Life had become crazy busy for a while, but it's starting to calm down again. As things calm down, I've been able to evaluate the past few months. One of the insights I've discovered is a deeper understanding of FU Money.
JL Collins didn't coin the term, but he's where I first heard it. Just like his article, linked above, I hadn't known what FU Money was, but once he described it, it made perfect sense. It was something I was aiming for too. Or at least I thought I was.
The more I think about it though, the more I think FU Money itself is kind of bulls--t. Although I thought FU Money was my goal, I've never been able to incorporate it into my financial strategy appropriately. The first issue I have is that retirements accounts have typically been my first avenue of investing. But as the balance of my retirement accounts increased, I never felt like that would be considered part of my FU Money bucket.
If I wanted to say FU to my job and go on a self-funded sabbatical adventure to discover myself, what I want to live off of my would my retirement accounts? Not really. I wouldn't want to cash them out and take the penalty hit for withdrawing from them before retirement. Instead of funding retirement accounts, let's say I funded a non-retirement brokerage account. Would that make a difference? Doubtful. I wouldn't want to sell my wealth-generating assets to cover my monthly expenses. I wouldn't be comfortable missing out on the opportunity cost of not benefiting from compounding interest or returns. The milestone I would have to reach to feel secure is the 4% rule threshold.
But if I waited until I reached the 4% rule threshold, then I would call that retirement money, not FU Money. I imagine FU Money is when you have enough in assets and cash that for any reason, you can quit your job without worrying about the scramble of immediately finding a new income stream. Retirement could be a side effect of this short-notice quitting, but retirement is an all-or-nothing scenario. When you retire, you retire for good. If you come back out of retirement, then that means you drained your investment accounts before you were ready to retire.
Plus, retiring early is extremely hard. There are quite a few people in the FIRE community who have retired early, but to retire in your 20s or 30s usually seems to be a direct result of penny-pinching to the point of depression. Or at least a significantly decreased life satisfaction.
What's the answer then if FU Money seems like a reasonable goal but doesn't' actually fit my model? Figuring that out has inadvertently become my current focus.
Over the past three months, I've been focusing on several different side projects. The first was a commercial real estate project that I had been watching for years, but the time had finally come to execute. This particular project will kick off a healthy but not retirement-worthy monthly cashflow. The second project was starting a side business doing online selling with my wife. This project doesn't produce passive income, yet, but creates an alternative revenue stream. And the goal is to grow the revenue stream enough that we can hire employees and helpers and start working on converting it to either a leveraged income or a completely passive income. The last project(s) was a few individuals in my technology network who reached out to me for freelancing. Freelancing is something that I've always done since college graduation, but I had a year-long drought in projects. The income generated from these projects tends to be very short-lived but usually significant in size than other side-gigs. At this point in my career, I also manage other resources with these gigs and charge a markup for my resources time instead of direct billing for my time. So I consider this leveraged income.
For the past year or so, my focus was on adding to my investment account balances. However, for these projects, the entire focus has been on created alternative income streams. Income streams that pull the monthly burden away from the 9-5 income stream. These income streams started making me think about FU Income. They didn't increase my investment account balances one bit; there has been no impact on my net worth. But yet I still feel more secure now than I did just a few months ago.
So I dug deeper. My net worth is already large enough that I feel like I have preliminary FU Money. But even with that net worth, I'm not interested in cashing out any of my existing portfolios to cover my monthly expenses. So it's FU Money that is untouchable if I want to say FU.
I was trying to sort out all of this, and it finally hit me. I had discovered FU Income. Between these three new income streams, I can cover the majority of our monthly expenses. That means if I quit my job overnight, to be entirely income-to-expense neutral, I could get a minimum wage job and still maintain my current lifestyle without decreasing my assets.
Another angle I started thinking about was the golden egg-laying goose. The moral of that story was to have patience in receiving a golden egg every day. The protagonist loses patience and kills the goose hoping to extract all of the golden eggs hiding inside, only to discover there are no golden eggs inside, thus destroying their future golden egg income. In my opinion, prematurely tapping into your FU Money is equivalent to killing your goose. Except instead of impatience being the motivation, needing to eat the goose for daily sustenance is the motivation. Although it's not a selfish motivation, the outcome is the same. With the purpose of FU Income instead of FU Money, I equate that to pursuing more geese instead of pursuing more golden eggs.
So now, I know what my focus moving forward should be. I have surpassed having FU Money. I must now focus on creating FU Income so that I can genuinely gain the financial independence that I seek.
(Written 2019.12.07)
JL Collins didn't coin the term, but he's where I first heard it. Just like his article, linked above, I hadn't known what FU Money was, but once he described it, it made perfect sense. It was something I was aiming for too. Or at least I thought I was.
The more I think about it though, the more I think FU Money itself is kind of bulls--t. Although I thought FU Money was my goal, I've never been able to incorporate it into my financial strategy appropriately. The first issue I have is that retirements accounts have typically been my first avenue of investing. But as the balance of my retirement accounts increased, I never felt like that would be considered part of my FU Money bucket.
If I wanted to say FU to my job and go on a self-funded sabbatical adventure to discover myself, what I want to live off of my would my retirement accounts? Not really. I wouldn't want to cash them out and take the penalty hit for withdrawing from them before retirement. Instead of funding retirement accounts, let's say I funded a non-retirement brokerage account. Would that make a difference? Doubtful. I wouldn't want to sell my wealth-generating assets to cover my monthly expenses. I wouldn't be comfortable missing out on the opportunity cost of not benefiting from compounding interest or returns. The milestone I would have to reach to feel secure is the 4% rule threshold.
But if I waited until I reached the 4% rule threshold, then I would call that retirement money, not FU Money. I imagine FU Money is when you have enough in assets and cash that for any reason, you can quit your job without worrying about the scramble of immediately finding a new income stream. Retirement could be a side effect of this short-notice quitting, but retirement is an all-or-nothing scenario. When you retire, you retire for good. If you come back out of retirement, then that means you drained your investment accounts before you were ready to retire.
Plus, retiring early is extremely hard. There are quite a few people in the FIRE community who have retired early, but to retire in your 20s or 30s usually seems to be a direct result of penny-pinching to the point of depression. Or at least a significantly decreased life satisfaction.
What's the answer then if FU Money seems like a reasonable goal but doesn't' actually fit my model? Figuring that out has inadvertently become my current focus.
Over the past three months, I've been focusing on several different side projects. The first was a commercial real estate project that I had been watching for years, but the time had finally come to execute. This particular project will kick off a healthy but not retirement-worthy monthly cashflow. The second project was starting a side business doing online selling with my wife. This project doesn't produce passive income, yet, but creates an alternative revenue stream. And the goal is to grow the revenue stream enough that we can hire employees and helpers and start working on converting it to either a leveraged income or a completely passive income. The last project(s) was a few individuals in my technology network who reached out to me for freelancing. Freelancing is something that I've always done since college graduation, but I had a year-long drought in projects. The income generated from these projects tends to be very short-lived but usually significant in size than other side-gigs. At this point in my career, I also manage other resources with these gigs and charge a markup for my resources time instead of direct billing for my time. So I consider this leveraged income.
For the past year or so, my focus was on adding to my investment account balances. However, for these projects, the entire focus has been on created alternative income streams. Income streams that pull the monthly burden away from the 9-5 income stream. These income streams started making me think about FU Income. They didn't increase my investment account balances one bit; there has been no impact on my net worth. But yet I still feel more secure now than I did just a few months ago.
So I dug deeper. My net worth is already large enough that I feel like I have preliminary FU Money. But even with that net worth, I'm not interested in cashing out any of my existing portfolios to cover my monthly expenses. So it's FU Money that is untouchable if I want to say FU.
I was trying to sort out all of this, and it finally hit me. I had discovered FU Income. Between these three new income streams, I can cover the majority of our monthly expenses. That means if I quit my job overnight, to be entirely income-to-expense neutral, I could get a minimum wage job and still maintain my current lifestyle without decreasing my assets.
Another angle I started thinking about was the golden egg-laying goose. The moral of that story was to have patience in receiving a golden egg every day. The protagonist loses patience and kills the goose hoping to extract all of the golden eggs hiding inside, only to discover there are no golden eggs inside, thus destroying their future golden egg income. In my opinion, prematurely tapping into your FU Money is equivalent to killing your goose. Except instead of impatience being the motivation, needing to eat the goose for daily sustenance is the motivation. Although it's not a selfish motivation, the outcome is the same. With the purpose of FU Income instead of FU Money, I equate that to pursuing more geese instead of pursuing more golden eggs.
So now, I know what my focus moving forward should be. I have surpassed having FU Money. I must now focus on creating FU Income so that I can genuinely gain the financial independence that I seek.
(Written 2019.12.07)
