There is a lot of debates raging around the FIRE (Financial Independence Retire Early) movement right now. Some people hate it. Some people (including me) love it. Others just want the FI piece and drop RE on the floor. There are a few that think someone who earns any income is not technically retired. Some call it impossible. Others accomplish it in their 30s. Everyone is entitled to their opinions, but the one thing I think we all can agree on is everyone should strive to have, at a minimum, FU Money.
If you love your job or think Financial Independence is a ridiculous, impossible goal to strive for, set your sights on FU Money instead. The number varies for everyone, but I like the ChooseFI version best:
Far below the 25X we need for Financial Independence, 2-3 years of yearly expenses saved up is far easier to accomplish but comes with a stack of benefits.
FU Money: Why Everyone Needs It
I first realized the power of FU Money when I was starting to flex my money muscles at work last year (Hello work-life balance)
Currently, we have 3-4 years of FU Money saved up depending on how you calculate it. If we didn’t need to pay for daycare we are closer to 4. The only downfall is a lot of it is tied up in retirement accounts. The Roth IRAs are easy to get at without a penalty on the amount we contributed, but 401ks are not as easy and come with some big penalties if we needed to tap into them.
We have been pumping up our brokerage contributions this year. Part of the reason is I want some easily accessible cash if an opportunity arises (real estate), part to make sure we have enough penalty free cash at our fingertips if we have an emergency.
If you need some more convincing, take it from my altered AE logo. Doesn’t he look happy? We should be more like him.
That’s what happens when you have a powerful cash reserve that gives you the ability to make decisions you normally wouldn’t. Like…
Escape a Crappy Job
I can’t think of a better reason to build up a pile of FU Money than escaping a crappy situation at work. Whether you are underpaid, overworked, some combination of both or just flat out hate the work you are doing. The ability to walk is powerful.
FU Money gives you the power to stand up to your employer, and if they don’t want to bend, you can walk knowing you have time to figure out a new plan.
The ideal job search looks something like this:
- Leave on your terms
- Don’t have to take the first job you find because you need a paycheck
- Negotiation power, because you aren’t desperate
Check. Check. Aaaaaand Check.
Take Risks You Normally Wouldn’t Take
Want to start a new business?
A new career?
Buy a rental property?
Or just simply skip out on some insurance that is borderline unnecessary?
It’s hard to do that if you are 100% dependent on your job for day to day income. I have said it a 1,000 times before:
Money = Options
It is the biggest barrier between doing what you want and doing what someone else wants for the majority of the population.
Enjoy a Massive Security Blanket
Now that we are pursuing Financial Independence with kids, security has crawled its way up our priority list. I think of our FU Money as an extra large emergency fund. If we somehow both lost our jobs or had a serious medical situation we are in a position to cover both events without having to borrow.
Having 2-3 years of living expenses gives you PLENTY of time to find a new job and the freedom to do what is right for your family if there is a medical situation.
Security was one of our main drivers to improve our finances with kids in the mix. I feel like we have already achieved it, and can focus on other goals.
Take back your Time
This is where I have flexed our FU Money the hardest.
Pushing the work-life balance
When I first started my career I was hesitant to take all my PTO or be gone longer than a week.
Year 7, I was at work for a total of 6 days during September and didn’t give any thought to my employer not being happy about it. I take time off for almost every doctor appointment (including being at every checkup for both pregnancies). If we want to jet out of town early to beat traffic, we do.
As long as I am getting my shit done I don’t stress out about “being in the office.” It’s a useless metric that I choose not to care about anymore.
I would consider my employer flexible, but a lot of that flexibility comes from employees pushing the boundaries and asking for it.
Not taking work home with me
I used to always be “on”
Email on my phone and our chat app sending me alerts if someone tagged me in a room.
I have since deleted the email app and only check into work if someone literally texts/calls me. Which they only do if there is a major issue (extremely rare).
My computer still comes home with me every day, but rarely leaves my backpack until I’m back at work.
Where Should I keep my FU Money?
As I mentioned before, the bulk of our money is in 401ks or Roth IRAs but we also have a 2-3 month emergency fund in cash and a brokerage account.
- 401K ~60%
- Roth IRA ~ 27%
- Emergency Fund ~ 7%
- Brokerage Account ~ 6%
That mix works perfectly for us now and as we boost our brokerage account over the next few years I will get more comfortable with our balance.
If you are gearing up for a big FU moment and think you might need it sooner than later, you probably want to shift that percentage to more cash/brokerage so it is easier to access. If not…
Make it work for you
When you don’t need it, FU Money works for you. Only 6% of our nest egg is sitting in cash, the rest is invested for long-term gains (100% stock market allocation). While the gains are not guaranteed, historically the return is from 7-9%.
Money is power, and doubling powerful piles of it every 8-10 years is nothing short of amazing and something everyone should strive for.
Even if you love your job, I still think an FU Fund is necessary for everyone. Things can change quickly and that dream job can turn on a dime and you could find yourself laid off.
Sometimes the power is in knowing you can do it, not that you necessarily need to
Do you have FU Money? Am I overstating its power? Are there any other FU Money benefits I am missing?