We have all heard it “sacrifice”. Not the word we want to hear but it can be a very very important one in getting out of debt or saving. So to start this adventure of building a financial foundation or another way of saying it “Debt Free”, we need to address this word very FIRST plus write down our goals!
WHY BUILD A FOUNDATION?
I am calling this a foundation because of the definition of the word. Foundation means to support a building or an idea; it’s the base layer of setting up something. The important word in the definition is support; a foundation main purpose is to support something.
Normally when I think of a foundation I think of a home. Every home has a foundation. And the foundation is one of the most important elements of building a home. Not sold on that… Well here is why a foundation deserves the highest focus and attention to detail: your entire house sits on top of it! If you skimp here or there, to save time or money, something will fail! Have you heard of stories where there is a crack in the foundation? This could resolute in watering coming into a home or the whole house shifting completely because of it. Foundations are the key!
That’s great but what does this have to do with personal finance? I want you to look at these 7 Steps as the foundation of living your dream! If you don’t place your highest focus and attention to the details (sacrifices, budget, rainy day fund, etc…), something will fail or not move at the pace you want. See the important of creating a foundation to support your dreams!
WHAT ARE YOUR DREAMS?
This is where you need to sit down and really think about what you want financially. Maybe you want to pay off your credit cards, student loans, car payment, or mortgage. Or maybe you want to save to buy a house, go on vacations, or retire! Whatever you want financially you need to decide it RIGHT NOW!
Write that goal down where you can see it, maybe in a couple of different places. Even tell your friends and family about your goals, that way you are really committing to it, plus they can help you remember!!
But I don’t want you stopping with just your goals; I want you to think about your dreams! What is your dream? Why are you even considering doing this? This is very important because you need to see the bigger picture, the finished house!
OK now that you have decided your goals & dream (your reasons) in doing all this, we can move forward in talking about sacrifices.
THAT WORD SACRIFICE
Something we ALL have to except in this adventure is that we will have to sacrifice some thing. Whether that be your time (second job), not eating out as much, getting rid of that fancy car, etc… This list could go on and on but the truth is that what I sacrifice will probably not be exactly what you sacrifice.
Everyone is going to choose different sacrifices; because we are all in different places in our life and let’s face it we live different life’s. But the big thing you need to decide is HOW BAD DO YOU WANT THAT GOAL? Is this item you are thinking of sacrificing worth it in the long run?
I have shared our one debt story and how we paid off over $40,000 in 4 years; remember this is on one income. But here’s the thing if we would have been smarter in our sacrifices or more willing, we could have paid off that amount sooner. Here are some things we were willing to sacrifice.
- Eating out (this could save you $100’s every month)
- Not going out to movies (we only watch maybe 5 a year at a movie theater).
Something we could have been better about:
- Our budget – This was mostly food. We had NO food budget for about 3 years and we were spending about $700 a month for 2 adults and a baby… (This was not eating out remember).
Now I want you to know that we are in NO way prefect, we are still in debt (a lot more because of mortgage, car, & more student loans for a MBA). But we still have our list of things we sacrifice. Plus now we are on a better budget. And again if we really wanted our end goal bad enough, we would start sacrificing more but to us they out weight the other.
If you are wondering what we are NOT willing to sacrifice yet, here you go:
- Vacations – we have to travel! It’s something we love but guess what; we still sacrifice inside of it. We go camping (instead of hotels), travel to places we can drive to (not flying), not eating out all the time when on vacation (making sandwiches). Eric and I do go on one bigger trip every year with just the two of us and we do fly there but we always save up for it all year!
- Remodeling our home – we feel this only helps us in the long run. But again we sacrifice inside this one by doing it ourselves (not a sacrifice to us!), buying things on sale, not getting the most expensive item, shopping around a lot, or reusing something.
These are our two big things we are not willing to sacrifice but did you notice something? Inside each of these, we do sacrifice something!
ALL PARTIES ONBOARD – AKA: AGREE ON IT
If you’re in this adventure with someone else (spouse or partner), you need to agree on the goals and sacrifices to move quickly. Time to admit something; in my life we have three types of debt; car, student loans, and a mortgage. We both agree that we need to pay off the car but one of us does not see the need of paying off the others quickly. For our sacrifices, we both are willing to sacrifice some things but then there are things one of is not willing to do (we both have them!). So these things are not sacrifices yet because we both don’t agree on them, meaning we will have to move slower through the steps because of it. Believe me its hard but it’s still worth building the foundation. And maybe one day both of us will be completely onboard.
So sit down together and talk about your goals & sacrifices and decide together!
This is what I want you to do before beginning STEP 2 – Create A Budget. And please take at least a week to really think about these things!
I have created a “Goal and Sacrifice” Printable for you to keep track of everything. You can download the PDF from my FREE Resource Library but you will need to be an email subscriber to access the page. Now you can use the PDF or just a plain piece of paper to do the homework.
- Write down your dream. Why are you doing this?
- Next write down what your goals inside that dream are; pay off the car, credit cards, or maybe save $$$.
- Now you need to write down the number. This number is the total amount of money you need to reach your goals. This can be scary but you need to admit it to yourself what the number is.
- Finally, start thinking about what you are willing to sacrifice. This really could be anything or something inside of something. Start becoming aware in what you are spending your money on and if you could do it differently to save you money.
- Now if you are already sacrificing, maybe it’s time to start thinking about your time (AKA: side jobs) to help you get to your goal. This process can be really hard to decide but you can do it. It will help you in the next step!
SIDE NOTE: As you go through the steps in this foundation you may find that you want to sacrifice more or change things up. That’s OK! Add to your list if you need to because it will only help you in the long run.
Just remember to get out of debt or save you will have to make sacrifices… and mine will most likely be different from yours!!! So do not compare yourself to anyone else!
OK, I HAVE MY LIST, WHAT’S NEXT?
Fantastic job, you now know your goals and what exactly you will sacrifice! Now the next two steps are probably the most critical parts to give you the best foundation, you are now ready to move to creating a budget!