The concept of F-you money

A while ago, I learned a lesson about money that changed my life and that many people don't know. It's so simple that I don't know why it is not part of everyone's education.

Have at least six months of cash in your bank account, and you can do whatever you want.

I learned this concept J.L. Collins book "The Simple Path to Wealth" and the core concept is that you are free to decline any offer that you don't like. If you don't need that job or don't have to work with a client who doesn't treat you well, you can walk away whenever you like.

I use this concept in my personal life, and it allowed me to become self-employed a few years ago. I wasn't depended on my monthly paycheck for a while and knew that if self-employment is not a good fit for me and I don't get clients within three months, I can get a new job as an employee without any risk. Sure, my F-you money would be gone, but that's nothing you can't get again. It depends on your expenses, but you'll have it eventually.

Talking about expenses, I don't burn through my income every month. I decided to rent a flat and don't commit to the luxury purchase of my own house yet. Many people see a property where they live still as an investment and go into debt for 30+ years. One thing they don't have in mind that a house will cost them money forever and that their mortgage is a huge liability. If their mortgage has been paid, they will need to fix things, get a new roof, a new heating system, etc. You also can't sell parts of your home if you need money. For me, it's a luxury purchase, and if I can't pay it from a fraction of my income, I don't get it.

A year ago, my wife and I decided to rent a luxury flat–we did the math, and if we use the money that we spend on rent every month, we could easily afford a house. The downside is that we can't afford to buy a home that has the same style as our current flat has. The upside is that we can easily walk away from this lifestyle if the business isn't going so well anymore or if we just decide to move somewhere else. At the moment, we enjoy this luxury and are grateful for it every day. I like the flexibility that renting gives, and if you combine it with your F-you money and not having any debt, you have a very high level of financial security while working on things you like and when you want.

In my life as a business owner, I decided to use the same approach. In our first year in business, we saved everything we could. Now, we have more than six months of salaries in our bank account, and that money gives us the flexibility to only work with clients we like and create product after product.

In 2019, we were able to launch an online course about PHP package development, founded a second company with our friends at Spatie, and launched a SaaS that takes error tracking for Laravel applications to a new level. We also built and launched Tinkerwell, our first desktop app. All these ventures are the result of our bank account with F-you money. We don't need to rush from client project to client project to pay our bills, and so the part of our income that these products contribute is growing every month. I described this in my post about progress–we are on track to become a software business and get rid of client work eventually. We are not there yet and enjoy working with our clients, but we keep working to reach this goal.

So, if you don't have F-you money yet, get yourself a plan to get it. Either reduce your monthly spending or increase your income without increasing your spending.