Money Management

Shedding some space could pay off big time. 

It’s somewhat common for homeowners to downsize as retirement nears, or once their careers wrap up. After all, retiring often means moving over to a lower income. And downsizing can be a means of savings at a time when money might be getting tight or more limited.

Plus, by the time many people reach retirement age, their children are old enough to be able (and want) to live on their own. And if you no longer have kids living at home, then paying for a larger home may not make sense. After all, what’s the point of keeping a four-bedroom house when it’s only you and your spouse living there, and you share a single bedroom?

But you don’t have to be nearing retirement for downsizing to be a smart move. Here are a few reasons to shed some square footage — even if you’re years or decades away from exiting the workforce.

1. You want to save money

The more it costs to put a roof over your head, the less you’re apt to save. Downsizing could be a big source of savings, though. You might swap a larger monthly mortgage payment for a much smaller one. And you might end up with a considerably lower property tax bill as well. That should give you more financial freedom and make your bills easier to manage.

2. You want to do less work

The more living space you have, the more work it might create. Think about the process of cleaning your house. If it takes you three hours every week to clean four bedrooms and three bathrooms, it might only take 90 minutes to clean a two-bedroom home with one and a half baths. That’s time you can spend doing other things — catching up with friends, enjoying various hobbies, or even relaxing and getting more sleep.

3. You want to make progress on other financial goals

A larger home can cost more than a smaller one. And the money you keep spending on it might be impeding certain goals.

Let’s say you’ve fallen behind on retirement savings because you’re spending so much of your income on housing. Downsizing could free up funds for your IRA account or 401(k) plan.

Similarly, let’s say your goal is to help put your kids through college. If you downsize and shrink your housing costs, you can free up money for your children’s education fund.

It’s not just for retirees

Although retirement is often when people decide to downsize their homes, there’s no rule stating you have to wait that long to shrink the size of your living space. You may find that downsizing earlier in life brings you closer to different goals and makes your expenses and schedule easier to manage.

And remember, downsizing might give you access to certain amenities you don’t have in your current home. If you move from a detached house to a townhouse or condo, you might get to benefit from an on-site swimming pool, gym, and tennis court, to name just a few potential perks. So don’t assume that downsizing will mean settling for a lesser quality of life.

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If you’re thinking about changing your car insurance coverage, read this first. 

With certain types of insurance, making changes to a policy isn’t necessarily easy — or even possible. Health insurance is one of those types. In most cases, it’s possible to switch insurance carriers only during open enrollment, unless a qualifying life event happens such as a change of jobs or a loss of coverage due to moving.

Life insurance can also be difficult to change, since adding more coverage or switching insurers could mean going through medical underwriting again.

Because of these restrictions, drivers may wonder whether it’s possible to change car insurance coverage freely throughout the year — or whether there are some limitations to be aware of before modifying coverage.

Here’s what drivers need to know about changing car insurance

The great thing about car insurance is it’s typically possible to make changes to coverage any time throughout the year without doing anything special. This could include:

Adding coverage, such as buying more liability protectionChanging the cars that are covered, such as when buying a new carAdding a new driver to the policy, such as when a teen starts drivingReducing the coverage that’s availableChanging the deductible on the policy, which is the amount to pay out of pocket for a claim that’s covered before the insurer pays the rest of the billsChanging auto insurance companies to a different carrier

Making a change can result in premiums going up or down, though. For example, many drivers opt to shop around periodically to see if a different insurer offers similar coverage at a more affordable price. Changing insurance carriers after getting a better quote could result in insurance costs dropping. On the other hand, adding a teen driver could send premiums skyrocketing.

It’s also important to know there are a few limits on coverage changes. For one thing, it’s not possible to buy coverage after an accident or covered incident and have it kick in to cover the loss. For example, if a driver’s windshield is damaged, the driver can’t add on glass coverage and expect it to pay for the pre-existing incident. Likewise, a driver without collision coverage couldn’t add it after a crash has already happened.

Drivers also shouldn’t drop their coverage below the required minimum amount of protection available. Most states set a minimum amount of liability coverage, for example, and motorists need to maintain that or they could face legal trouble for not having the required protections in place. And in states where Personal Injury Protection coverage is mandated, drivers need to carry that coverage as well.

How to make a change to auto insurance coverage

Any driver who wants to make an allowable change to their coverage can do so easily. It’s a simple matter of calling the insurance company or calling the insurance agent if the policy was purchased through an agent.

In most cases, the change will go into effect immediately, so there’s no delay in getting the new coverage in place. Any premiums that need to be paid will also be billed by the insurer.

Because it’s pretty easy to change insurance, drivers who haven’t shopped around for coverage recently or who think they may need extra protections should look into addressing these issues ASAP so they have the auto insurance that’s right for them at all times.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Setting goals and planning are cornerstones of financial success. 

The start of a new year is the perfect time to reset and take charge of your finances. Whether you’re just starting out in your career, or have been in the game for a while, everyone needs to ask themselves three important questions regarding their finances.

Where do I want to go?Where am I now?How will I get there?

Following this checklist can help you answer these questions and make 2023 your best financial year yet.

1. Set your financial goals

Setting your financial goals answers the first question. Without first determining what your financial goals are, there will be nothing to work towards or focus on. Your financial goals help give you a sense of direction and motivation when things get tough. Take some time to write them down and post them somewhere within easy view.

You can even break them down by short term, mid term and long term. Long-term goals may be to retire at a certain age; a mid-term goal to save for a home; and a short-term goal can be to save enough for your emergency fund. Make your goals SMART (specific, measurable, achievable, relevant, time-based) and share your goals with others so they can help you be accountable.

2. Create a budget and net worth statement

This answers the second question, “Where are you now?” Like a GPS tracker, you need to know with accuracy where you currently are so you know the path to get to your goal. Creating a budget and a net worth statement isn’t as intimidating as it sounds. In fact, it’s one of the most important steps you can take when planning for your financial future.

A budget helps you keep track of your income and expenses so that you know exactly where your money is going each month. It also allows you to plan ahead and prioritize how much money you want to save each month. Your net worth statement is a list of your assets (cash, investments, property, etc.) and your liabilities (credit card debts, loans, mortgages, etc.).

Once you have a clear picture of your finances, it will be easier to make smart decisions about your spending habits and what liabilities to reduce so you can reach your financial goals.

3. Create a financial plan

Now that you know where you want to go and where you currently are financially, you can create a financial strategy and a plan to get there. Let’s say you want to retire at age 50 living off $50,000 per year (your goal). If you are currently 30 and just paid off your education, but have little savings (budget and net worth), how much do you need to save? The answer will depend on a variety of factors, but by using the 4% retirement rule and assuming a 10% annual return, you will need to save about $1,600 a month (how you will get there) to reach your goal. Can’t afford that? Then you may have to adjust your goals. This is why knowing your budget and net worth is so important!

Saving money should be at the top of everyone’s list when it comes to their financial future. Start by setting up an emergency fund. It’s always good to have some cash saved away for unexpected expenses or emergencies that arise. Then, work towards creating longer-term savings goals and maxing your retirement accounts. You should also consider setting aside additional funds each month specifically for large purchases like cars, vacations, or home renovations so that those items don’t become too much of a burden financially down the road.

Any financial plan will need to address paying off any debt as soon as possible. Credit cards, car payments, and other debts — these all add up quickly if they are not taken care of immediately. The sooner they are paid off, the more money you will have available each month to save. Consider consolidating any high-interest debt into one loan with a lower interest rate so that it is easier to keep track of payments and manage your overall debt levels.

As part of your financial plan don’t forget to look at your insurance coverage. Do you have enough life insurance, home insurance, and other forms of coverage? Do you need a will or estate plan for your beneficiaries? Addressing these issues is also an important aspect of your plan and will help give you greater peace of mind.

Making small changes now can lead to big results later. This checklist provides just a few simple steps anyone can take today in order to create a secure financial future for themselves. Your plan will help you track your progress towards your goals. So why wait? Start taking control of your finances now and set yourself up for success in 2023. With this checklist in hand, nothing is stopping you from achieving your financial goals this year!

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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