The first question that everyone who wants to retire early should make. It is also one of the first questions that I analyze with my clients… How much square footage (or square meters, if you’re European) do you really need?

I’ll try to answer it from a not so explored angle…

How much square footage do I need to live the good life

Most people fantasize about a huge home (and a nice car). This is in fact what trapps them into a mortgage that they need to work their entire lifes to pay off.

However, if you are asking yourself how much square footage you need, you’ve probably arrived at the conclusion that a small home is a smart decision…

So, this month I moved to my new home. My net worth is about a quarter of a million dollars, but as always, I like to look at spending money based on the amount of happiness it brings me. If having lunch out will boost my happiness on that particular day, you bet I am going to go grab that 10 buck lunch!

This follows my philosophy that you should spend your money based on the amount of happiness it will bring you. ALWAYS make that question before spending any money. “Do I really want to drink an espresso right now, or is this rather an impulse buy?” “Does having lunch out today will make me happier and more productive?” “What will make me happier? A big home and a big mortgage or financial comfort and a passive check in my mailbox?”

Think about life as a game, where characters have those fancy “happiness bars” on top of their heads. Something like this:

OK, these are what I am talking about. Imagine those next to you. You’re in the game now – you’re the main character and you’re trying to maximize your happiness. If you look to the other side, you’ll see a number, that is your money. Now go out there and try to get the best case scenario: spending as less money as possible, you want to maximize your happiness bar. Note that in this game you don’t have to impress people you don’t like. Stop now. Ask yourself. What is my perfect home now?

Chances are you’ll say you don’t need a big home because there is a sqft where your happiness levels actually start to decrease. Instead, you’ll trade a few square feet for a few (a few != many) other things, including a nice chesterfield where you can relax and a fast internet connection to read From Cents To Retirement or any other nice site out there (although you know that this is the best). You’ll probably buy plants or something that connects you to nature because we are naturally connected to nature. Or maybe you’re a city guy and nature doesn’t turn you on. Maybe an espresso machine and a shelf of books (this is sooo Ben Davis).

The bottom line is that if you ask these questions to yourself, you’ll find a reasonable limit where more sqft don’t translate into more happiness. Fortunately, downsizing has been considered more and more a weapon to early retirement. For instance, this family sold their house for £130,000 and bought a £24,000 boat, where they live permanently in. And I bet they are happier!

Have a look at the property I chose to live in (which is actually one of the units of my 6-plex), since the beginning of the month:

This unit is about 500 ft². Yes, that’s it. It has a small kitchen, a room, a living room and a small bathroom. I will live alone, so that is more than enough for me.

Would my happiness bar increase a lot if I moved to a much bigger home? Probably not. Would yours?