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“I may never own a Mercedes but I’ll always be able to say what needs to be said when it needs to be said.”
— Jim. L. Collins.
A year ago, our department had been given the order to pick a bunch of poor saps to get fired. One of them was my best friend who had not only lost her mother but also her grandmother and her uncle, all within the course of a year. Good times.
Every day, familiar faces would disappear, replaced with unfamiliar ones that more often than not, communicated to us remotely via computer screens from India. The reason so many people were getting laid off was blamed on budget cuts, even though the company had just reported a corporate profit of $2 Billion dollars.
Nice.
Everyone I knew was losing sleep and on anxiety meds.
Understandably, hostility surrounded these new, unfamiliar faces. And in hush whispers, people would huddle in groups, conspiring about not sharing information with these “fucking Indians”, to keep “those fuckers from stealing our jobs.”
I could see that the horrible things happening to my co-workers were not the fault of the newcomers. After all, they had homes to take care of and families to feed too. And in fact, they were squeezed even harder than my co-workers, working around the clock and in one case even missing the birth of their own child for a tiny fraction of what my co-workers were getting paid.
But every time I shared information or stood up for them, I was seen as a traitor.
But I didn’t care. Since I had enough F-U money and no longer needed my job, I could say what was on my mind and be objective about the whole thing.
That was when I realized the true power of F-U money. F-U money lets us be our authentic selves, without having to compromise our beliefs for money.
And recently, I experienced the benefits of F-U money yet again.
Ever since this blog took off, we’ve been asked to plaster it with ads that in no way shape or form benefit our readers, in exchange for fat wads of cash.
Once again, because of F-U money, I chose “telling it like it is” over making lots of dough.
I hate hypocrisy, lies, and general fake-ness with the heat of a thousand suns, so being able to tell it like it is makes me ridiculously happy. That’s why I don’t give a shit how much money a company offers me to promote their crappy product. The only things I care about are a) being able to tell it like it is, and b) only recommending products we love and use ourselves c) keeping this site free for everyone
Financial education is a right, not a privilege. Everyone DESERVES to know exactly how investing works, without being thrown all sorts of Wall Street bullshit and having their hard-earned money stolen by shitty mutual funds with 2% MERs.
And it is because of F-U money that I’m able to say exactly what I think, without the fear of losing my livelihood or selling out.
So how did I stumble on the idea of F-U money and its role in keeping us honest?
Two words.
The first person who taught me about the value of F-U money, way before this blog was born and way before we became FI.
For those of you who don’t know J.L Collins, I like to refer to him as “The Godfather of the whole FIRE movement” because he’s been financially independent since 1989. Along with Mr.Money Moustache, he’s one of the first people who started blogging about FIRE (Financial Independence Retire Early) online.
So after fan-girling over his blog for the past few years, when I found out Jim wrote a book, I immediately ordered it from Amazon:
And let me tell you, it is worth every penny.
Why?
It’s honest and authentic:
Jim wrote the book as a way to teach his daughter, Jessica, about investing. So you know there’s no hidden agenda there, as all the advice in the book is something he wants his own daughter to follow.
It’s self deprecating
Jim talks about all the investing mistakes (choosing individual stocks, selling at the bottom in 1980s) he made during the last 20 years. This takes a tremendous amount of self-awareness and courage. Admitting you were wrong is NOT easy, but Jim does it effortlessly. All in the name of teaching you what he learned from his mistakes so you won’t make the same ones.
It’s fun to read
Most investment books are boring as all HELL. This one isn’t. Jim even compares stocks to booze. And anyone who talks that much about booze while still being coherently able to explain complex investing concepts gets my seal of approval!
It’s simple and straight forward
Wall Street LOVES making investing seem complex (CDOs = Collateralized Debt Obligation? Stop. Just stop. I know you get your rocks off by jamming nonsensical words together. I’m not buying it.). But Jim talks about investing in only 2 ETFs. Simple and straight forward. And who doesn’t appreciate simplicity right?
Even the “Acknowledgments” section is funny
As an children’s author and avid reader, I hardly ever read the acknowledgement section of a book. Why? Because it’s insanely boring. But not in this book. That’s how you know Jim put a monumental amount of effort into making this book entertaining. He puts 110% effort into everything in this book…including the dismissive Acknowledgements section.
To give you a taste, here are the titles of some of my favourite chapters:
• Why You Need F-U Money
• There’s a major market crash coming!!! And even famous economists can’t save you!
• Index funds are really just for lazy people right?
• You, too, can be conned
• Portfolio Ideas to Build And Keep Your Wealth
See? Definitely not boring.
Now, in the interest of honesty, I have to admit, we do have some differences of opinions. But that’s okay, if everyone agreed on the same things all the time, the world would be a SUPER boring place.
Here are some of the things Jim and us disagree on:
100% equity portfolio:
Jim advocates for the 100% equity portfolio and then stepping it back to 75/25 when you retire. Being allocate more heavily in equities gives you higher returns over the long run.
We advocate for the 60/40 portfolio. While we are all for higher returns, we prefer to be more conservative so we can sleep at night. To me the most important thing is to not panic and sell at the bottom. And by living off the 3% dividends/fixed income from our 60/40 portfolio, we won’t have to.
Dollar Cost Averaging
Jim is not a fan of DCA and would rather you dump your money in all at once, since history has shown the market always goes up, so the longer your money is in the market, the more money you’ll make.
We believe that you should always DCA. Read more about it here.
Put all your eggs in one basket and forget about it.
Jim doesn’t believe rebalancing your portfolio is necessary if you can mentally tough it out. He believes the great irony of investing is that the more you watch and fiddle with your holdings the less well you are likely to do.
Since rebalancing saved our asses in 2008, we prefer to have enough in our fixed income assets to allow us to rebalance during market crashes.
Don’t bother with international stocks.
Since the largest companies in the S&P 500 are all international business, which generate 50% or more of their sales and profits overseas, Jim argues international exposure is covered with VTSAX.
We believe having some international exposure (around 20% in our portfolio) is good since it provides additional diversification.
As you can see, compared to Jim (and most of the other FI bloggers), we’re pretty conservative. Maybe it’s our Canadian-ness or our pesky engineering brains constantly needing to hedge against risk, but we tend to have a lot of backup plans, and backup plans for the backup plans, when most other bloggers are optimistic that everything will turn out all right and believe that we should all just toughen up and ride the market.
But…despite our differences, our overall message is the same:
Investing is the key to wealth generation over the long term and FU money will set you free.
Ever since we started the blog, we’ve been getting lots of questions about how to get started with investing,
If you’re American, this is your investing bible (as it talks about the Vanguard ETFs you need to buy and how to minimize your taxes):
Click Here to Buy the Book from Amazon
Full disclosure: This is an affiliate link so we will get a small percentage of the book price if you buy from this link. But if you prefer to get the book from the library, we won’t judge 🙂 As long as you read it, we’re happy.
But no talk about F-U money would be complete without bringing in The Godfather himself to talk about it. After watching this video, you’ll understand why we like Jim so much.
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I love that clip from the Gambler. JLCollins and basically anyone talking about FU money is exactly right. If you need that paycheck, you basically have zero negotiating power. What else are you gonna do?
But if you’ve got that FU money in hand, even if its just enough for a few months, a year, whatever, suddenly, you’ve got a lot more personal power. Don’t like the job, just move on to something else.
JLCollin’s book is really so simple. Wish something like that existed back when I was 18 years old. I think I’ll be buying his book as gifts this Christmas.
The simplicity of JL’s book is what really sells it. There are so many books out there that includes too much filler material and not enough practical advice. Simple is always better.
Ha! Love that you ended with the parody clip. The first time I heard about the Fuck You position was when I watched that movie and was all YES! This is what I want from life! (not the house etc., but being in that position).
I like Jim Collins’s version much better but the essence is the same – I am a grown woman, and no one is going to tell me what to do and where to be.
GREAT POST! (as always)
“I am a grown woman and no one is going to tell me what to do…”
Hear hear!
The Godfather was missing from FinCon last week!!
I tried to take his place but massively failed… 🙂
On the plus side, I was once able to pretend I was Mr Money Mustache when I had a *ahem* mustache and he did not. #SCORE
But YES to all of this. Freedom > Money > Stuff
You’re quickly becoming one of my favorite bloggers…
The spirit was willing but the flesh weak.
Word is, I missed an awesome time. 🙁
Taking my place is easy. Taking the place of J. Money is beyond the hope of mere mortals. 🙂
Plus 1. This the the most awesome blog to come down the pike in sometime. I’m thrilled to have my book reviewed here and especially to have it past muster under her critical eye!
Guys guys, enough with the compliments. My head is going to be WAY too big to fit into my hotel doorway.
*runs away* *hides*
Holy shit! J’s on my blog! *insert major fan-girling*
“I was once able to pretend I was Mr Money Mustache when I had a *ahem* mustache and he did not. #SCORE”
HA HA HA. Take that, MMM!
“You’re quickly becoming one of my favorite bloggers…”
–> YEAR. MADE
I’ll have to agree that FU money is pretty great. Too many decisions in life are made out of fear. Fear of loss. Fear of a future with fewer ‘things’ than others.
None of those ‘things’ matter. In the end, we’re going to lose it all anyway.
FU money (for me) means NOT living life like a drug addict. When everyone gets done with work for the day, they go get their quick hits of pleasure (and luxury) and that’s it.
To me, that kind of life was unfulfilling.
Financial independence is a better way to live.
Exactly. See, this guy gets it. FU money means I never have to fear anything ever again. Well, except crossing the street in SE Asia. That’s still terrifying.
We really enjoyed the 2008-2009 stock market crash. Equities went on sale, times weren’t too busy at work, and I was hoping to get laid off so I could collect 2 years ($50,000!!) of unemployment benefits. Most people would freak out about unemployment in the middle of the recession, but, as you say, I had the FU money in hand (er, in my accounts). No job? No problem. We could squeeze by on the $50,000 plus some savings even if both of us lost our jobs.
This never came to pass, though the FU money snowballed into a full on FIRE stash several years later and came in very handy when I got fired on a Monday morning and had about 30 minutes to pack my stuff and leave. 3 years later and life is peachy!
You had all your assets in cash in 2008/2009? Wow. That must have been fun to go shopping.
No, I was fully invested, but we had 60-80k/yr in disposable income that we kept plowing into the market. At the worst point I think we still had over a quarter million in assets, so that could have kept us going for at least 6-7 years in a pinch even if we BOTH lost our jobs and couldn’t find any paid employment in those 6-7 years AND the market remained flat from the very bottom in March 2009.
Turns out it got better. Very better. 🙂
Great post.
One of my personal heroes is J. Bogle. He has a very similar message.
I have thought for many years whether or not diversifying beyond the US was necessary. I have concluded it is not also. The largest companies in the S&P500 obtain 50% of their earnings internationally. Buying 100% S&P500 gives you adequate international exposure while hedging out international macro risk.
I think Collins & Bogle are right. One of the most important lessons I have learned in my 15+ years of investing experience is to keep it simple.
Regardless, your blog is very good. Thanks!
I dunno, I get the argument but there’s still political risk that your government does something goofy that affects your entire stock market at once. Unlikely, but it could happen. Mixing in Internationals may not boost your return much (again, since everything’s linked Europe won’t drastically outperform the US over the long term), but it will have a volatility-reducing effect. Then again, since Collins just ignores volatility like the cowboy he is, that probably doesn’t mean much for him.
Ugh
The REAL power of FU is having what it takes to produce great stuff that people really want.
You’re playing a small game with this “referrals” nonsense.
I really don’t give a shit about somebody else’s book, nice as it is.
I come here because I give a shit about YOUR BOOK.
Write it. Publish it. So we can all BUY it!
I can’t be the only one who wants to PAY you for what you know.
OK, I’m writing it! I’m writing it!
Yeesh.
I bought the book on the spot
I bought the book on the spot. Great post.
Is there an investing bible for Canadians? I love the idea of this book but would love the equivalent for us Canucks!
The Wealthy Barber Returns by david Chilton is decent (it’s a 2011/2012 publication).
Thanks Stan! Funny you say that – I am reading the Wealthy Barber right now (the original one, written as a story).
Do you happen to know that one too, and if so, would you say it’s worth it to read both?
Thank you!
I have not read the original Wealthy Barber – seems somewhat outdated although I hear the principles are sound. One thing though – that book talks about mutual funds, which in 2016, as we know, is far inferior to ETFs.
Here’s a link to Wealthy Barber Returns: http://bit.ly/2f6yqht
(PDF, Kindle and Kobo/ePub versions of this book contained in the link.)
I forgot to add:
Wealthy Barber Returns is different in that it’s not in a ‘story’ format. It’s pretty much an assortment of topics divided into short chapters. It’s great to delve into in any order you please.
Thank you! I was wondering about the mutual funds vs ETFs thing.
I will look into the WB Returns. And follow along with the investment workshop here! 🙂
I have a question. Every financial blog I read pretty much advises a 60/40 split (or something close). This is actually the first time I’ve seen somebody suggest a 100% equity position. I understand the logic behind the 60/40 approach and for the most part it seems to boil down to comfort and emotions.
That being said, if you are completely comfortable with massive fluctuations in the value of your portfolio (I’m talking 30-40% losses in market crashes), you KNOW you will not crumble and sell at the bottom, you are strong enough to ride out any storm and you know you will not be needing that cash urgently, isn’t it always worth going in at 100% equity? I know you’re a fan of math prevailing so I assume the only reason you don’t invest at 100% equity is because you don’t think you can stomach a market crash if you were? Otherwise, if math tells you 100% equity returns more in the long-term, why aren’t you invested that way?
I’d be curious for your blog to do a comparison of 100% equity versus a 60/40 split over a certain time frame. I’m tempted to move to 100% equity the longer I’m invested as I know I’m comfortable with massive fluctuations, but I’m wondering if there are any other reasons than emotions and comfort to not be invested at 100%.
I have been wondering the same thing!
Yup, the timeframe of when you need the money also matters. Completely ignoring the psychology/comfort level aspect, if your timeframe is > 15 years, mathematically you want to go cowboy it up at 100% equity. If your timeframe is lower, you want more dividend/income from your fixed income portion so you can live off it without selling during downturns.
When we started seriously considering going for early retirement, we sat down, did the math, and realized with our savings rate we were at most 5 years away even with no investment returns. So our investment time frame didn’t justify a 100% equity weighting. 60/40 was where we settled on an acceptable risk/return, and now in retirement we need the fixed income so we’re staying put.
If our portfolio increases in size or our living expenses decrease to the point where our withdrawal rate is around 2% for whatever reason, we can pivot more towards equity since the dividend yield of the S&P500 is around 2% anyway.
I guess that makes sense, I didn’t think about the requirement of receiving dividends to live off. I find time frame such a fickle thing it is hard to absolutely dedicate to a 10-15 year commitment of not needing the money in order for 100% equity to be safe. Right now I don’t think I will need to touch the money, but if something changes in those years (health issue, kids etc.), especially during during a downturn in the market, the entire plan goes to sh*t.
Agreed, if you can stomach a portfolio of Equitys, and watch your money disappear, good luck. 2 people I know, had large Equity portfolios in 2008, sold it all in 2009 (at a 30-40% loss) and put it in GIC’s… both were near retirement. They are screwed…
A balanced portfolio lets you sleep at night… Remember a 60/40 is a percentage calculation, so as your Equity grows, (and bonds dont) the ratio changes automatically. So a 60/40 at the bottom of a cycle becomes a 80/20 at the top… So you take some money off the table, and balance back to 60/40, now you have cash ready for the next bottom. And its coming… just not soon…
D.
How much is enough for F-U money?
And what do you think of the comment that we are in a “Big Fat bubble”? I’m considering to hoard cash for now.
You need to figure out how much you spend on average each year. Take that number at multiply by 25.
This is known as the 4% rule. This is a quick and dirty calculation as there are many factors unique to you that you need to consider.
You can read more about it here –> http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/
Completely agree that F-U money makes you a different employee. In my last few years, I was so much more effective at work because the politics and BS didn’t concern me. As such, I ended up getting high performance reviews, bigger bonuses, more opportunities. It’s a nice cycle to get into.
Also, thanks for defending India. I spent 3 years in India transitioning finance tasks for a multi-national corp and can attest first hand to the dedication and commitment of the workforce for little pay and next to no recognition.
I feel for those guys, I really do, and it was freeing to be able to treat them as human beings rather than as a threat to my job.
Thank you for the book recommendation, I will definitely read it! (Plus now I also know how to order it :)) I follow the posts of both you and Collins and it’s interesting to see some different approaches summarized. Which one is right? Probably both, as at the end of the day both of you guys have already made it.
It would be interesting to see how your portfolio would’ve performed under the 100-0 pre- and 75-25 post retirement allocation. Have you ever thought of back testing it? I am working on some historical comparison with real data and find the results quite interesting.
Well, in hindsight 2012-2015 was a rising market, so of course a 100% equity would have done the best. That’s not a very useful analysis since you’d end up going “well of COURSE you should have gone 100% fixed income in 2008-2009, then 100% equity 2009-2016.”
Your portfolio allocation really should be a function of two things: 1) Your comfort level with investing. Higher = More equity and 2) Your investment timeframe. Anything over 15 years = 100% equity.
So why aren’t more young people saving and investing, especially when there is so much free information and low cost products available?
I think I figured it out when I was watching my kids take swimming lessons. The swim coaches don’t start by taking the kids to middle of a lake and throwing them off the boat. That is the practical application of swimming – it could save your life. The coaches instead start in the kiddie pool getting the kids used having water in their face. Then the kids progress through several levels where eventually you can safely swim in the lake.
What to Financial planners do in the first meeting? they talk about RRSP’s, TFSA’s, mortgages, various mutual funds and insurance products.
Financial Advisors should instead talk about saving up FU money. Everyone gets that since most people hate their jobs and their managers. Who wouldn’t want to quit their day some day? Once enough FU money is saved up in a TFSA account then there should be discussion about other financial products such as RRSP’s. I don’t know why some advisors like talking about retirement planning to 20 and 30 year olds in their first meeting.
Retirement is a dated term anyways, most successful people I know usually refer to it as FU money.
FU money and early retirement is still a relatively new concept. The first generation of early retirees (The Godfather JL Collins who was the earliest to write about it, ERE’s Jakob Lusker, Mr. Money Mustache) almost stumbled into it accidentally and were widely seen as weirdos and radicals at the time.
Now people like Jeremy from GoCurryCracker, Justin from RootOfGood, and ourselves are taking the lessons learned from the FirstGen guys, refining the ideas and trying to make it easier to understand and less scary for the masses. But we are A LONG way away from having stuff like this taught in Universities and High Schools.
Early Retirees will still be weirdos and radicals for some time, and I wouldn’t have it any other way 🙂
How did you get JL Collins to post on your blog, like did you relentless email him or something?
Nope, he contacted us and told us he liked our blog. You can imagine our surprise. It was a little bit like Michael Jordan coming over and saying “Hey, you’re pretty good!”
Yep.
Somehow I stumbled on her video manifesto and was captivated.
After reading many of their posts, I reached out.
Great content captures my attention. 🙂
Avoiding hypocrisy is a tough bar. Good goal, but impossible to achieve. I get it, sites cost money to host etc, etc and opportunity presents… Gotta take the cash and run.
So, if ads that appear while viewing your site are strictly things you have experience with and recommend I am curious how you pack your elliptical machine when you change cities and how you ever managed to get enough use on a snowblower in Toronto to have a useful opinion?
So, should you not dump the targeted ads based on your latest ‘hypocrisy’ policy?
What are you talking about?
I see an ad to buy a house of all things, in the top right of my page also…there are some ads sometimes in your blog, but I don’t really care 🙂
IMO you don’t have FU level of money unless you have enough for both the Benz and to be FI. I grew up in Ontario Big 3 country and watched people live like paupers for 30 years so they could retire at 55 and…live like paupers for 30 years. Ugh, not for me. Go big or go home; have it all I say.
If that’s your definitely of FU money, you will need to work longer (at least 30-40 years). Or possibly never retire.
So are you conflating being FI with no possibility of working? I mean it is possible some of us could lead your lifestyle (or better) with our current resources but chose to keep working? Also, you’re making some assumptions if your conclusion is one would need to work 40 years or never retire, no? The assumption is pretty easy to deduce, namely that one cannot earn enough money in under 40 years (or ever) to lead a better lifestyle than what you two are.
I applaud your investment and spending thoughts. I agree with you one should have a spend rate of around 4-5% but what if one wants 3-400k @4%? Obviously the corpus needs to be more than $1 million (math this shit out as you might say 😉 ). And what if one enjoys outright owning a nice house, nice car, etc?
For me this is about balance. On the one side you have all these folks that you talk about, hostage to their mortgages, stuck in their jobs. I agree with you two this is a horrible way to live. On the other is you and Wanderer, living in a frugal albeit unencumbered manner.
I walk neither of those paths but could easily step down from my position today and never work again if I was willing to not lead the life I’ve decided I want. My point is a dichotomy has been created and I don’t think that’s warranted.
Keep up the investing, and keep spreading the news people do not have to be slaves to their mortgage, but remember once you lock yourself into thinking there’s only “one true way” you have actually eliminated many choices from your life.
Nice article! Loved your rejection of ads and marketing on things you don’t believe in. I’ll do the same! Well, it’s easy to promise that when you have a very low traffic 🙂
Anyway, I’m still not convinced in buying the book and here’s why: the path to wealth is simple, as JLC says, and it can be expressed in a 1000 words post. And I got it: 100% equity, 80% domestic stocks and 20% domestic bonds (well, that would be enough for me to not buy the book since I’m not “domestic” in US). So, why should I buy the book? Because Jim is awesome? Ok, I totally agree! But I don’t want to buy the book in the hope of finding funny puns.
Why should a financially educated person like me, like you, like 95% of your blog followers buy the book? What’s its added value?
Applaud your skepticism. I’m a huge skeptic too so I understand where you are coming from.
Even though a lot of the information can be found for free on Jim’s site (check out his investment series: http://jlcollinsnh.com/stock-series/), I like having a physical book as a reference, so I can flip through it quickly to find something. I really like chapters 19-21, where Jim breaks down the specifics on tax minimization (401k, 403b, tsp, ira, etc), RMDS (Required Min Distributions) and HSA (Health spending account). The US tax system is complicated, and there are SO many different types of tax shelters, it’s insanely hard to keep track of it all. These chapters breaks it down in a structured and easily digestible format. That alone will save you a ton of money by reducing your tax burden as much as possible.
There’s also nifty graphs on pgs 212-215 which shows portfolio success rates by withdrawal rates, portfolio composition, and payout period. So you can see how well different allocations did over the past 15-30 years and compare 3% withdrawal and 4% withdrawal rates. Very useful and extra content that I haven’t seen on other FI blogs yet.
There a lot of finance books other there, but I haven’t seen many that go into the specifics of how to retire, pick asset allocation, minimize taxes, and stay the course without panicking. This book is a the best practical guide that breaks it all down in a simple-to-follow format.
If you have 20% in bonds you’re by definition not 100% in equities. Bonds are a debt instrument.
“I could see that the horrible things happening to my co-workers were not the fault of the newcomers.”
How do you “see” that? You mean you use mental gymnastics to come to the conclusion you want to in order to curry (ah hem) favor with those in power.
“But every time I shared information or stood up for them, I was seen as a traitor.”
Because you were.
Oh good the Trump supporters are here…
I believe you should always have FU Money. Let me share with you why. I’ll let Mark Cuban take it away.
“Enough” is what it takes to not worry about the bills. “A lot” is enough that you never have to worry about working again. “Fuck you” money means you can rent a jet to go wherever you want, whenever you want, and no party is out of reach. “Fuck everyone” money means you can have your favorite band in your backyard, not care how much it costs, and lend them your jet to get there.”