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Downsizing isn’t just for retirees, empty-nesters

Downsizing isn’t just for retirees, empty-nesters

Sophie and Scott McDonald’s story about downsizing may at first glance sound familiar: the married couple were looking for some relief from the financial vise that accompanies living in Metro Vancouver, so they moved from their beloved home to a smaller townhouse.

Here’s where the tale takes a twist: while the idea of scaling down might bring to mind images of retirees or empty-nesters, the McDonalds are a young family — the two are both in their 40s and their kids are still in elementary school. But they’d had it with money-related stress and decided to make the leap sooner rather than later.

“We finally have some breathing room,” Sophie says. “It’s had a huge impact financially. Before, we would say things like, ‘We’ve got to put more money into the kids’ RESPs. We’ve got to start building our RRSPs. But it never happened. Even since we moved here [this past December], we’ve seen both of those transformed. It’s made a huge difference.”

There is no statistical data on the number of younger people who choose to pare down early, and the McDonalds may not be typical, but the financial reasoning is the same across age groups: sell and scale down to generate income and reduce expenses.

There’s no denying that living in large cities like Vancouver is tough for anyone who ever hopes to own a piece of real estate. The McDonalds could be onto something: Most people are going to downsize one day anyway; why not do it now?

Certified financial planner Effat Aboulhosn, with RBC Financial Planning in Vancouver, says downsizing well before retirement has numerous benefits. Besides slashing hefty mortgage payments, downsizing also reduces overall housing costs such as property taxes, utilities and upkeep.

Among younger people, it’s a move she’s seen primarily among those in the suburbs. People may have been initially attracted by lower housing prices but want to get back to a central location.

“There seems to be a trend with younger couples who own homes in the suburbs downsizing now rather than waiting until they retire to do so,” Aboulhosn says. “Moving back to an urban centre gives them more access to amenities perhaps not found close to a suburban home without having to jump into your car. They can save the time in commuting to work, save money, and spend more on their lifestyle needs.”

The rewards of a smaller, more manageable homestead pay off.

“The pride of ownership still exists; however, they want it without compromising their lifestyle,” she adds. “They want to have more cash available to travel, do activities with their kids as well save for retirement. This is difficult to do when 40 to 60 per cent of their income goes towards debt obligations like a mortgage.”

McDonald is quick to emphasize that the decision to move was a difficult one, and they’re still adjusting to things. They loved their former home and their neighbourhood. Their house was on a coveted cul-de-sac near the kids’ school. Her husband enjoyed taking care of the place and tending the lawn. And all four family members were close to their neighbours. They miss it terribly.

“It’s not for everyone,” Sophie says of downsizing early. “It’s had an emotional impact as well, and it has not been easy.”

The McDonalds have less space now than they did before, but their townhouse is new, meaning warranties are still in place should anything be in need of repair. They did their research and found a reliable builder and purposely bought into a complex without a pool or an elevator — two features that can substantially jack up strata owners’ fees down the road. They back onto a beautiful park and are near biking and walking trails.

Their new financial reality has also enabled them to purchase a desperately needed car to replace their old one. And they’ve recently returned from a family holiday — the first vacation they’ve had in years.

“This is a lifestyle move,” Sophie says. “It’s brought a lot of relief.”