Are you one of the consumers living from paycheck to paycheck? Do you feel like you are working harder just so you can pay your bills? You can help improve your personal finances by living in a smaller house. There are two determining scenarios that will help you make your decision.

Too much space
Your home’s square footage may simply be more than you need. As Americans, we often equate the size of our homes with our affluence. But if you have areas in your house you seldom use, you are nonetheless incurring unnecessary expense by paying utilities and taxes for that unused space. In a fragile economy when every dollar can make a difference, it may be time to shed that space and realize the cost savings each week.

Too much stuff
To the other extreme, your current home may be jammed with unneeded and unnecessary clutter. In fact, research indicates that Americans often feel stressed because of their cluttered homes. A recent study revealed that 8 out of 10 Americans feel stressed because they feel like their house is unorganized and unclean. An additional IKEA study found that we spend an average of 55 minutes each day just looking for things we can’t easily find.

In either situation, the one constant is that we prefer to live in homes that are actually too big for our practical financial needs. Whether it’s the need to unclutter your home or simply make the most practical use of your current living space requirements, you may want to consider downsizing.

One of the most obvious benefits homeowners will realize when they decide to live in a smaller house is that sharing space encourages a closer family bond. Since the house is smaller, families tend to watch television together and bump into each other more often. Additionally, upkeep of the house becomes easier and more manageable. Additionally, families learn how to use their living area more wisely since most available spaces are being utilized.

Beyond added closeness, there are obvious financial benefits that you get from choosing to live in a smaller house. With this move, you can also shore up your finances. Here are three benefits to thinking small:

  • Smaller mortgage payments. If you make the right decisions when buying a much smaller house, you might end up with no mortgage at all. If you feel more comfortable in a slightly smaller house so you have slightly less livable space that is okay as well. As long as you are sure that you will be using every space in the house every day and not just occasionally, then go ahead. Buy that house. More often than not, when you base the size of the house on what you really need, the mortgage should not be adversely high. Buying a house based on the amount that the mortgage lender will approve is incorrect. You have to base it on what you really need in your house.
  • Smaller utility bills. Another way that living in a smaller home saves your finances is by lowering your utility consumption. Smaller houses are easier to heat and cool.
  • Smaller space lowers purchases. Since you now have limited space in your house, you will be discouraged from buying a lot of items. Most of the time, we buy stuff that we think we need but after a few months, it ends up as junk in our house. If you live in a big house, you feel the need to fill it with furniture and home accessories. In either situation, reduced square footage will become a determining factor in your purchases.

Bonus tips:

Try a combination room in a smaller house– A sectional sofa that folds out into a bed, and a desk with a chair can give you a combined bedroom, den, and office.  Stream TV shows and movies onto a large computer monitor (they’e dirt cheap nowadays), and you won’t even need a television in the room.

Plan for the future: If you are going to live in your home to a ripe old age, be sure there is a bathroom on the first floor and easy access into the house.  Whether your joints ache or you are recovering from surgery, you will appreciate not struggling to climb the stairs all the time.

Thinking small can benefit both your family as well as your wallet.