I think I’m a nice guy.
I honestly can’t imagine those words ever coming out of my mouth.
So why the hell would I be writing an article about the concept of “Fuck You!” money?
Well, having a nice cash buffer has been one of the most powerful weapons in my ‘rat race quitting’ arsenal and putting a swear-word in the title probably got your attention.
The thing is, I think that if you want more freedom in your life, this is a really important concept you need to learn about.
What is it?
When I talk to people about having a large amount of money on hand, their thoughts are usually at the Lotto winner end of the spectrum. I’m sure you’ve heard variations on the following theme:
If I drop the jackpot tonight, I’m going to give it to my boss straight first thing tomorrow.
My personal definition of “Fuck, You!” money however is much more modest:
I have enough cash lying around that I’m not worried about where my immediate income will come from.
In my case, the approach I’ve settled on to keep me comfortable is to keep a year’s worth of my family’s living expenses in cash (well, in the bank!) at all times. If this amount starts to drop, it’s time to work hard to replenish it. If it starts to rise, it’s time to invest the surplus productively.
Taking this approach has all sorts of benefits which might not be immediately obvious, so I’m going to go through my top 4 reasons that piling up some cash is a good plan.
A negotiating tool
I believe in arrangements between parties with mutual benefit. I think that negotiations should be win-win wherever possible. If you’re negotiating, I think you should always ask yourself how you can benefit and add value for the other party at the same time.
If you need a stick to beat your counterparty with, the negotiation is probably not going to have a brilliant outcome regardless of who holds the upper hand.
That said, the best position to have when negotiating with somebody is the ability to walk away.
Imagine you have a job and want a pay rise. You know that you’re a respected member of the team and that you generate value many times in excess of what you cost your employer. You have key abilities that are rare in the market and crucial knowledge of company-specific issues which would take a newcomer many years to accumulate, no matter how able they were.
Rationally, it is in the interests of your employer to prefer giving you more money than seeing you walk out of the door with all of your human capital. However, that doesn’t mean that if you throw down a request for more money on the MD’s desk that you’ll get what you want. There are human beings involved which means pride, politics and the status quo are all powerful factors.
Having a pile of cash available can help.
Now, and this is very important. I’m not suggesting that, under any circumstances, you should ever go to see your boss and say something like
I want a pay rise. I don’t need this job and if you don’t give me what I want then I’m off!
That would be very unprofessional and probably wouldn’t work. If it did, there would be hard feelings and the strategy may well come back to bite you on the arse in a couple of years.
However, having plenty of cash on hand gives you an alternative to getting what you’re given.
Now, obviously enough cash to support yourself for a year is not a direct alternative to a job which will pay you every month indefinitely. However, if you combine the fact that you have the cash with the value of your human capital, you can be pretty confident that if things don’t go your way and you decide to leave, you’ll be able to turn your income back on way before you run out of cash.
Now you can put on your best poker face and stick to your guns. Assuming you’ve estimated your own value accurately you’ll probably get something close to what you want. If you don’t, you have a contingency plan.
This means you won’t find yourself in the position of having stated an acceptable outcome to the other party and then backed down because you couldn’t find a reasonable alternative quickly. Remember, if you are beaten down once, future negotiations are far less likely to go the way you want them to. You become a pushover. So, with your cash stash in mind, your approach can change from
I’d like you to pay me what I’m worth but there’s not much I can do if you say no as I need to eat next month.
It will benefit us both if you pay me more. If you don’t agree, I’m willing to seek other opportunities immediately. Making the decision to leave would not impact my quality of life or cause me any undue stress.
The cash will also give you more confidence to push ‘the number’ a lot higher and redirect as much as possible of the value you create into your own pocket.
As much as I love the concept of win-win, some people are just arseholes!
There are bullies, narcissists and sociopaths in society at large and you’re bound to run into them at some point in the working/business world. Bullies exploit positions of power. We need to make sure that, as far as possible, we’re never in a position where somebody has the power to make really big negative changes to our lives on a whim.
- If your boss gets actual pleasure from making your life miserable, you need to make sure she’s not got the power to make you (or your kids) go hungry.
- If you’re doing freelance work for a multinational corporation and the accounts payable clerk hates your guts, make sure he’s not got power over whether your mortgage gets paid this month.
I’m certainly not advocating accumulating power and then becoming the bully. You should however use it to stand your ground when it is justified.
Have you ever been landed with new responsibilities which are outside of your job description? How about being expected to do unpaid overtime which makes the company money but doesn’t benefit you at all?
Well then you need the power to say “no”. You need the ability to act according to your principles rather than being driven by fear.
Just think of having a big pile of cash as a suit of armour to protect you from other people’s bullshit which you would otherwise have to endure if you didn’t want to starve.
A creativity liberator
Sometimes I have a sudden flash of inspiration. I’ve found the solution to a common problem and I think I could sell it. I’m sure you’ve had the same feeling.
If lots of people get inspired like this, then why do I meet so few entrepreneurs (or other people who have lives which are not based around a 9-5 job) amongst the general population?
Because regardless of how good people’s ideas are, many still have to focus on how they’ll pay for groceries next month. If taking a risk and doing something different could increase your level of fulfilment, you need to put yourself in the position to jump. I’m not saying you should actually take the plunge now, just get together enough cash to be able to change the way you see the world from
I have good ideas but I’d never take the risk – I have a family to feed. What if it all goes wrong.
I know that whatever I decide to do, we can eat for the next year. Now I can be creative and keep my eyes open for opportunities which I know I’m in a position to take.
Consider a concrete small-business example.
You’re a chartered accountant who works for a large corporation as an auditor. You want more freedom and think that becoming an accountant who serves small business clients on a freelance basis would provide the work-life balance that you want. You’ve spoken to a few small business owners and you’re reasonably confident there’s a market for the services you want to offer.
If you had to replicate your current corporate income immediately in order to live, you could never pursue what seems to be a solid business idea. What if you’d got it wrong? Do you really want to be scrabbling around in 3 months’ time to get the first available job, panicking about the £10,000 credit card debt you’ve accrued to pay for your living expenses?
On the other hand, if you could forget about the day-to-day worry of producing sufficient income to let you live now, you could focus on building a sustainable business. You could seek out quality clients and nurture win-win relationships. The pressure would be off.
If it turns out that your initial calculations were wrong and the business idea is doomed to fail, you’d know after a few months. The cash buffer would give you plenty of time to right the ship’s course. You could spend time looking for the most suitable employment opportunities and not feel under pressure to accept the first thing that comes along.
Having “Fuck You!” money makes you brave enough to achieve your potential.
An insurance policy
Sometimes shit happens. Sometimes it happens all at once!
Just because you’ve had to replace all of the car’s tyres and pay for a full service this week doesn’t mean that the boiler’s not going to break whilst your house’s roof is leaking next week. Could you cope with that situation if it happened?
Perhaps you could go to the bank and get a loan. What if you lost your job too? How about asking your family? Do you really want to be in that position?
Let’s be honest. You live your life with each month looking much like the last. You expect your salary to hit your bank account on the 25th. You ‘know’ what you’ll get and roughly what you can afford to spend this month to leave enough to pay for your fixed costs. If this sounds accurate, and you have no backup plan, you are extremely vulnerable to whatever luck sends your way.
This is what I describe as ‘living month to month’. I like to think about my existing cash in the bank as being the real way that I pay for immediate expenditure. So long as, over the long term, we earn more than we spend, we’ll be fine. It doesn’t matter that this month’s outgoings were twice as high as our income because all the bills will be paid from our existing stash. Our income will then top the buffer back up. It will all come out in the wash over the next few months.
It seriously astonishes me when I learn that somebody has two brand new Audis and a big detached house, i.e. all the trappings of being ‘wealthy’, but they’re a month or two away from trouble at all times.
Are people crazy?
This also highlights the importance of liquidity when compared to total wealth. You may well be much wealthier than me on paper because of the value of your house and investments in your pension. However, in the absence of a catastrophe, due to cash (and other liquid assets) on hand, I’m pretty sure that my family’s lifestyle is safe for quite some time to come. Can you make the same statement?
If not, maybe it’s time to start piling up some reserves.
Just do it!
There we have it. I’ve covered what I think are the 4 most beneficial aspects of having a decent “Fuck You!” stash.There are so many other benefits that I could talk about this all day but I’m going to stop here as this article is touching 2000 words!
I’ve made my case for why you should have a “Fuck You!” fund but that’s not going to get you any closer to actually getting the cash together.
My main advice here would be to think about how you’re spending money at the moment. Does your spending return enough value to you? Are the little treats you buy yourself worth the sacrifice you make to pay for them? If you currently buy a particular thing every month and you’ve determined it’s not worth the time you have to sacrifice to get it, stop buying it and put the money in your stash instead.
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[Images “UK Sterling Money Notes And Coins” courtesy of Serge Bertasius Photography at FreeDigitalPhotos.net, Cartoon Character Hamster Exercise courtesy of saphatthachat at FreeDigitalPhotos.net]