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Survival Tier Cash Flow

Survival Tier Cash Flow: Ian Bloom, CFP® covers the Hierarchy of Cash Flow and the Survival stage. Thinking about your cash flow in the survival tier, you should be prioritizing more income and reducing expenses so that you can afford your basic needs.

Transcript:

What's up internet? My name's Ian Bloom. Welcome to Nerd Finance. I'm your resident, financial life planner and huge nerd. In today's episode, we are going to be talking about this graphic that I just came up with. And it's going to be the subject of a couple of conversations we're going to have on this channel over the next three, four weeks. You see, this is a hierarchy of cash flow, and basically it's designed to help you think about where you are and what things you should be focusing on with your spending money. Now, what I want to emphasize is much like the Maslow's hierarchy of needs or the food pyramid, just because something is foundational and comes first like survival, it doesn't mean that you should never spend any money on extras if you're in the survival stage. But what it does mean is that most of your money, time, and energy should be focused on the thing for the stage that you are currently at.

So let's talk a little bit about that in terms that a nerd like me might think about it. The survival stage, this first stage is when you are level one. It is when you're first starting to get a handle on the games mechanics, and the things that you should be thinking about and focusing on in order to make sure your character doesn't die or put themselves in a very unfortunate untenable situation. You might be learning how to cast your first magic spells or do battle with an Orc. But in reality, what this looks like is maybe you're graduating from college, or maybe you've been out of college for a while, but finances were pretty hard for you. And so you're starting to figure out that your income needs to be greater than your expenses in order for you to ascend to the next stage, which is stability, or maybe you've been here for a while.

In fact, unfortunately, a lot of Americans are back in this position due to the pandemic for the first time. You see, survival is when you're focused on keeping the roof over your head. It's when you're focused on putting food on the table or paying the bills. And essentially, the thing that gets you out of the survival state is having a consistent income that is greater than your expenses.

Now, this may mean that your income needs to rise. Like you just lost your job and you need to find a new one, or you need that new promotion, or it may mean that your expenses need to fall. And expenses falling is one of the hardest things to do because you get used to the spending and all those things. Also, even though I said earlier in the video that you don't need to not spend any money on extras during the survival stage, because sometimes spending a little bit on yourself can keep you sane and rewarded, some people tend to spend a little bit too much on extras way too early in this hierarchy.

You see, extras are those things that are advertised to you all the time. And so they're very tempting to spend money on, but for survival, you need to focus on the basics, food, water, shelter. And probably electricity and internet in this day and age, let's be honest. It's hard to work without the internet. So anyway, for the next three, four weeks, we're going to be ascending through this pyramid and talking about the rest of the stages. And I hope that this conversation is interesting to you. There's a lot to talk about here. Cashflow is something that I deal with as a financial planner all the time. So if you have questions, make sure to leave them down below or send me an email or just book an appointment on my website. Anyway, I hope this video was helpful to you. Have a wonderful day.

A Good Villain (Blog Post)

Every story wants a villain. Villains make stories feel complete, and full of excitement. It would be a lot less exciting if Luke and Darth Vader were a normal father-son duo, right? What if there was no light and dark side, just a grey side? The story would not be told the same way. The epic battles would cease to be the focus. It would become another less-interesting story of a civilization just existing.

Stories don’t just want villains. The best stories want grand villains with a striking image. In Skyrim you battle Alduin, the World-Eater. Alduin is a dragon that seeks to enslave and end the various mortal races inhabiting his world. He makes a good villain because his motives are clear. You can, and should, oppose him just by hearing him speak of his desires to dominate.

In 2020 we are facing a villain. It’s not a sentient being and it’s not striking or grand. The virus that our society faces is difficult to write about or even think about, because we cannot perceive it. That also makes it harder to research and to predict.

To illustrate this confusion, let’s look at the S&P 500’s movements over the last few months. The big drop in the market began on February 20th, 2020. Over about a month the index fell about 33%. During that period you could argue that the American people understood (or thought they understood) how the villain would affect them. The market is emotional, and this drop largely reflected the way people assumed the economy would be hit.

Sure. That makes sense. But then how do you explain the next month? From March 23rd to today (written on April 27th) we saw the market climb over 28%. We’re still not back to the highs we started with in February, but the uncertainty around how our society will actually deal with this has resulted in “business as usual.” A recovery and slow uptick is what tends to happen following drops in the market.

Losing ~50,000 Americans, and countless other global citizens, is not “business as usual.” It is certainly a major cause for concern. Losing millions of jobs, having business suspended, and having unemployment payments support a huge percentage of those folks is not “business as usual” either. But, the enemy is not visible. We have no idea how long this will last, and so we return to a sense of normalcy pretty quickly...as long as it’s not affecting us. Humans are creatures of habit, after all.

I did not write this piece to encourage you to be normal in this moment. I wrote this piece to point out a helpful resiliency we have, but a feature of humans that ultimately does not aid us well in this case. We don’t have some big villain to fight, there’s no statue to topple, but that also doesn’t mean things should go back to “business as usual” for you yet. You should spend more time caring about some specific things.

On the financial side, care about your income and your savings, be able to weather a coming financial storm. On the personal side, care about your level of activity and your mental health. On the health side, care about your distance from others and the limited list of people you should be physically near. On the social side, you should care about each other. We need each other more than ever right now. We need to laugh, to smile, and to allow ourselves to be vulnerable sometimes.

So here’s where I share with you all my moment of vulnerability. Right as all of this started, as our invisible villain began dismantling our normal, I faced another challenge in my personal life. It was another story without a clear villain. It’s not one you will write an epic novel about, or that will be featured in a video game.

My wife and I got separated. I’ve written about Rebecca here before. She was, and still is, someone I care about very deeply. However, our invisible enemy was change. The two of us began a relationship with very aligned goals. Stay together forever, no children, build a life that is fun, exciting, and adventurous.

Change took Rebecca down a different path than me. Having a child became very important to her. I understand why, and I don’t hold it against her, but I still do not want that for myself. My big change, becoming a business owner, took its own separate toll on our relationship as well. So because of this change, there was no real resolution besides separation. She’s not the villain in this story either. We both changed. But, that did not make the separation and the eventual divorce that will follow any less painful.

So there’s my moment. There’s my villainless struggle that I needed to be vulnerable about. The good news is much like our current global crisis, the same human resiliency is pulling me back to a state of normalcy. There is no good or bad with this habitual behavior, it just is.

Even though my situation may seem dramatic and sweeping, that does not detract from the struggles that I know many of you are going through right now. So whether your struggle makes for a good story and has a clearly-defined villain with horns and pointy teeth or your struggle is more emotional or mental, please make sure to share it.

It helps. It really does. Thank you for reading and please, stay safe and healthy.

Animal Crossing and Mindset

Ian talks about the coronavirus and how it presents an unprecedented challenge for our mindset. Tips for getting through this alright include patient progress, relaxing music, and social interaction.

Transcript:

What's up, Internet? My name's IanBbloom. Welcome to Nerd Finance. I'm your resident financial life planner and huge nerd. In today's episode, we are going to be wrapping up our three-part Animal Crossing series by talking a little bit about something that I think is especially important during this time of social distancing and the Coronavirus, and that is simply mindset. Animal Crossing does something for a gamer's mindset that almost no other game does, which is that it puts you in a state of patient progress and total ease. I want to talk about a couple of things that you can do in your life that you can pull out of Animal Crossing that will give you the ability to maybe get through this time a little bit easier.

Now, I want to start this off by saying that I'm not a psychologist, but I do practice a lot of mindfulness as part of life planning. The first thing that I think you can do to maybe make your life a little bit less stressful is put yourself in a mindset of patient, measured progress. Animal Crossing is all about this. There's almost no sense of urgency in the game. The loans that you take on from Tom Nook to upgrade your house have no interest rate. The trees re-spawn and refill on a three-day cycle, and so you don't necessarily have to harvest every day. There are only a certain number of certain actions that you can perform during the day. Everything is about patience and a little bit of iterative improvement in Animal Crossing.

Something else that I think is important is finding a sense of calm that can be gotten through music, mindfulness, or meditation. Animal Crossing's soundtrack is all low, happy tones. It's all calming and soothing, and whether you get your soothing feelings from music, like a lot of people do, or whether just sitting and meditating or relaxing via any other means is your particular cup of tea, I think it's important to have a ritual that puts you in the mindset of relaxation every once in a while. Animal Crossing does this very well through its music and slow, I won't call them mind-numbing, but patient tasks that it asks you to perform, like harvesting from your trees or chopping down wood, things that take very little physical effort in relation to your physical body, but are attentive in the game and allow you to focus on something different outside yourself.

The last thing that I think is important is Animal Crossing promotes social interaction. Social interaction is extra important during a time where you're stuck in your home, and that doesn't mean that I'm telling you to go outside and go to the local pub or brewery and spend time there. They won't even let you in. But what I am telling you to do is find ways to interact with your friends in a new manner. You see, Animal Crossing asks you to go to other players' islands to get the different types of fruit that you need. It asks you to go there to sell your turnips at higher prices. It asks you to go there simply to interact with other players and see what their Island is all about, because one of the biggest parts of Animal Crossing is the creativity and customization that you have. So, I think that that is a good lesson that you could take away from it. This is a trying time, and other people will help you get through it.

So, anyway, wrapping up the three things that I think are really important is to adopt a mindset of slow, patient progress. Don't beat yourself up over things that you thought you might get done that day, but maybe didn't have the energy for it. Just try to do them the next day. The next thing is that I think you need to find a ritual that puts yourself in a place of calming and soothing mindsets, whether that's music, meditation, yoga, exercise. Whatever does it for you, I think that's important. Then the third thing is make sure that you find yourself some social interaction every now and again. Animal Crossing does that on purpose, because it knows that games are more fun with other people, but turns out everything in life is more fun with the involvement of other people at the level that you desire. Keep in mind, I understand that introverts exist. If you don't want to see tons of other people, just find one friend or family member that you can check in with every day. Anyway, I hope that this video was helpful to you, and that's the end of our series on Animal Crossing. Thank you so much for watching, and have a wonderful day.

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