The Idea of F*** You Money
For the last 10 years, I have been an employee of several companies. My career started at a local bank, where I learned everything about investing and personal finance. My job was to help others improve their financial health. At least that was the official version. Secretly it was more about selling insurance or saving products to clients, no matter if it’s in their best interest.
It took me 5 years to resign and move on. My next professional chapter was meant to be different. Instead of selling, I started creating things. Today I am a product manager, working on software products in the financial space. This shift in my career and my mindset completely changed my financial situation. Living in a major German city as a 28-year-old can be tempting when it comes to spending money. The idea of financial minimalism helped me to design a lifestyle that allows to combine a great life and build wealth at the same time. Before I start describing what I did: It took me several years to make all the following adjustments, so patience is critical.
Although I hated selling financial products to others, I learned a lot about how to accumulate wealth. My goal was simple. F*** You Money. Just enough money for my desired lifestyle so I can live completely independent from others. Whenever I am done with a job, I want to be able to quit. Life is too short to spend time on assignments, people or activities, that do not bring value or joy in your life.
Saving 50% of your annual income is not for everyone, but for me, it was easy. Knowing why you want to save money is crucial. Saving for the sake of saving can work, but probably will not be enough motivation to keep going. It feels good to sacrifice short-term satisfaction that comes with spending money on things. It helps to remind yourself what the long-term goal is. Never in my life, I want to be forced to spend my time with people that I highly disrespect just because I am dependent on a salary.
People often make a mistake and focus on the small and irrelevant stuff. So I decided to tackle the problem with priorities. The following list shall give you an overview of what aspects of life I tweaked to accomplish my goal. The order of the list goes from most important to least important.
Increase your income
The more you earn, the easier it gets. After I worked in product management for a few years, I decided to test my market value, so I quit my job and started approaching other companies. I was curious to find out what others are willing to pay for my work. It took me a while to figure out that I can increase my income, and so I did. This set the baseline for anything else, and I could start optimising from there.
Optimise your costs
It is essential to look at both separately. Increasing your income is an entirely different game than optimising your costs. Optimisation requires an in-depth knowledge of the status quo. So the first thing I did was writing down and aggregating everything I knew about my spending behaviour. I dug down into my bank statements, checked my contracts and wrote down everything in a spreadsheet.
My steps before optimisation
- Create a spreadsheet and write down everything you spend money on within the month.
- Categorise and tag your spendings. What are the things that you have to pay? Where does this spending belong to? This gives you a better understanding of your savings potential.
- Tags: Everything that was essential was tagged as “necessary” because there was nothing I could change about it.
- A list of some of my categories: Living, transport, food, restaurants, health, education, business, insurance, investments.
- Identify savings potential by asking yourself. Do I really need to spend that much on … and tagging or marking those things.
The last step is probably the most individual one, so I wrote down my thoughts on a few categories.
Cost of living
Renting an apartment became more and more expensive over the last few years, and I was fortunate that my girlfriend and I decided to move together. This saved me hundreds of Euros each month. We also chose not to buy fancy furniture, which also saved us tons of money. Our priority was to live in the city centre, where life happens outside of your apartment, so it’s okay to keep everything basic and minimalistic.
Although living in a bigger city is more expensive, when it comes to renting, I saved a lot of money by selling my car. Fuel, insurance, taxes, parking, and maintenance, was the second-largest piece of my savings potential. Not to mention all the time I saved by not sitting in traffic jams etc. Instead, I got used to walking a lot and sometimes use public transportation if needed.
Food and Restaurants
Never in my life, I thought that food might be one of the most expensive things in my daily life. Realising how much I spend on restaurants and delivery services was shocking, but at the same time gave me a lot of hope. I deleted all my food delivery apps and decided to cook more often. During work, I stopped eating out every day and instead get some groceries and cook for a fraction of the price.
How many streaming services does a person need? Am I really that dependent on same-day delivery? I cancelled my Netflix and my Amazon Prime subscription. I checked all my insurances and tried to find cheaper ones for the same value. The same happened with all my utility providers. In my opinion, this aspect is often overrated, but still something you should be aware of.
I didn’t stop buying things, but the minimalist approach helped me a lot. Before I buy something, I ask myself. Do I really need this thing in my life, and what is the value it will provide? At the same time, I decided that buying a new phone every two years feels great, but not really necessary.
Education and health
I didn’t want to compromise on those categories, so instead of subscribing to Netflix, I bought more books. I still have a gym membership and bought myself some expensive running shoes. Every month I pay for a premium membership on Medium.
In general, I could observe that my behaviours and priorities changed. Initiated by the willingness to save money and manifested in a lifestyle that is more focused on owning less dumb stuff, eating healthier and consuming a different kind of media. Also worth mentioning: Since I stopped having a car, I probably contribute less to polluting our wonderful planet.
Back to F*** You Money
So after I changed a few things, I went back to my spreadsheet. I was astonished to see that if I was extremely disciplined with food and didn’t buy any consumer goods within a month, I was able to save 50% of my income. Some of you might ask yourself, how long will it take accumulate enough money to call it F*** You Money? Well, let’s assume, if 50% is something between 1000 and 2000 Euros each month, it is still a long way to name it F*** You Money. This is true if you assume that the plan is to stack up so much money, that you can make a living from the returns like dividends etc.
From my perspective, saving 50% for 12 months would give me 12 months of runway. If I decide to quit my job, I can live on my saving for approximately 12 months without the need of changing my lifestyle. Imagine you plan to start your own business or take a year off. At this savings rate, you will have a 1:1 ratio regarding the time you save money and the time you can use the saved amount to live on it.
Although I do not plan to quit my current job for at least another 12 months, I will keep saving as much as I can. Meanwhile, I do invest all my savings, but this is a topic for itself.
If you liked the article and would like to know how I invest my savings, leave a comment.
PS: Thank you for reading the article. You are awesome.