What is F.U. Money?
Much like an emergency fund sitting in an account in case something out of the ordinary happens – like needing to replace an appliance in your kitchen or fixing your car so you can get to work – F.U. money is also saved up funds – but for something much more exciting… for FREEDOM!
It stands for “Freedom Unlimited” (or the easily guessed adult language version). These funds are typically saved over years – sometimes in a savings account or for longer term – in a CD at the bank or even invested in a brokerage account with a financial institution like Fidelity or Vanguard. With enough savings sitting in there you can have the ability to walk away from a job situation that involves terrible management, boring job duties, doesn’t suit you or to take a break from a career for enough time to train for another better one or maybe you just want to disappear and travel for a bit. We’ve all probably been in job situations where we said “If only I had $XX – I’d tell my boss exactly what I think and to take this job and shove it!” That’s EXACTLY what this money is for!
Of course different scenarios require a different amount of funds depending on how many months/years you plan on being paycheck-free and your risk tolerance. I consider F.U. money needing to be at least 5 years of annual expenses saved up in a very liquid – easily converted to cash – and in relatively low risk investments such as bond index funds or REITs along with funds in a savings or money market account. Of course some people want way more than that to feel comfortable. These funds also should not include the equity you have in your house or what is sitting in a retirement account like a 401k. F.U. money can also be the side income you generate outside of a W-2 job such as rental income from a roommate situation or airbnb, driving for Uber, or dividends from stocks or mutual funds you own in a brokerage account or any type of gig that you plan on continuing in the future.
Why do you need F.U. Money?
Back in the day people used to work at one or two employers their entire working careers with a union protecting them or a pension to look forward to. The vast majority of companies have done away from pensions forcing employees to save and invest on their own with the hopes of having enough along with social security to pay their bills later in life. While socking away part of your paycheck to a 401k and/or ROTH IRA is important – having a large set of funds beyond that gives you leverage to not stay in a job you don’t like, aren’t growing in, or at a location that doesn’t serve your life anymore. Maybe you want to go back to school for a different type of job/career or maybe want time off to travel while you are young or healthy enough to do so. Others need to leave their careers for a while or even permanently to take care of their or someone else’s health needs. Having enough money to pay your bills while not working a 9-5 is not a pipe dream and average people do it all the time. You also don’t need to have a high income but you do need to have a high savings rate by cutting unnecessary expenses that you won’t miss in order to make it grow fast.
Part 2 of this F.U. money series details two (very different) scenarios where I used my F.U. money to leave jobs/employers that didn’t suit my needs. It was an amazing feeling both times to take control of the situation and do what was best for my life!
