What is important to you
First of all you need to decide what is important to you in your life. Figure out your priorities before downsizing. Downsizing is not only moving to a smaller house, it involves several other aspects. You need to check out what you like best in your life and what is less important.
Calculate your monthly spending
People think they know what they are doing and where they are spending money. However, when you calculate your monthly spending you will be surprised to know where your money goes. You will be amazed to see how many non important things you have purchased.
Check out your food and beverages expenses
Next you need to have a look on your food and beverages expenses. Whenever you order or eat from outside, you add up your expenses quickly. Eating in a restaurant once a week can add up expense of around $200 to $250 per month. In addition to this, if you are having coffee form Starbucks or fast food from McDonalds twice or thrice a week then you further increase your expense by $150 per month. Picking up gums, candies, snacks when you stop for gas can also increase the expense quickly. Thus you should prepare snacks and drinks before going to bed or wake up early to make your snacks in home. This will help you a lot.
Check your closet
Go through your closet and look at your shoes, clothes and accessories. You should get rid of items you do not wear any more. Donate them to charity centers or put them up in a yard sale. If you have trendy stuff which you do not wear, you can take them to a consignment store.
Check out phone and internet bills
You need to review your cell phones, cable and internet service plans. Pick up the most economical package.