV on Christmas and, while we were watching it, my Dad said if he were younger, he’d absolutely move into a tiny house to save money. My mother disagreed, so it’s a good thing tiny houses weren’t an option back then like they are today, but the seed was planted. Think of the money you could save on housing and utility costs! What joy!
While living the tiny house lifestyle isn’t for everyone, for anyone struggling to pay fixed expenses and have anything left over for saving or “fun”, tiny houses might be an option. Here’s how living in a tiny house can help you pay off debt (or jumpstart your savings, investing plan, and more!)
1) Living in a tiny house helps to slash your mortgage or rent payments
One of the fundamental differences between people who buy tiny homes compared to “regular” homes is that tiny house people are buying property outright. The majority of the people interviewed on HGTV were buying homes that were $50,000 or less – and often significantly less than $50,000 (think $19,000!)
For many of us, that’s a sum we could probably save up over the course of several years. Even if you had to get a mortgage, think about what a $20,000 mortgage payment would be compared to a mortgage of $150,000. Your mortgage payment could be $150 a month. That’s less than you would probably pay for 99% of apartments in your city!
2) Dramatically reduce your utility bill
In Phoenix during the summer, our utility bill is usually $300+. This is likely the same for cold-weather states in the winter, which see heating bills in the hundreds of dollars. A tiny home, on the other hand, can be anywhere from 100 sq. ft. to 500 sq. ft. (with some larger than that, but it’s debatable if they’re tiny homes at that point). Think about what your utility savings could be if you went from a 1500 sq. ft. home to a 500 sq. ft. home!
In addition to reducing your utility bills, you’ll probably come up with some creative (and more affordable) ways to power your house. These include using solar electricity to power your home and heat your water tank, propane to cook, or even a composting toilet. Note: not every tiny house has to have a composting toilet, but some do, and they could save you money!
3) An affordable way to own
On average, homes cost upward of $225,000. If you’re in some of the most expensive cities, you could be priced out of the market, with homes starting at half a million – or more. “But renting is throwing away money,” you say. Whether or not you believe that to be true, there is a certain something to owning your own home. In your own home, you can paint the walls whatever color you want, remodel, or sell when you feel like it.
Sure, buying your own tiny home may not be an awesome investment. Many tiny homes are mobile, meaning you’d either have to buy land or be content to be a nomad. Even if your tiny home is in a permanent location, the market for tiny home buyers is much smaller than the average home buying-population. After all, most people won’t want to live in a tiny home with 2+ kids, and people in their 50s likely don’t want to be climbing on lofted beds every night.
However, buying a tiny home is one way to own something that’s completely yours. You can redecorate and remodel to make your tiny home completely customizable. Also, if you do decide to expand one day, there’s nothing that says your tiny home can’t be a studio or guest suite in your backyard. Or you could always sell it to the next generation – their student loan debt burden isn’t getting any easier!
4) No longer buy more “stuff”
Beyond a more affordable mortgage and cheaper utility bills, moving to a tiny home will make you dramatically change your standard of living. When your closet is no bigger than the width of a shoebox, you quickly learn what you can live without. While downsizing, host a yard sale and sell as much as you can. Everything you can’t sell can be donated or tossed, depending on its condition.
Once you’re in a tiny home, you are forced to make do with what you have and get creative. You can’t have 5 different kitchen utensils that cut avocados, hull strawberries, or get out cherry pits. You’ll have to use a knife or your mouth – just like they did in the old days. This will also save you money – no more buying $10 apple corers when you have a perfectly good knife (and hopefully a steady hand – otherwise, buy the corer).
In addition to no longer buying more clothes and kitchen appliances, you’ll downsize in furniture and gadgetry as well. Your furniture will begin doubling as a couch and a pull out bed, and any gadget that doesn’t do double duty will be sold – or never purchased in the first place.
5) Spend less on maintenance and repair
With our older home, it seems like something is always breaking. First it was the roof, then the A/C, then the washing machine. The house also needed to be repainted. It all added up!
While you’ll still likely have many of the same repair problems as bigger homes, consider maintaining a 200 sq. ft. house over a 2,000 sq. ft. house. Just imagine painting 200 sq. ft. versus 2,000 sq. ft. That tiny home will not only save you in gallons of paint, but also in time, especially if you are handy enough to do the work yourself.
With the money you save from living in a tiny home, you could undoubtedly pay off your debt – or save, invest, splurge on epic travel adventures, etc. The amount of flexibility you have with a tiny home could fill a whole other post – in fact, some people even blog about living in tiny homes!
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Personal Capital lets you see all of your accounts in one convenient place. Sign up now for free.With all of this said, I would move into a tiny house tomorrow. Beyond the savings in housing costs and utilities, I’m short (under 5’5) and don’t mind living small. My 6’+ fiance, on the other hand, loathes the idea, so I doubt we’ll ever move into a tiny house. If spouses weren’t in the equation (or if they like the tiny house movement themselves), would you ever consider trading in your house/condo/apartment for a tiny home?
I own a lot of tools, gear, and supplies for work. Which would make it difficult to downsize permanently… But there is always getting creative with multi purposing tools.
That’s true: maybe you could buy a small storage shed or rent a storage shed offsite. There are definitely some things people just can’t live without – also, you wouldn’t want to sell your tools either! Great tools are expensive and should be stored safely, so I definitely see your point there.
I can’t bring myself to move to a Tiny House but I find the lifestyle fascinating. I keep watching the shows and thinking about it.
I agree, Adam! I love the idea of living in a tiny house, but I just don’t think it’s practical Buying land isn’t what many people want, but neither is moving around to different campsites or mobile home parks either. Maybe if the idea catches on for downsizing houses, then it would work!
I would move in to a tiny home tomorrow as well. I only need one room to live/sleep in, and a kitchen. For me the kitchen would be the hardest part I love to cook, and have many,many,many gadgets for doing so (all of which have a purpose I only buy if it’s something I would use once a week). That being said my wife needs her space, she thinks the place we currently live (a 700 sq ft condo) is too small and wants to move into a house. Great idea though
I think there’s always one or 2 things we would miss if we moved into a tiny home, like gadgets, kitchen appliances, etc. It’s definitely a new mindset, but people did it 100 years ago! Maybe one day your wife will want to downsize a little, after she’s tired of the expenses from a bigger house! 🙂