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Thursday, October 2, 2014

FI=FU?

Posted by Tim Stobbs on May 30, 2012

I’ve occasionally come across people that refer to financial independence (FI) as ‘fuck you‘  (FU) money.  While if you hate your boss that might sound appealing, in my case I won’t bother…I like my boss.  Yet that did get me thinking, what are the benefits of going for financial independence before you ever get there. In my short journey, this is what I’ve learned.

  1. Open Your Month Money – Imagine for a moment that you had a 7 year worth of income emergency fund, do you think you would speak up more at work?  Well hell yes, that is exactly what happens with me.  I’m still respectful of others, but I always speak my mind now.  Why?  What’s the worst thing that can happen?  I get fired and I’ve got seven years of cash before I need to have another job.  The reduces my stress about speaking up hugely.
  2. I Can Walk Away Money – In negotiations the one party that can walk away from the deal holds most of the cards.  Which is why I was always schooled to never fall in love with a particular house, I can walk away from the deal.  Now could you do that with a job offer?  If you have lots of bills to pay, likely not.  Yet if you are on your way to FI, then you can start playing a little more aggressive negotiations. Ask for a raise before you start? Sure.  An extra week of vacation? Why not.  What can they do? Say no.  Then you can decide if you still want that job with out the extras.
  3. Can Earn Less Money – Could you handle a 20% pay cut if you were told you would lose your job otherwise?  How about 50%? I could handle either if I wanted to, since my expenses are much lower than my income. In fact, for three different jobs now I’ve chosen to earn less money than I could make.  Why? In some cases, what I wanted out of the job wasn’t money related.  One job I picked because of the geographic location (I wanted to move closer to my extended family), another I wanted the free time to pursue a personal interest and the last one I picked because I really wanted to work for a particular person.
  4. Stress Free Money – People are somewhat surprised when I tell them I never worry about money, but it is true.  I like to talk about money, think about where to invest it, run projections on when I will be FI, but I never worry about it. How? My bills will be paid regardless of if I get up and go to work this morning because of my savings.  If I get hit by a bus, my family will be fine (financially speaking) without me. I know exactly where my mortgage payment could come from if my paycheck was late a week.  Do you?
  5. Take the Extra Risk Money - Starting a small business can be a gut twisting exercise because of the risks involved.  In most cases the worries tend to focus around getting the startup cash and being able to afford to put in some time to get the business off the ground while you don’t take any profit.  With a large pile of savings, neither issue is a problem anymore.  You can take a unpaid leave from your work if you need to, you can finance the business startup costs if you want.  In summary, you can take more risk in other areas of your life since you have a financial buffer.

So what you have you learned on the your trip to FI?  Does FI = FU for you?

Comments

13 Responses to “FI=FU?”
  1. Jon_snow says:

    Tim, just had another look at your latest net worth update – I’m not seeing a 7 year cash emergency fund… Have I misunderstood your post somehow?

  2. Tim Stobbs says:

    @Jon_snow,

    Sorry about that, I did a rough calculation if I sold off all non-lock in accounts, less my current mortgage balance and my wife kept her business going we could in theory go seven years without me earning a dime. Not that is a particularly ideal thing to do, but it is a nice to know number.

    Tim

  3. Julia says:

    Financial independence is a big goal, and I think the emotional equivalent for many people is the ability to say FU to a crummy boss. At some level financial goals are tied to emotional goals, for me it’s about having options and opening doors, for others it’s about early retirement. Everything you’ve listed is a great emotional benefit of working towards FI.

  4. deegee says:

    Nice topic, Tim.

    One added benefit of having FU money is when you can combine it with the leverage of being needed at your company. Together, that makes for a potent weapon when negotiating for things your boss has control over (as opposed to, say, inflexible corporate policy).

    This happened twice to me as my path towards FI began to take shape. The first time was when I asked to switch to working part-time instead of full-time. It happened at a time when my company could not really afford to lose me. Then again, how often do people go into their boss’s offices and ask to be paid LESS?

    Just to show that was no fluke, I did it again 6 years later when I asked to have my work hours reduced even further. This was when my ER plans were really taking shape and I had begun picking a resignation date (about 18 months later). And again, I was working on a key project that they could not easily replace me with someone else midstream. Must have baffled my boss to no end to have someone come to him twice in 7 years and ask to be paid LESS. But I needed to reduce that awful commute (FU Commute?) in the worst way so they let me do it. And it saved my boss some money in his budget, so everyone won!

    Then again, I am sure my boss thought I would eventually quit after asking to have my pay reduced that second time. Not that I cared. :)

  5. Jacq says:

    Well, here’s the thing – nobody seems to piss you off anymore when you actually have the cash to say F-U. I’m not sure if you smell different or if it’s an attitude or what but it’s kind of freaky. It’s like going into a job interview and not really wanting the job or knowing you’d be better for them than they would be for you. They seem to really want you then no matter how much you tell them you’re not really the right person for the job.

    Having said that, a major motivator for me to initially get off my duff and start having even *some* financial independence was to want to have that F-U cash so that I would never again be in the position of thinking I had to put up with BS because I needed the money. Maybe for some people the threshold is different, but for me, it was having about $100k saved. That’s when I knew I was really safe and could just walk at a moment’s notice. I’ve only exercised that option once though and it was over something really quite silly in hindsight. It felt good though. ;-)
    I think it must be equivalent to how you’d feel if you were part of a double income family where your spouse made enough to support the family and just wanted you to be happy at work. I have no personal experience of this scenario, but I think it must feel kind of good.

    FWIW, I know you don’t worry, but it is slightly worrying to be thinking of whether you are making the right call on the market when you are actually depending on it giving you a decent return vs. a nice to have because you still have a job that you can choose to stick with or walk away from. Compound that by being a bit older and maybe not being able to re-enter the job market easily. Or maybe the job market just sucks. I think it’s quite common to have a bit of worry in that situation. I see quite a few people worried about these things on the early-retirement forum anyway. Some alleviate the worry by having a shit-ton of money socked away, some by making extremely conservative investment choices, some by being ultra-frugal. It’s not quite that simplistic as you get older anyway.

  6. Tim Stobbs says:

    @Jacq,

    Ha, I really do wonder if you start giving off a different smell to?!? I’ve seen a similar thing with others. With regards to the double income thing, I really haven’t felt it either…our incomes are so at the opposite ends that even if my wife keeps working it doesn’t provide a whole lot of extra income (some, but not a lot).

    Good point about the worry does change as you get older. Your ability to work starts dropping off and so your right people tend to combat the worry with tonnes of cash, conservative investments and/or being ultra frugal…hell I’ve seen cases of all three at once!

    Thanks,
    Tim

  7. Rob says:

    As part of our work up to ER, my wife’s income was never considered as usable income. Our budget was based on my pay, in case she ever lost her job. So, 2 years before I retired she did the “FU”, at her crappy job, as we had already reached “FI”. A nice bonus for both of us. I did a similar thing once I was pensionable. But I had a timeline/schedule that worked for the family, and so it did not alleviate as much work related stress as I would have hoped. Plus, I have always had this horrible “loyalty to the job”, thing going on, and it didn’t go away when I put in my request for termination.

    Now that we have achieved “ER” & “FI”, there is no job to “FU”, however, many of the same rules apply. If I wanted to take a job, I could choose something I wanted do, for what ever pay, as money would not be the reason to take the job. We don’t worry about money, well mostly, its a continuous job to monitor and maintain “FI”. And walking away is the best part, if we don’t like a deal, that is exactly what we do, freedom to wait is good, but freedom to pounce on a really good deal, is even better. Although the wife says I have to stop buying property; up to 3 now. As for the risk money, we are selling everything we own that won’t fit into our sailboat, and heading to the Carribean for as long its fun, then will do whatever we want later. That’s what true “FI” is all about. And what “ER” allows us to do.

  8. greg says:

    “Maybe for some people the threshold is different, but for me, it was having about $100k saved”

    for me it’s fully financial independence … or about $625k

    FU money is definitely my primary life goal right now, and I even put off defer some other goals on acquiring skills until my financial position is more stable (currently at $135k after 3 years from 0)

    “freedom to pounce on a really good deal, is even better”

    hell, yes!

  9. Steve says:

    FI = FU totally fits with my line of thinking.

    My wife and I are both frugal by nature and that’s helped us keep a good perspective on our wants and needs. We paid our mortgage off five years ago and are now very much on the same journey as this blog with a Free at 45 goal with the extra cash now pumping up our retirement savings.

    What’s really put it into focus though is the fact that because we now have a growing nest egg instead of mortgage debt means if needed we could walk away from a job for a good chunk of time.

    Where I’m having difficulties is in deciding how much amassed savings is enough.

    One million sounds like a great number and I know my wife and I could live off the dividends of that. I’m certain we could actually live fairly easily off half that even.

    But we also have young kids so I need to balance our desire for early retirement with the costs of children and dental bills and schooling and everything else as well.

  10. Tim Stobbs says:

    @Steve,

    I feel your pain, I’m in the same boat of trying to determine exactly how much is ‘enough’. I used to be fairly damn firm on my I need $750,000 number, but as things have moved along I wonder about how conservative do I really need to be. In some ways, my firm value is now a bit more of a range $550,000 to $750,000 which will depend on when I get to that range and how I’m feeling at that point. I’ve given up on trying to know exactly when and accepted the decision will be context based as well. I won’t know exactly where my comfort level will be until I get there.

    Tim

  11. Steve says:

    Yup – $750,000 sounds just about right to me. Spinning off $30K in dividends at a conservative 4% a year. But then what do I do if/when an unanticipated $10K emergency cost comes up? I keep thinking I want to build a bigger cushion for those what ifs but I keep reminding myself to balance that with live a little today . . .

    I worry that when I hit $500,000 and then later $750,000 that I’ll say to myself that I should work just a little more and save up just a little more . . .

  12. nancy says:

    This is an interesting conversation as I have lately really wished I could say FU to my employer!Talking it over with my husband we had to admit there was no way right now that I could afford to quit, what with the new car payment and all! That led to the conversation about how FI means the freedom to choose your life and not have it dictated by others.
    My recent experiences in my work place have really been driving that point home lately.

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