What is FU Money and How Much Do I Need?

FU Money..

Isn’t it nice to be able to say f*ck this job and walk away? How much money do you really need to be able to say it?

Let’s deep dive in…

Table of Contents

What does FU money mean?

In general, FU money means that you have enough savings to cover your living expenses for a long period of time, at a minimum of one year.

This can especially be useful when you:

Have to take care of personal or family matter
Cannot deal with things like the toxic culture at work and terrible bosses
Get laid off
Want to take a mini-retirement
Wish to make a career change

You can simply walk out that door and say goodbye to your old job without worrying to pay your bills in the next 12 months or so.

But another great side-effect of having FU money is that you feel empowered. Having FU money reduces your tolerance of BS at work, which in turn encourages you to speak up and stand up for yourself.

Someone with F/U money may feel more confident to set boundaries for themselves – for instance speaking up to your boss when you get too much workload.

How much money do you need?

FU money can be quite different for everyone. It is relative to your monthly expenses and how long do you think you will be out of job.

In general, to calculate your estimated FU money, you will need to consider three things:

Your monthly expenses
How long do you plan to stop working
Unexpected expenses

Let’s say your monthly expenses are $3000 and you plan to make a transition in one year, and just to be on a safer side, you may want to add another year – so that means you will need $3000 x 12 x 2 = $72,000, plus any estimate unforeseen expenses.

Retirement funds such as 401k and traditional IRAs should not be counted into your FU money.

The reason is that you would have to pay a 10% penalty if you withdraw it before 55. It’s best to keep these retirements intact until you reach your retirement age.

Difference between Emergency Fund and FU Money?

Emergency funds are money set aside to pay unexpected expenses such as car repair, medical expenses, and unemployment. The funds keep you afloat when you need them without having to go into debt.

Emergency funds typically have 3-6 months’ worth of expenses, while FU money can cover your living expenses for a minimum of one year.

I love my career. Do I need FU money?

I think everyone will benefit from FU money.

For someone who loves their career – it may seem that you don’t ever need FU money. But the truth is (this may sound harsh, but it’s true) companies have no loyalty to any employee and everyone can be dispensable (including the CEO).

For instance, I once enjoyed working on my project and my team, but the new upper management suddenly decided to re-structure the organization.

I ended up assigned to a different team and having to report to a new project leader. Things started to go down the hill quickly, and I disliked the new project leader (a lot).

I felt that I experienced gender discrimination, but it was so subtle and I don’t know how to express it to HR. I noticed my previous manager (who had been there for 20 years) was degraded to a lower position. Even my ex-coworker was laid off because they decided to eliminate a part-time position.

In the next two companies – maybe because I am unfortunate, but I have to deal with two unqualified managers. During the interview, they seemed fine and I thought I would stick with them for a long time. But, I learned that you can’t really judge your managers until you work with them. People can turn out to be a jerk when they know they have power over you.

The moral of the story is you never know how things will turn out in the future. Nothing lasts forever. Isn’t it nice knowing that you have an option to walk away when you cannot deal with BS at work anymore?

I have my FU money now and I hate my job/dealing with my boss BS. Should I use it?

I know this is going to sound contradicting… but I’d not quit without a new job lining up (or a plan) unless you really have to.

First, employers will most likely ask about the gap in your employment history.

Second, you will still have an incoming paycheck, contribution to your 401k, and other benefits (such as HAS, employer match, health insurance, etc).

But, if you have an urgent situation (such as taking care of sick family members or your job causes you mental and physical health problems), yes – I think it’d be wise to quit.

I know it is frustrating to have to deal with your boss BS.

But knowing that you could quit anytime can help you feel empowered and more in control of the situation.

If you do quit though, I wouldn’t burn the bridges. I think It’s better to keep the reason short and simple to HR and your manager (I was so tempted to spill the beans to his manager and the HR, but I decided it’s not worth my time to elaborate on what happened 💁 ).

If you hate what you do – FU Money or FIRE may not be a permanent solution for you – I’d suggest finding a new career path.

Lots of retirees usually have some kind of hobbies or activities to fill their time. This is a good chance to find yours. In fact, people derive happiness through creativity and productivity.

While building FU money on the side is very helpful, but FU/FIRE money won’t completely solve the deeper issue.

Difference between FIRE and FU Money?

FIRE (Financial Independence, Retire Early) means you can live comfortably off of your investment and savings without having to work anymore.

While FI means you have enough in savings or investments to cover your living expenses for a shorter period of time (for instance a year – two years).

FIRE is definitely a bigger and harder goal, and FI can be seen as a mini-milestone before FIRE. The RE (Retire Early) part is optional, you can pursue your hobbies, travel, or get a part-time job.

When should I start building FU Money?

Generally, as soon as you can. But it makes more sense to start building off your FU money after paying off your high-interest debt first such as credit card debt.

How do you build some FU money?

Here are three main ways to build your savings quickly:

Cutting your expenses

Cutting your expenses is the easiest way to quickly build your savings. You can start doing it today. Some of my favorite ways to save money are:

Negotiate your phone bill or switch to a cheaper phone plan (I found lots of people use pre-paid cell phone plans which can be expensive because of the tax and fees. I helped Josh, my fiancée, to cut his bill by $80 a month / $960 a year after switching to a post-paid plan, Tello).
Cut cables and sign up for a cheap internet plan and online streaming subscription.
Wait for a few days before making a purchase. I found this is an effective method to reduce my impulse buying habit.
Cut unused subscriptions. I am guilty of this too – sometimes I have a FOMO of new piano subscriptions. After evaluating my monthly subscription usage, I actually did not use it as much as I should. Are you too? Review your credit card statement and cancel the service that you don’t use.
Budgeting for your expenses. (I plan to write more on budgeting, stay tuned!)

Here are some of my posts about savings money:

Earn more money

Before taking an additional part-time job or side-hustle, I’d recommend checking the average/median of the salary of your position. If you are in the tech industry – check this site.

In one position, I realized I was so underpaid, I discussed this with my previous boss twice – but essentially, he said no. So, I walked away, got a better offer with 25% more, and that’s when they were trying to match my salary – but it’s too late. I still walked away anyway.

If you are in the same situation – moving to a new company is not a bad idea at all.

In fact, moving around can boost your salary a lot and you may find a better package, too (I’d recommend do this moderately, moving too often can be a red flag to hiring managers).

If you stick around with the same position, you can generally expect a 3% increase.

How about taking a leadership position? If you are interested in taking more responsibilities – you can start by discussing your future career aspiration with your manager while looking at job openings at your company. Typically, it will be easier to get promoted internally than to apply for a managerial position in the new company if you don’t have a managerial experience.

Lastly, if you have additional time – it may not be a bad idea to take a part-time job such as:

Sell your service at Upwork.com and Fiverr.com
Become a DoorDash driver
Selling your art on etsy.com (good ways to practicing your art skills while making money as well)
Learn new skills such as photography, video editing (this can be a fun side hustle if you are into it), and find clients on Fiverr.com
Become a virtual bookkeeper
Become a freelance tax preparer (it is more a seasonal job)
Take care of elderly
Walking dogs
Become a part-time cleaner

Learning new things have always been my favorite things to improve myself. Check out this FREE trial on premium Skillshare classes. You’ll get 14 free days to access all classes on Skillshare.
In skillshare, you’ll get access to a bunch of classes such as programming, data science/data analysis, accounting, and many more.

Invest in Index Funds

What is Index Funds? Here is quick definition from Investopedia:

An index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the Standard & Poor’s 500 Index (S&P 500).

I know.. it sounds complicated. In plain English, it essentially contains a list of stock companies and it is designed to mimic the performance of the stock markets.

Warren Buffet, a legendary investor, has also recommended index funds. He advised the average investors to buy all S&P 500 companies at low cost rather than picking individual stocks.

Not only that it is tiring to constantly monitor individual stocks investment, but people have also studied that only 1% of active traders beat the market.

If you got other things to focus on, an index fund is a very simple, yet powerful tool to build your wealth.

But, before you invest – I think it would be wise to consider if investing is the best use for your money at this time.

These are the two things you should consider before investing:

Do you have 3-6 months of emergency funds?
Do you still have high-debt interests such as credit cards? If you have high-interest debt – it would probably make more sense to pay this off before investing your money. Once you pay off your high-interest debt and build an emergency fund – then increase your 401k contribution (make sure you take advantage of the company’s match) and open a Roth IRA.

Roth IRA

Roth IRA allows you to invest after-tax money and there are no taxes on the earnings (Yay!). If you still have some money left (good news!) – open a Roth Ira and contribute as much as you can up to $6000 per year (or $7000 if you are over 55).

The great thing about Roth IRA (it seems that many people don’t know about this) – you can withdraw your contribution (not the gains) anytime without penalty because you already paid taxes on the money.

So, Roth IRA can act as an emergency fund/FU money fund, and at the same time, you grow your money tax-free.

Here is a tutorial on how to open a Roth IRA on Vanguard. (Let me below if you want me to create a tutorial).

Personal Investment

If you still have money left – you can open a non-retirement account. Currently, I have a personal investment and Roth IRA account with Vanguard, Charles Schwab (You’ll get $100 if you put in $1000) respectively.

I mostly bought VTSAX (Vanguard’s Total Market Index Fund). If you buy VTSAX, you essentially buy a piece of the entire US stock market.

I recommend checking out Bogleheads wiki page – It is a great resource to learn investment (I still read and come back to it when reviewing my portfolio).

Conclusions

For the majority of people, FU money gives you the flexibility when you truly need it. Not only the option to walk away, but it also empowers you and gives you a sense of control at work.

Please share this post if you found this helpful! Sharing is caring 😊.

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