Downsizing isn’t just for those on the verge of retirement. Millennials — that is, anyone born between 1981 and 1996 — can also do it if they’re looking to simplify their life, cut costs, or simply make a change.
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If you’re a millennial who’s thinking about downsizing, weigh each decision carefully to make sure it truly reflects what you value and your lifestyle needs. Otherwise, you could end up regretting it.
Here are the top things millennials are likely to regret downsizing in 2024.
“Many millennials are looking to downsize into tiny homes as it is quite trendy,” said Becky Beach, money-saving expert and mom financial blogger. “However, this minimal space isn’t good for storage or even raising a family.”
For millennials who work from home and need a bit of extra space for their office, moving into a smaller home could also become problematic or stressful.
Moving into a smaller home could save you money on things like property taxes, maintenance, repairs and homeowners insurance. But you’re also giving up potential equity.
“You may miss potential price appreciation if you sell your home and move to a smaller or less expensive property,” said Laura Adams, an award-winning personal finance author and money expert with Finder.com. “Home equity can be a large part of many people’s net worth over time.”
“It’s easy to see a vacation as an unnecessary cost you can cut to help balance your budget. But it isn’t that simple,” said Todd Stearn, founder and CEO of The MoneyManual.
Vacations cost money, but they also have non-financial benefits. Not only can they clear a cluttered, overworked mind, but they can also boost your creativity or productivity in the workplace.
“It’s hard to quantify the benefits increased creativity could have on your career, and therefore on your bottom line,” Stearn said. “But the benefits don’t stop there. They can extend to your sleep as well as your mental and physical health in a variety of ways.”
Rather than cut back on vacations altogether, it might be better to plan your next trip to someplace cheaper or look for deals and discounts to save money.
It’s tempting to buy cheaper goods over expensive ones, but this can lead to financial regret later on.
“Millennials might part with higher-quality, durable goods in favor of cheaper, more disposable options,” said True Tamplin, founder of Finance Strategists. “This decision, while initially seeming economically sound, could lead to greater expenses over time as items need to be replaced more frequently.”
Buying disposable or easily breakable items can also lead to more waste in the environment.
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Retirement Savings Budget
Most millennials are still in their late twenties to early forties. Aside from those who plan to retire early, saving for retirement might seem like an unnecessary expense — one that’s worth “downsizing” on for the time being.
But this can quickly lead to regret when these same millennials realize how much they’re shortchanging themselves when it comes to their retirement savings.
“The power of compound interest means that even small reductions in investment contributions can result in significant shortfalls in future wealth accumulation,” Tamplin said.
In other words, the more millennials can start saving and investing now, the more that money can grow over time.
“Millennials should make sure they’re contributing at least enough to their 401(k)s to earn the maximum employer match, if one is available to them,” Stearn said. “If that’s not realistic right now, start small and work up to that. Set reminders to reevaluate your financial situation periodically so you don’t forget as your financial situation changes.”
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Car
Switching to a less expensive or eco-friendly vehicle can be a good thing, but there are certain drawbacks. This is especially true for those with larger families or a lot to pack.
“If [millennials are] used to having an SUV where they can pile in groceries, kids’ sports gear, and suitcases, they’re going to have a hard time getting used to limited cargo space in a sedan,” said Melanie Musson, a finance expert with Insurance Providers. “There are a lot of pros to downsizing a vehicle, but it might not be the right timing for millennials.”
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Insurance
“Downsizing necessary financial products, like health and disability insurance, could cost you much more in the long run than you spend on premiums,” Adams said. “Don’t make the mistake of cutting insurance meant to provide a financial safety net if you become ill or get injured.”
The same goes for car insurance and homeowners insurance. Switching from comprehensive car coverage to minimum liability coverage could backfire if you get into an accident. As for your home, if you opt out of key coverage options — like earthquake or flood insurance — and something happens, you could end up with a hefty bill later.
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Sporting and Recreational Items
For those who are more active, downsizing on certain recreational items or equipment could lead to future regret — especially if the reason is that there’s no longer enough space to store these items.
Whether it’s an ATV, a boat or sports gear, it’s best to keep them until you’re sure you won’t need or want them again. Otherwise, you could end up having to buy them anew.
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Career Opportunities
“As a financial expert and millennial, there are things I’ve regretted downsizing also, so some of this comes from experience and some is input I’ve received from other millennials,” said Naomi Strong, a financial expert with James A. Strong.
One of the biggest regrets millennials have is sacrificing career opportunities in pursuit of jobs with limited growth or lower salaries for the sake of a better work-life balance. While it’s important to have a solid work-life balance, going too far with this decision could impact their long-term financial stability and career fulfillment.
