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Carla Fried: $38 billion yearly on self-storage — better spent on retirement savings?

Carla Fried, Rate.com on

Published in Home and Consumer News

You likely have noticed in your town, or driving through its outskirts, that self-storage is an increasingly popular business.

There are an estimated 45,000 storage facilities across the country, and new construction has tripled in the past five years. There is now an estimated 6.5 square feet of self-storage space for every person in America. Households, not companies, account for 80% of industry revenue of $38 billion a year.

What is marketed as affordable convenience comes at a high cost, and masks an oddly American appetite for stuff. It is estimated that 90% of the global storage facilities are in the U.S.

The average monthly cost is about $1 per square foot, but in many urban areas it stretches to about $1.50 or more per square foot, especially if you want to guard against flood damage by having a unit above ground level. That works out to at least $150 a month for a popular 10-by-10 unit. If your homeowner's or renter's insurance policy doesn't cover your self-storage unit -- most don't -- you'll likely need to pony up another $10 a month for a low level of coverage. That works out to nearly $2,000 a year to store stuff.

You don't need to spend more than 10 minutes watching A&E's "Storage Wars" -- now in its 12th season -- to know that, more often than not, people are not storing truly valuable possessions or anything of sentimental value. That suggests the $2,000 (or more) could be better used. Save $10,000 over five years and then invest it for another 25 and you will have nearly $35,000 for retirement, assuming a 5% annualized return.

And it's not as if the majority of storage space renters are cramped-dwelling city residents. An industry survey a few years ago found that two-thirds of storage units were for homeowners, many who also had a garage. Nor are those homes increasingly crowded. The average household size has not budged for decades, but newly constructed homes are a lot bigger. The median size in 1980 was less than 1,600 square feet. Today it's pushing 2,400 square feet. Yet even with 800 extra square feet for new homeowners, self-storage is a growth industry.

Whether you currently have a self-storage unit (or two or three), or are on the verge of getting one, there is a financial and emotional upside to making the decision to purge instead. Consider:

--When was the last time you used this stuff? Months? Years? Can't remember? C'mon. It's one thing to hold on to a $10 monthly subscription to Spotify, Apple News or whatever subscription you really don't get value out of, but paying $150 or more a month to store stuff you don't use is a budget drain for no good reason. If you're contemplating "decluttering" by just moving stuff to a storage unit, ask yourself, why? Because you will use it next month or next year, or you are sure this is an heirloom that will appreciate (more on this in a sec)? Or because it's easier to store it than make a decision to sell, gift or donate? Treat yourself to the financial and psychological upside of letting go.

--Holding on to stuff for when your kids have a place of their own? You might want to ask them. Their tastes aren't necessarily yours.

 

--Feeling sentimental? Understood. A popular exercise in purging circles is to winnow down your sentimental keepsakes. One piece of furniture, rather than five. A favorite piece of art, not the seven you no longer have the wall space for after downsizing.

--What about gifting and donations? Let family and friends know what you are ready to let go of. If it finds a new home with someone you know, that's a win-win. And there will also be an appreciative recipient awaiting what you decide to donate.

--Why not cash in? Rather than spend cash on self-storage, consider selling everything you don't need. You can go old school and try a garage sale, or go digital: eBay, Craigslist and your local NextDoor network make selling stuff easier than ever.

--Stuck? You don't have to be an outright hoarder to find purging difficult. A decluttering coach might give you practical advice and emotional support to let go. You can find local help at the website of the National Association of Productivity & Organizing Professionals.

For more financial news, go toRate.com/research/news.

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