Everyone needs an FU fund. It’s not an emergency fund, it’s the cash flow in your net worth that will allow you to walk away from a job you hate. It will allow you to not stress about job losses, or highly stressful money situations. I first read about why you need FU Money from Jcollinsnh. When he got laid off instead of entering a financial crisis the job loss allowed him to pursue other business ventures. He was actually happier thanks to his FU Money.
I forgot who wrote this so if it was on your blog please let me know and I will credit you. I read that “FU Money is the little brother of financial independence.” Before you can become financially independent, you need to make sure your FU Money is large enough. We all have envisioned the day our boss tells us to do another tedious task or redundant report. Not only will you not do it but you can tell him/her to STFU cause you’re done! Before that day comes however FU Money can help you in other ways.
Makes you more productive at work.
In business you need to take risks to succeed. If you’re always worried about losing your job you’re not going to do what it takes to be innovative. That fear will lead to complacency, since I have been building up my FU Fund I have been a lot more confident in my work.
Reduces your stress level in your personal life.
Knowing you have FU Money to back you up in case of a job loss. You won’t have to worry if you’ll lose your income or unable to feed your family. The best part of building up FU Money is that you’re living below your means to save this money. Building a large amount of FU Money means that you’re living way below your means, which we all know is they key to building wealth.
Allows you to pursue things that will make you happy. Some endeavors will make you no money early on. (Blogging cough, cough) Your FU Money will allow you enough time to pursue your passions to build your business. Life is too short to spend endless hours working in a career you absolutely hate.
Here is what I’m doing to build my FU Money:
Maximizing 401K and Roth IRAs: My wife and I max out all retirement accounts. You have to consider retirement as part of your FU Money because it is a large component of being financially independent.
Taxable investment accounts: This is where we’re a little light. Currently we have 4 months of income in stocks, my goal is to eventually have three years of annual income invested. I will be using my tax rebates from my solar panels and investing it until the loan is due.
Primary home and rental properties: Buying a home locks your housing expenses for several decades. I agree that a house is not always an asset because of the monthly mortgage and maintenance costs. In order to afford our house we rent the bottom floor of our two story home. I also have rentals, the problem with real estate is that it takes years before you see significant cash flow.
CDs and cash: I use Ally bank for my CD and online savings account. I also have a separate business account for the rentals in case of vacancies and repairs. I don’t like having too much cash as I always am looking for something to invest in.
I haven’t done Prosper or Lending Club, I think at this point there are too many investors chasing too few good loans.
Do you have FU Money? How much FU Money do you need? What is your investment of choice for your FU Money?
I would like to thank Andrew at Livingrichcheaply, Walt at Mywealthdesire, Laurie at Frugalfarmer, Jmoney at Rockstarfinance, Mike at Wealthyturtle, Joe at Stackingbenjamins for mentioning my posts on their sites.