In the past 2 1/2 years or so I have been slowly paring down my possessions. As a result my living space has decreased from 960 ft2 to 720 ft2, and now to 670 ft2. In 4 months, I could consider downsizing again, probably to 550 ft2 or so. Less space means I can get a nicer space for the same money (though usually less), in a better location. Maybe I'd consider staying put if I had a live-in girlfriend, as there's plenty of closet space for someone else's things.
It's amazing the amount of stuff you tend to haul around with you. What do I miss that I've gotten rid of? Not a thing. I now know where everything is. It's getting increasingly easier to get at everything Cleaning is simple. A smaller space means lower utility bills (i.e. electric going from $80/mo to $35/mo). Fewer clothes (that I never wear) means less laundry to do. I still have some useless things that have sentimental value, and it'll probably take considerably more time before I consider passing those along.
Though most importantly, it leaves more money available for the things you really care about. Money is ultimately a tool, and I'd rather have it available for more worthwhile things.