Thursday, February 16, 2017

Do Your Expenses Decrease After Downsizing?


In August last year, we downsized from a 3800 sq foot suburban house with 2 cars in the USA to an 1800 sq ft urban condo with one car in Canada.  This is supposed to be a trend for baby-boomers: urban to suburban, bigger to smaller, Trump to No-Trump, etc.

  1. But what happens to your expenses?  
  2. Do they really decrease and is it significant?  
  3. What are the sources of the savings?
Luckily, I track expenses using Quicken and we follow a budget so the answers should be easy to find.  We also have not changed our lifestyle or budget since downsizing.

The answer to 1. and 2. is yes, there are savings of about 10 to 15% overall, depending on which downsized month is compared to our previous full-size average.

The harder question to answer is number 3, what are the sources of the savings.  
  • Unfortunately, the biggest absolute saving was in a category that I call "household" and includes a lot of miscellaneous expenses: decorating items, small services, small purchases, etc.  I am not sure why our expenses dropped by 8 to 10% in this category.  Maybe we don't have the space for impulse purchases or the need for a lot of services?
  • Utilities dropped by about 10% and that makes sense.
  • Auto expenses dropped by 50%
  • Groceries went up by 15%, prices are higher at urban supermarkets
  • HOA fees went up, home repairs and services went down, for no net change
  • Entertainment expenses went up by 10%, there is more to do downtown than out in the suburbs.
But net-net, our expenses have gone down by about 10 to 15%.  So you can expect some savings but this will not radically change your lifestyle.

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