I was recently talking with one of my former students about their new job. As we were talking about her time at our university and her new job she was already wanting to plan her escape. Even though she had only been out of school about five years she was already tired of the grind, feeling compelled that she had to do something related to her degree, and she just felt “shackled.”
I said I could relate and that over the past year or so I had come to this revelation that I didn’t want to be shackled myself. I discussed how, even though I am 10 years into my chosen profession, I feel like I am also shackled. Not necessarily to my job because I love my job, but that I am compelled to do certain things with this job. As the conversation went on I thought about a blog post I had read on Jim Collins’s blog (for those of you who want a primer on investing and just basic information his blog is maybe the best out there. His stock series is FANTASTIC. It is a classic in the personal finance blogging world with good reason). Mr. Collins wrote about why people needed FU money.
FU money is a term that basically says you have enough money that it, in essence, works for you so that you don’t have to worry about earning anymore. In other words, if you lose your job the money you have saved and invested will work for you so that you don’t have to worry about getting another job. You can say FU to the job market, economy, etc. You have plenty of money to live on and not worry about where your next meal comes from.
As I remembered that post I came to realize that is what I want. If there is a phrase in all of this personal finance stuff that would encapsulate my philosophy at the moment it is FU money.
FU money is not the same as an emergency fund. Emergency funds run out. FU money is using the money you have saved to live your life. If you want to add to that pile of cash…great, but it is having enough money so you don’t have to worry that you will run out of money.
In my opinion, it is a little different than being financially independent. Financial independence, to me, is a calculation of how much money I need to live and how much I need to save to offset my normal spending. There are different rules of thumb, which I mentioned last week, when considering what this level of financial independence is. FU money goes just a bit beyond that. It is a bit of a cushion so that even if the market takes a downturn you can say FU to what is going on in the outside world.
How Much FU Money Do You Need?
Part of this blog is not only to convey different ideas about investing, keeping myself honest as I go through my own journey, but to also see what kind of personal finance lessons I also learn about myself. After thinking about it I realized I really want FU money. The question is how much is FU money do I need? Well, the answer for each person is different because incomes are different, spending is different, etc.
As I was doing a little research for this article I came across a formula from the website Lifehacker that offers a formula for calculating this FU money. Considering that I am writing this post really early in the morning and my batteries aren’t fully charged I haven’t done the calculations yet, but it is certainly an interesting idea.
How much money do we need beyond our basic expenses to have FU money? That is only a question you can answer.
Now I might here some grumblings from those who read this post who say I can barely keep my head above water what is this stuff about FU money? Are you crazy? I can barely pay my bills.
If that is the case then I truly do feel for you. Despite Mrs. ROB and I making an ok living we still live paycheck to paycheck because of larger debts (another post for another time). That, however, doesn’t keep me from saving and doesn’t keep me from thinking about that larger goal.
The problem with the mind-set of someone who says I can’t do it or I am living paycheck to paycheck is that they, in my opinion, are too provincial. They aren’t thinking 5-10 years ahead or even longer. I hope you aren’t living paycheck to paycheck forever. The idea is that we make more money as we get older and priorities get simpler.
Yes, I know that we also incur more expenses: kids, house, family, dog, more expensive lifestyle, etc. But you could also argue that is nothing more than lifestyle inflation. I won’t have FU money tomorrow. It is going to take a bit, perhaps 10 years or more, but I still have it as a goal. I still want to put it out there.
Getting mired down in the misery of my current debt situation doesn’t help me get out of it faster. It just makes it worse so I have to have a larger goal. I have to have some kind of aspiration. If I don’t I will go financially crazy.
So I want FU money. I would love to have it now, but it will take a bit. Later on today I am going to try to tackle that formula and see what my FU money figure is. Maybe it will be lower than I think. The point is I think about it beyond just my everyday life.
Everyone should strive for FU money. What would your total be?