Try this data on for size. According to the Census Bureau, the average square footage of newly-constructed, single-family homes in the U.S. increased by 56.5% from 1,660 square feet in 1973 to 2,598 square feet in 2013. Over the same period, however, the average number of people per household fell from 3.01 to 2.54. The average sales price of newly-constructed, single-family homes surged 419.2% from $62,500 in 1978 (earliest available data) to $324,500 in 2013. No wonder Americans are increasingly more worried, and doubtful, they can afford a comfortable retirement.
The Employee Benefit Research Institute this past year said upwards of 49% of workers are “not at all confident” about their retirement prospects. Just keeping the lights on in a larger-than-necessary house is a huge cost burden, not to mention the mortgage, property taxes, insurance and maintenance associated with it.
But we need a bigger house to keep all our stuff, right? Note that more stuff comes with more cost, as well. A good friend of mine just downsized at age 37, after having their 4th child, to a home that is comfortable, adequate, and less costly than their previous home. The move will allow them to eliminate debt sooner, accelerate savings, and start creating more life-experiences and memories through vacations and outings with the excess liquidity.
I’m not advocating everyone put a for-sale sign out in their front yard after reading this. Rather, in regularly evaluating your situation and plan – which alone is good financial practice – consider where your largest expenses and biggest roadblocks are to strengthening your net worth. Start there, and simply ask the question, “Why?” Maybe there are opportunities to mitigate the dollar outflow. Speak with a trusted advisor to get a second opinion and objective feedback. There’s no harm in just talking. It might just lead to an even more secure financial position for you and your family. All the while, stay diversified.
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