Smaller Can Be Better- Maximize Your Savings With A Small House

Hi, I’m Ariel, Michelle’s sister-in-law and editor. I’ve been editing and learning from Michelle’s blog for over two years now, and if you’ve read any of the posts I’ve written for Michelle, you know I’m conscious about my savings and spending. I have a degree in English Literature, and I make a living as an…

Michelle Schroeder-Gardner

Last Updated: May 27, 2023

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Smaller Can Be Better- Maximize Your Savings With A Small House. Small house decorating, small house organization, small house plans, under 1000 sq ft #smallhouseideas #smallhouseplansHi, I’m Ariel, Michelle’s sister-in-law and editor. I’ve been editing and learning from Michelle’s blog for over two years now, and if you’ve read any of the posts I’ve written for Michelle, you know I’m conscious about my savings and spending. I have a degree in English Literature, and I make a living as an editor, preschool teacher, and knitting instructor.

My husband and I were recently faced with the reality that we would have to find a new house and move. I’m not going to spend too much time on specifics, but it has to do with a retail development going smack dab on top of us.

We were only 19 and 20 years old when we bought our house and had very limited buying power. With what felt like nonexistent options, we fell in love the minute we walked into our little 900 sq ft. brick bungalow. It was the dreamhouse we never knew we wanted, and we were pretty certain we would never leave.

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Well, 15 years later and our family has expanded – we now have three kids, two dogs, two cats, a snake, and some fish. That probably sounds pretty chaotic for the size of our house, which was the average house size in the 1950’s, but it actually fits us really well.

Now that we are moving, we have had to start thinking about what we want in our next, and hopefully forever, home. We are now in a much better financial situation – our house is paid off, we have an established emergency fund and savings, we have excellent credit scores, and no credit card debt. Actually, a lot of those financial milestones were reached because we live in a smaller home and aren’t maxing out our income.

We’ve been looking for several months, and we did entertain the idea of buying something twice as large and maxing out our budget. Thinking about stretching out in that extra space was really, really exciting. Even though we make 900 sq ft. work, I will admit that it occasionally feels cramped.

But then, the summer came. My husband is a teacher and off for the summer, and I have several jobs that allow me to choose my schedule and work remotely. We spent most of our summer traveling or outside with friends, and it felt so good. That was the stretching out we really needed. It sort of hit us that this is the lifestyle we want, not one that is stifled by an extra large mortgage, even if it is within our budget.

Living in a smaller than average house makes some cringe. There are definitely trade-offs, but I strongly believe those trade-offs are worth it.


Find a lifestyle that works for you.

Before I go on about why we are choosing to buy another smaller than average house, I want to impress upon you something you probably already know. Buying a home is a huge financial decision, maybe the biggest one you will ever make, and it will directly impact your finances for the rest of your life.

Like I’ve already said, we had an epiphany this summer when we realized that rather than buying a home that would max out our budget, we would rather relax, travel, and save more money. We’ve also built a life in a smaller house that allows us to accommodate those luxuries. Yes, there are lots of ways to increase your income and have the kind of lifestyle I’m talking about, even if you buy an average or larger than average home. Buying a smaller house doesn’t mean we going to stop finding new ways to grow our income, it just means we are making the decision to start on more stable ground.

In addition to the immediate and obvious savings that come with a smaller home, we are choosing a lifestyle that reflects our personal values, and it’s okay if we have different ones. Some people may dream of a big, old farmhouse. Some people may want a ultra-modern condo in the city. But, if you are looking for ways to maximize your savings, downsize a little, or are just considering staying in something smaller than average, I hope our experience in a smaller home will inspire you to stay in something small or to downsize.

How to make living in a small house work and why you should try it:


Size matters.

This isn’t a post about tiny houses, and I don’t think the size of our current house actually qualifies as one. Rather, this is about living in something that is below the current, average home size.

Like I said, our 900 sq ft. home was about the average several decades ago, and in the 60+ years since our house was built, home sizes have grown exponentially. Currently, new homes average 2600 sq ft. according to the U.S. Census Bureau.

Also, looking at current home building trends, almost half of the new homes built in the U.S. had four or more bedrooms. If you consider that most families average 2-3 children (according to the Pew Research Center), this means new homes likely have one bedroom for each child, possibly extra bedrooms.

Related content: Downsizing Your Home? Here’s How I Went From A 2,000 Square Foot House To An RV


Smaller Can Be Better- Maximize Your Savings With A Small House. Small house decorating, small house organization, small house plans, under 1000 sq ft #smallhouseideas #smallhouseplans

But, what about the children?

Okay, so we have three kids in a three bedroom house, which means two of them share a bedroom. Yeah, it can be tense at times, but really, they don’t just live in their shared room.

I would never criticize someone for wanting individual bedrooms for each of their kids and maybe even an extra one for guests. But, I will tell you that having your kids share a room isn’t terrible. When you think about what a bedroom is, it’s essentially where you sleep. Sure, it is nice if it can fit all of your kid’s belongings, but that’s still possible when they’re sharing a bedroom.

Plus, and this is one of the bittersweet things about kids and their bedrooms, they aren’t going to live at home forever. The goal is to raise kids that can move out of their childhood home. As they get older, they are spending less time at home and more time in school, with friends, and in extracurriculars. This is really when their room becomes just a space to store their stuff and sleep. Now that we have a teenager, I can definitely attest to that.


More space, more stuff.

When were looking at those larger homes, my first thought was, “ohmigod we’re going to need more furniture.” One home that we seriously considered had three living room type spaces, whereas we currently have just a living room and TV room. Yes, it was exciting to imagine filling those spaces with new stuff, but then I started thinking about the cost of it all.

Having an extra room doesn’t mean you have to fill it with furniture, but it’s really hard not to. I think it’s pretty natural to use and fill the empty spaces around us, and that comes at a cost. Even if you purchase your furniture second hand, those costs add up, and eventually you will have to replace something, which can add even more financial strain.

With so many kids and pets, we have a joke in our house that we can’t have nice things, but that’s the reality when thinking about buying new furniture.


Organization, not minimalism.

We have a lot of stuff, a lot. Our house is often carpeted in Legos, I have an out of control shoe and yarn habit, and my husband collects mopeds and scooters. Having a small house doesn’t mean a minimalist lifestyle. I mean, if you adhere to that mindset, that’s awesome. But, I wouldn’t label myself one at all, clearly.

I’m not just collecting clutter as I go – I downsize as needed and consider each purchase I make. But, the real key to making a small house work, without the minimalist lifestyle, is good organizational skills. This means putting things away when you’re finished with them, making sure everything has a dedicated space, and finding creative storage solutions that work for you.

One of the best ways to make a small house work is to see what your limits are to the stuff you can have. If you don’t have space for something, don’t buy it. Or, see if there’s anything you aren’t using and get rid of it.

If you are struggling to organize your space, spend the afternoon at Ikea. I often go for inspiration on how to organize our things in a way that makes our smaller space more manageable. Bookshelves with baskets or bins is a great way to keep clutter off of the floor while still being accessible.


Savings abound in a smaller home.

As we began looking at homes, especially the larger ones, we also started considering the cost beyond the mortgage, which are the utilities. It’s pretty simple, the larger your house, the more you are going to pay to heat, cool, and provide electricity and water.

Beyond basic utilities, there are lots of other unforeseen costs of homeownership. A larger house likely has a larger roof, and there is more surface area on the outside and inside. More space means everything costs more. I know this isn’t news, but the cost of new floors, a new roof, countertops, even painting your walls is all determined by square footage. Even if you think bigger is better, it also means bigger is just going to cost more.

This could mean the difference in actually making the updates you want or need to make. It can also determine the quality of materials you are able to use. Even though I’m big on saving with a smaller house, I’m all for paying a little extra for better quality. Higher quality materials likely means you won’t have to make repairs or replace things as soon as you would with lower quality materials and workmanship.


Environmental responsibility.

It’s hard to ignore the importance of environmental stewardship. It isn’t just the news that reminds us that humans are sucking the earth of its resources – it seems like everything we buy speaks to how environmentally friendly it is.

Like I said, in a smaller home you save on utilities, and I know this is obvious, but that’s because you are using less. You can have solar panels, rain barrels, and low usage appliances, but for most homeowners, it is incredibly difficult to have a zero energy home.

And, if you have a smaller home, it costs even less to get closer to zero energy use. Just like the cost of a new roof being determined by size, the cost of making a more environmentally friendly home has a lot to do with size. Several years ago, we made some updates to our home that made it more efficient, and those updates were less costly because we had a smaller house. This meant we gained even more savings overall.


Basements don’t have to be off limits.

For homeowners with basements, this part of your home is usually thought of as the dark space below the rest of your house. It’s where you store boxes of holiday decorations, out of season clothes, etc. If you are only using your basement for storage, you are sitting on top of underutilized space.

Our basement is partially finished, with a TV room, a bedroom, studio space, a laundry room and storage area. By using it, we are actually doubling the useable square footage of our home.

There are lots of things you can do to make your basement more habitable, and one of the most obvious is refinishing. That can be a costly home improvement, but there are smaller, more affordable things you can do in the meantime, such as French drains to reroute water, adding some electrical outlets, and painting unfinished walls and floors. Area rugs or carpet squares can give it a more comfortable feel, as well as curtains.

When you are ready to make larger improvements, Pinterest is a great place to look for inspiration. There are things like recessed lighting, egress windows, and built-in bookshelves that will transform your basement from a cold storage area to a functional and comfortable living space.


Are you thinking about trying a smaller house?

If you are at all considering a smaller than average house, especially if it means downsizing, you likely have some concerns. The biggest being, how can I make everything fit?

To really get serious about finding out whether a smaller house will work for you, there are a few ways you can start. Let’s start with your living spaces. Say you have two or three shared use spaces, like a living room, TV room, and/or family room, walk through those rooms and really think about how and when you use them. Ask yourself what you aren’t using and how you can organize the spaces to combine them.

Once you realize that you could probably combine some spaces, actually begin to get rid of things and work to combine those spaces. Is that working for you? If so, you might want to really consider trying a smaller home as your next home purchase.


What’s really next for us.

I can’t say for certain that our next house will also be 900 sq ft, but I do know that finding something close to that size is a priority.

After buying your first home and living in it for awhile, you find things you have to have and others you don’t need. We’d love an extra bathroom, but we can always put one in the basement. We also need a garage, and we’d love a yard as big as our current one.

Really, thinking about buying a home means you have to consider the space and what you gain from it. For us, the savings we accrue with a smaller than average home more than makes up for square footage.

How are you using your home to its fullest potential? Would you ever consider downsizing?

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Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. Great article! People keep talking about a “home affordability crisis” and I believe it’s partly because the average new home is 2500sq. feet! If the industry started building more normal sized homes – the sizes that were common in the 60’s and 70’s – then they’d be more affordable to many people.

    But the market builds what the market demands, so the consumer is driving this madness. People have to start demanding more modest-sized homes. Only then will their value go up and the building industry will respond by building more of them.

    1. Yes, I think you are spot on with the market demands. I’ve heard from several people that these small homes just don’t exist in new building, and I believe it.

  2. Marleigh

    Love my 1500 sq ft home. Not too big. Not too small. Just right for the 2 of us and every space is used. Love my little jewel box.

    1. Aww, I love that you say jewel box– that’s exactly how I feel about ours.

  3. I certainly agree with that. It’s good to buy a small house just to say you own something vs. renting and throwing money away, and becoming a quiet “side hustle millionaire” in your “little house.” It’s better to become a [side hustle millionaire] slowly and quietly while looking and living like a regular person so you don’t give yourself away that you’re building wealth in secrecy. 🙂

    1. Haha, I never thought about it that way! I’m no where near being a millionaire, but if and when it happens, you still find me in something small.

  4. Alexis

    Aw, I love this post! Ariel needs to guest post more often! 🙂

    1. Aww, thanks! I’d love to write something for you too! Maybe something about healthy and inexpensive vegetarian or vegan foods for a family 🙂

  5. Great post. Many people max out what they can afford and are never able to save any money. They keep building bigger houses because there are higher margins on those houses.

    1. Thanks, and I see that a lot where I am!

  6. Vivianne

    I have three kids too. If not for the nanny taking up one of the bedrooms, I would say three bedrooms is definitely enough for a family of 5 with young children. Last year we moved from a 4 bedroom to a 3 bedroom because we wanted to stay in our estate and the 3 bedroom was the only house available. I was upset because I thought this would be too tight for all of us, though it’s pretty spacious with a home office and second living room upstairs. Also, no guest room for friends and family. My husband and I are very social people so the fourth bedroom came in handy. However, living in a three bedroom hasn’t been bad at all. We made it work. We are renting and plan to purchase a home next July. It would have to be 4 bedrooms because we enjoy having company, but we now realized we don’t need a big house like we always imagined and thought we should buy. This experience will probably help us save money on the mortgage we expected to pay if we decided on a 5 bedroom. This article was helpful and please checkout my blog, Ms. Tech Savvy.

    1. Anita

      Isn’t a home office a spare bedroom?

  7. Clint

    Great post! Our house was 1350 sqft when we purchased 9 years ago. We also added 2 kids and several pets during that time which required us to add another 280 sqft on the back. It was way cheaper than buying a new house. Plus, we love our home. Less to clean, lower utlities…it’s a win-win.

    1. Clint, thanks! We have thought about adding on to our house too, maybe even an outbuilding that could be used as an office. I definitely agree that adding on can be much more cost efficient than buying something else. The thing that has held us back is that we would likely be the largest house on the block– not good for resale value.

  8. You hit the spot right on the money Michelle.

    Although there are some aspects of having a large house that can be beneficial, most of the time that extra space is not utilized and brings with it much higher costs as you pointed out.

    Higher property tax, higher maintenance, higher utilities, etc it can all erode one’s finances quickly. A home can be a huge money pit so you minimize this risk by minimizing your house.

    It also is much more difficult psychologically to go from a large house to a smaller house to downsize due to finances. I have a series on my blog called The Doctor Bill, Can You Afford It? and the last submission I posted was from a couple who had a large house and wanted everything to keep it despite wanting to retire early (they still had a 900k+ mortgage and wanted to give up higher income jobs (check it out if you are interested in what our decision was 🙂 ).

  9. We are definitely thinking smaller! We JUST moved from 1,400 sq feet to 3,300 sq feet and it is an an adjustment for sure. An expensive one. The only reason we went this big is because my mom is the one who purchased the house (we went in half with her, but she’s on the loan) and it’s what she wanted. When my husband and I buy our next home for just us in a couple of years we will definitely be moving down. Not only are we spending more on the mortgage, our first electric bill was over $400 and we’ve been spending money filling it up with stuff we don’t really need (again, mostly my mom, but still). I loved how close the whole family was at all times in our smaller house. In this giant thing I’m constantly walking around yelling for my 3 year old and my husband trying to find them.

    1. Haha, yes I can totally see yelling around the house to find people! I definitely always know where mine are– it can get loud in a small house.

  10. More rooms, more furniture, more cleaning! Who wants to do that when there are more fun things to do?

  11. Hello Ariel,

    You are an amazing minimalist.

    I love the term, “Down size and save.”

    I think it gave me a kind of idea on a decision I have been trying to make lately. Thank you so much for this awesome piece.

    I want to ask, How are you living with the snake? It scares me.

    Looking forward to more posts from you.


    1. Emenike, thanks, and I hope your decision works out well!

      Well, the snake was an adjustment for me. Fortunately we have a VERY secure cage.

  12. Shanetta

    Great post. My family thinks I’m weird when I say I don’t want a big house. When I bought my first home, I was excited about the 3 bathrooms and big yard until I realized I had to clean them and mow it. As a single woman, the big house doesn’t make sense for me. I am a big believer in not being burdened with too much house – either in size or price. Do what’s best for your lifestyle and you won’t have any regrets later.

    1. Shanetta, thanks!

      We’ve had some sideways glances from family too. And yep, you’re right– being confident in your choices means you won’t have any regrets.

  13. CJ

    This all depends where your house is located. 900 square feet is considered a mansion in Manhattan.

    1. Haha, yes! My cousin is in NYC and has talked about this before.

  14. Great article! We’re raising 8 kids in a 4 bedroom house. 3 are married now and 2 are mostly in dorms. But sharing rooms with sibs is how my kids build relationships and thoughtfulness toward others. They learn to step aside and take the focus off of “me.”
    Does it always work? No. None of us are perfect. But they’re learning life skills.
    And we keep our spending contained by living in a smaller house.

    Well done for living your values.

  15. Hi Ariel, this was a wonderful post! I think you’ve made the case for living in a smaller house 🙂

    I love especially the point you made about a bigger house having higher costs. I understand that this isn’t news, but somehow a lot of people that I know don’t understand this concept. People only seem to look at the price of the house, completely ignoring the fact that there will be higher interest costs (when you take out the mortgage), higher property tax, higher utility bills and higher maintenance costs!

    I used to be one of these people. My girlfriend and I very nearly dropped a 20% down-payment on our dream apartment, which costs $800k! We were so financially inept back then. I eventually gave up this dream apartment, which I actually wrote a whole blog post about. But the gist of it is this – I’ve never regretted that decision. “Buying a home is a huge financial decision, maybe the biggest one you will ever make, and it will directly impact your finances for the rest of your life.” – Very well-said. I love this! I can’t imagine what my life would have become, had I bought that apartment.

    I would most certainly want to buy an apartment / house in the future, but I’ll definitely get a smaller than average one 🙂 And like you, I’ll try to add environmentally-friendly features to boost savings even more. Thanks for the great post and the inspiration!

    1. Liz, thanks!

      It’s SO easy to get roped into those choices when, as you put it, are “financially inept.” We’ve been those people in many situations. I think one of the biggest things that has helped us has been learning how to step back and take a second before jumping into something.

      I also love that you’re thinking about environmentally-friendly features. We’ll definitely be pursuing that in our next house too.

  16. The Curious Frugal

    Love this part: “…that was the stretching out we really needed”. My husband and I and our toddler and two cats live in an 800 SF house. It works really well for the overall lifestyle we want.

    1. Stretching out for sure! Your home is a lot of things, but when you realize it’s basically where you put your stuff it can help shape your priorities.

  17. Ariel, I think you just helped solved my housing problem. I have just been married for a year and we’re expecting a girl soon, but we still need to buy a house of our own. My husband wanted a bigger one than the one we are currently renting, but I told him it’s better to start with just the right size for the three of us. It’s not that we’re tight on budget or anything, actually, we have saved up a decent amount of money dedicated to that dream house of ours. I am just contemplating about the burgeoning finances that would come up once we live in a larger house. Like you mentioned, bigger space, more furniture, more utilities to maintain. So now, after much contemplation and after reading your article, I do believe that a smaller home is just what we need – because come to think about it – it means less expensive to purchase and less expensive to keep (insurance, taxes, electricity, Thank you so much for this!

  18. Maddie

    Love this post! My husband and I have just downsized from 1500 sq ft to 540 sq ft (1500 is considered pretty large in the UK) and we are loving it. Smaller utility bills and escaping the mortgage ball and chain is amazing.

  19. David

    It’s all a matter of perspective. Anyone who has camped, has experienced the tent bedroom. You dont do anything in the tent but sleep, and as efficiently as possible, get dressed. The rest of your day is spent outside the “bedroom”. I think we lose perspective on where we spend our time each day. I have lived, as an adult, in spaces ranging from a carpeted janitor closet, with a full bathroom, to a 1600 sq. ft. tri-level. I housed a family of 4 in that tri-level, and everyone was unfortunately able to isolate themselves in a different part of the house. Growing apart was fast becoming the norm. I now live in a small 820 sq.ft. home that in comparison to the janitor closet, is a palace. Perspective.
    I have been a curious student of the tiny house movement. I have wondered at the range of reasons people have for “going tiny”. Some are trying to be trendy, some appear to use it as some kind of lifestyle therapy, and some view it as the embodiment of the value they place on the few but very important posessions they have. There is a saying i really love. “It is not about having everything you want, but about wanting everything you have”. So many people acquire and have things they never use. If we looked upon every single thing in our lives, and only kept the things we REALLY like, and use, i believe we would have far less, and yet, consciously treasure those far fewer things much more. Square footage could be looked upon in the same way. Perspective.