This Is How You Downsize Your Home and Start Living a Better Life

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Although most Americans would probably forgo a 200 square foot tiny house, the heyday of the McMansion is fading. As many of us are learning the hard way, bigger houses are not necessarily better. Here's how to ditch your big old house and improve your life in five easy steps. (See also: How Much House Do You Really Need?)

Step 1: Envision Your New Space

What would your perfect small house look like? Think through everything you do in your house and where you do it. It might help to write it all down. Your current, bigger house might have separate rooms for each activity — an office for working, a playroom for playing with toys, a guest room for hosting family, etc. — but that's probably not going to be be possible in a smaller house. (See also: 20 Ways to Live Large in a Small Space)

Think of ways to maximize your space and ways to use one space for multiple purposes. For example:

• Work at your dining room table and keep paperwork and your computer in a nearby hutch or cabinet.

• Install a fold-out desk in your bedroom or family room to create a workspace.

• To create a space for guests, install a Murphy bed, invest in a futon or sofa bed in the family room, or buy a folding bed frame and store the mattress under another bed when it's not in use.

• Plan on a play/toy section of the family room or living room, rather than a separate playroom.

• Use room dividers to designate separate spaces within one room.

• Install rolling casters (that lock) on furniture to make it easy to move if you need to regularly rearrange the room. For example, if you install a Murphy bed in your family room you may need to slide the sofa over in order to use the bed.

Step 2: Purge

Now that you've thought through how you'll use your new house, it's time to purge. If you're downsizing from a 2,700 square foot house to a 1,400 square foot house, you're going to need to get rid of a lot of stuff. It's a daunting process, but you'll feel great when you have less junk weighing you down. Here are some quick and easy ways to get rid of your stuff — and make money in the process. (See also: 25 Ways to Simplify Your Life)

Sell It on Craigslist

Craigslist is a great place to get rid of larger items that you wouldn't want to ship, like furniture and TVs. (Tip: I wouldn't recommend listing your items for free; I've found that the people who say they'll pick up free stuff are far less reliable than those who are buying something. Even if it's only for $5, it will ensure that the person actually comes to pick it up.)

List It on eBay

eBay is perfect for selling smaller or more valuable items like jewelry, designer clothes and purses, and electronics. (See also: Should I Sell This on Craigslist or eBay?)

Consign It

Consigning is a great option for purses, jewelry, toys, and clothes — especially women's and children's. Call your local consignment shops before showing up with your goods, though, as most have strict guidelines about what they'll accept.

Donate It

If you don't want to bother with the hassle of the above options (and there is hassle involved with all of them), box up your unwanted items and call your local charity thrift store. They may even pick up your stuff for you.

If you can't part with something, put it in a box in the garage or basement. If it's there for three months, and you don't miss it (or forgot about it altogether), get rid of it.

Step 3: Know Your Limits

Odds are, any small house you find is going to need some work to make it your dream home. You may want to open up a space by taking down a wall, or divide a large room into two smaller rooms. It's important to be realistic about how much work you're willing to do or have done to make the house your own. (See also: Is DIY Home Renovating for You?)

Here are a few questions to think about before diving into to home search:

• What are your must-have features?

• How much work are you willing to do?

• Are you comfortable tearing down walls?

• Are the types of changes you want to make safe and legal?

• Will you hire a contractor or do the work yourself?

Regardless of how you answer the questions above, remember to keep an open mind when you're looking at houses. Paint colors are easy to change, fixtures are a cinch to switch out, and bathrooms can be updated. Try to stay focused on the layout and the home's potential to meet your needs.

Step 4: Find Your Perfect Small House

Now that you know what you want, it's time to start looking for that perfect smaller house. Most real estate websites allow you to search by square footage, so make sure you plug in your maximum number there. Then narrow the search down with other criteria. (See also: What First-Time Homebuyers Need to Know)

Step 5: Savor the Perks of Small House

Your smaller house and new lifestyle come with a ton of perks like:

• It's less expensive to heat in the winter and cool in the summer.

• Your property taxes are lower.

• You have more money to spend on travel, food, retirement, and other things that are important to you.

• You've reduced your environmental impact.

• You don't feel weighed down and stressed out because you have too much stuff.

• Post-purge, you're not surrounded by clutter.

• You have less house (and fewer bathrooms!) to clean.

Having a smaller house can be great for your mental health, your savings account, and the environment. Happy house hunting!

Have you downsized from a big house to a smaller one? Any surprises? Please share your experience in comments!