BLUF: Having one years worth of expenses in accessible money can change your life. It can reduce financial stress, increase your confidence at work and provide the courage to take entrepreneurial risks.
There’s a magical thing that’s happened to myself and Mrs. MFI over the past 18 or so months. Over that period of time we’ve learned about the concept of FU money, implemented all pieces of the formula and have been able to feel the impact that it’s had on our lives. It’s had a really positive impact on our lives so I’m excited to share the formula for FU money that’s allowed us to reduce our life stress, manage uncertainty better and increase our confidence at work.
If you’ve been around the FI community you’ve probably heard about this idea but I think there’s a little more to the story than just saving a chunk of money. My goal is help you understand the formula that worked for us and give you the tools so that you can let FU money transform your world like it did ours.
Oh, side note. Hopefully it’s obvious that FU stands for f*ck you. If that bothers you and you want a family friendly version call it Freedom Unrestricted money. There’s going to be some swearing along the way via a fun video with J.L. Collins so skip that if it bothers you. Consider yourself warned!
What is FU Money?
The basic premise of FU money is very simple. FU money is having enough money to be able to get fired from your job or quit your job and be able to cover your normal life expenses until you find another gig. The “FU” part coming from the theoretical situation where your job or boss asks something of you that crosses a line. You financially could say “FU” and quit. You could also apply it in a situation where you don’t have an issue with your job but you want to give some kind of entrepreneurial activity a shot.
I will put my manager hat on and add the disclaimer that I don’t recommend telling someone FU when you quit or quitting in a disrespectful way in general. Ever. It might feel good in the moment but it’s almost impossible to repair a burned bridge when you leave a place on bad terms.
Depending on your location or industry if you burn a bridge it could have unintended consequences for many years or for life. You never know how word will get around if you go out in a blaze of glory causing it become difficult or impossible for you to get hired again. Your old company could put you on their do not hire list. Your old manager or management chain could change companies and recommend you not be hired if you applied to their new company.
The FU Money Formula
Having a heading that says “money formula” implies that there’s some math headed your way! Well, actually there’s almost no math but the formula part has more to do with the fact that to feel the impacts of FU money requires a few conditions to be met.
Knowing How Much You Need
How much money do you need to have FU money? Well, it depends. If you’ve used this article to calculate your emergency fund based on a job loss then you know how much money you need to survive until you find another job. If you want to plan for a worst case situation of quitting and therefore getting no unemployment benefits then leave out unemployment.
You need to know how much your life costs in order to know what it costs to cover that life without income. If that sounds like too much work then an easy rule of thumb is to have at least 1 year of living expenses in accessible money and you’ve got FU money. You understand what a year of expenses costs by tracking your spending.
Location, Location, Location
Here’s a key part of FU money that I didn’t get right until much later in life. You MUST have that FU money in a place that’s accessible now, not in retirement. It feels so obvious to write that I almost feel stupid doing so, but I didn’t experience any of the benefits described in the next section until the money was accessible. Not in a 401k, 403b, TSP or other account that’s harder to access until 59.5 years old.
Where should you put the money? Well, much like most of my emergency fund I keep my FU money in a brokerage account largely invested in stock index funds. It lets my money stay invested and continue to grow more aggressively. Sure, there’s the possibility of a market crash when I want to use my FU money but I look at both of these events as tail events. What’s less probable than one tail event? Two tail events overlapping in time.
You’re welcome to put your FU money other safer places like a bank account, high yield savings account (HYSA), CD or money market fund. A Roth account is also acceptable although I prefer to not touch that and let that money grow tax free. After all, you can’t just replace Roth contributions that you withdraw.
In Summary:
You generally need at least 1 years worth of living expenses in an accessible location to have FU money and start to feel it’s true benefits.
The Unexpected Benefits of FU Money
I didn’t intentionally go after accumulating FU money, it just sort of happened by accident. We starting tracking our expenses with YNAB and ran our emergency fund scenarios to know how much we needed to cope with a job loss. We then started investing in a brokerage and Roth account to have more accessible cash for the potential of early retirement.
When all those things came together and we realized that we had FU money, there were a number of other psychological benefits that we started to feel that impacted our lives in very unexpected ways. I talked with Mrs. MFI and she echoed feeling the same benefits that I’ll go through below.
Peace of Mind and Stress Reduction
As humans I think we naturally have fears of the unknown. The unknown normally associated with losing a job is how will you pay for everyday life and how long will you be without a paycheck? Not understanding how long you could survive without your job would be stressful for anymore.
Having FU money removes the fear of the unknown. You’ve run the math, you know exactly what would happen under various scenarios and you have the money to take care of your needs.
With FU money, you can sit back and confidently know “We’ll be okay”.
There’s something about knowing that you have your basic needs of life covered no matter what happens with your job that makes life and job stress just melt away. Life is uncertain and sometimes what happens with your job is out of your control. But FU money is something that you can control.
On the Job Confidence and Honesty
If you’ve ever watched office, then you know the classic scene where Peter interviews with “The Bobs.” I’ve included the clip below because it’s awesome and worth a watch even if you’ve seen it many times before.
What is different about Peter from the normal W2 worker? He has no fear about losing his job at this point in the movie. In the movie it’s because he’s hypnotized to not care and worry about his job. However, in the real world Mrs. MFI and I have found that having FU money has provided some of the same benefits.
Mrs. MFI has begun to stand up for herself when crappy co-workers treated her poorly and made for a poor working environment. FU money decreased her fear and worry about being trapped in a poor situation where she couldn’t say anything for fear of losing her job.
In my job FU money has provided me with the confidence to speak up when I see things that aren’t right but other are too scared to talk about. Even in the most ethical work situations there are plenty of people afraid to help point out a mistake to a superior out of fear. I’ll speak up with tact but that fear factor is gone for me.
I also began making decisions to fix things that were in the best interest of the company but were gray areas policy wise. Instead of asking for permission for anything uncertain I just made the decision.
FU Money: The Courage Creator
Did your grandfather take risks? I guarantee he did it from a position of f*ck you.”
J.L. Collins recreating “The Gambler”
To take a major financial risk like leaving a steady job to pursue starting a business is a scary idea. A steady paycheck is a safety net and you leave that behind for an unknown period of time to start a new business where income may be zero or inconsistent for some period of time.
FU money eliminates the risk of not being able to pay for life expenses while you don’t have income in the pursuit of a passion. In that way, FU money can provide the courage to pursue a venture that you really want to do but has risk associated with it. It could be the difference between living the life that you want and living a life of regret for not giving your idea a shot.
Action Steps:
- Tracking your spending so that you know what your life costs for one year.
- Calculate how much you need to survive a job loss. If you want to assume the worst case of quitting then don’t include unemployment insurance in the calculation.
- Start saving FU money! The key is that it’s NOT locked inside a retirement account like a 401k/403b/TSP. This could just be an extension on your emergency fund that’s stored somewhere that it will provide you growth and interest. For us, that’s both a brokerage account and a Roth account on top of some normal high yield savings accounts. Most of our FU money is invested.
- Celebrate reaching it and small milestones along the way! Knowing that you have 3 or 6 months of expenses is empowering too.
- Enjoy the glorious psychological benefits.
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