If you're thinking about your finances for retirement and trying to save some money, downsizing to a smaller home is a classic and effective way to cut costs.

When you're trying to spend less, you probably focus on everyday things like groceries. But, did you know that if you move to a smaller house, you can also lower your monthly expenses? Your mortgage, energy bills, and maintenance costs can all shrink when you downsize. According to Realtor.com:

““A smaller home typically means lower bills and less upkeep. Then there’s the potential windfall that comes from selling your larger home and buying something smaller.”
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— Realtor.com

If you've owned your home for a good amount of time, chances are you've got some serious cash stashed away in that home equity of yours. And guess what? You can actually use that money to help you snag a new home that suits your current lifestyle better. Here's what Daniel Hunt, CFA at Morgan Stanley, has to say about it:

““Home equity can be a significant source of wealth for retirees, often representing a large portion of their net worth. . . . Retirement planning can be complex, but your home equity shouldn’t be overlooked.”
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— Daniel Hunt, CFA at Morgan Stanley

When you're all set to tap into that equity to make your next big move, your real estate agent will be there every step of the way. They'll help you figure out the best price for selling your current house, find a new home that suits your changing needs, and make sure you understand what you can handle with today's mortgage rates.

What This Means for You

If you're considering moving to a smaller place, why not start by asking yourself these questions:

• Are the reasons I bought my house still valid, or have my needs shifted since then?

• Are you sure I need all this space, or would a smaller place work better for me?

• Sure, so what are my current housing costs, and how much should I aim to save by moving to a smaller place?

Could you schedule a meeting with a real estate agent? You can ask them, "What choices do I have in today's market?" By meeting a local agent, you can learn about the equity in your house and how it can benefit you if you decide to downsize.

Bottom Line

Looking to cut down on costs for retirement? Think about downsizing – it might be just the ticket. When you're set, how about we chat about your housing goals for this year?