Ian Bloom, CFP® covers the Future tier of the Hierarchy of Cash Flow. The Future tier is all about contributing toward your retirement or future financial independence. Future-focused cash flow enables you to make long-term financial progress, not just prepare for the now.
What’s up internet, my name’s Ian Bloom. Welcome to Nerd Finance. I’m your resident financial life planner and huge nerd. Today we are focusing on the third stage in this graphic. You see, the future stage is very, very important to the development of a financial plan. And it’s incredibly important to the hierarchy of cash flows going forward. Once you have developed stability and you can take care of those immediate needs, you will then be focused on what you can do for the future. The future is really important, because stability in the now is nice. But knowing that your future is taken care of is amazing. So the way that you start entering this stage is very, very simple. Let’s use some gaming terminology. You have got a good grasp on the mechanics, and you have decided that your one, two punch of sword and spell works really well right now. But it will not work against the end game bosses. So you start to plan out the skills that you need to purchase at each level up in order to make sure that you’re ready for the end game.
That is the future stage in a nutshell. As far as cashflow goes, it’s when you start contributing to things like 401ks and Roth IRAs. It’s when you start allocating dollars towards future use, so that future you will thank you today. And that’s really, really important. Because creating wealth doesn’t happen on accident. It is an intentional decision that has to be made once the household is safe, comfortable, and taken care of from a financial perspective. So what does this look like? Well, if you work at a traditional employer, it may look like just deciding that you need to put five or six, or seven, or eight or 10% into your 401k every month. And that after that, you can still maintain the household and keep up with your savings, right?
That will allow you to build towards a financially independent future. It may also look like something that’s a little bit more in my neck of the woods, which is sitting down with a financial planner and saying, “Hey, how much money do I need to save in order to make sure I can have this life I want at age 55 or at age 65?” Whatever the age where you want to reach that financial independence stage is. And we can give you some exact numbers on that. But the least you can do is make sure that you’re contributing something towards your retirement every single week or paycheck, or month. However you want to think about it. If you’re in a non-traditional employer, you could also just contribute to something simple like a Roth IRA. A Roth IRA can be held at any custodian.
And it stands for Individual Retirement Account. So you’re not required to have a particular employer to do that. You just have to have an income. So anyway, future focused money is money focused on the long-term. It’s money focused on the things that you know that you will need later on, like the ability to take care of yourself financially. I hope this video was helpful to you. Keep in mind that the stability and the survival stages need to come before the future stage, because if you contribute money to your future, and your now is not secure, then you may end up needing to take the money out of the future focused account just to make ends meet today anyway. So make sure to do these things in ascending order. Though, don’t put off your future contributions until you’re all perfectly financially set, or you’ll almost never start making those contributions. Thanks so much. And again, I hope this video was helpful to you. Have a wonderful day.