JL Collins Explains FU Money vs. FI Money

Summary

Financial experts JL Collins and host Andy Hill define 'Fu money' - having enough savings to make bold decisions - versus 'FI money' (financial independence) which frees you from required work. Collins shares how small savings empowered him to take a 4-month trip without quitting his job. They discuss how financial independence brings freedom and purpose without necessarily retiring fully. Collins advocates living below your means, eliminating debt totally, then carefully considering major purchases like houses so they don't curb your financial freedom. His new book 'Pathfinders' features diverse people successfully working toward financial independence.

Takeaways

• 😀 Fu money provides flexibility to make bold career decisions, like taking a sabbatical
• 💰 Fu money is having enough savings to not live paycheck to paycheck
• 💡 Fu money shifted perspectives showing options for career flexibility
• 🤝 Fu money allowed negotiation with an employer for career flexibility
• 🌟 Financial Independence (FI) means your money covers living expenses so work is optional
• 🚀 To calculate if you've reached FI, multiply yearly spending by 25. That's the savings needed.
• 🏠 Don't buy an expensive house unless you need it. It won't help reach FI.
• 📉 Inflation helps those investing, not those just spending paychecks.
• ✂️ To move towards FI, cut expenses ruthlessly including housing/cars if needed.
• 📚 Pathfinders book shows FI journeys from many backgrounds, not just privileged.

Q & A

What is the difference between Fu money and FI money?

Fu money gives you enough financial cushion to make bolder decisions and negotiate better, while FI money means you have saved enough that work has become optional as your money can support your needs.

How did having $5,000 in savings help JL when he was younger?

It allowed him to negotiate a 4 month leave from his job to travel Europe while still having his job held for him when he returned. This showed him the power of having savings to open up new possibilities.

What does being financially independent (FI) specifically mean?

When you have enough money invested that is generating enough income to cover all of your basic living expenses so that you are no longer required to work for money.

What lifestyle options open up when someone achieves FI?

Complete control and flexibility over how to spend your time. No longer being required to work gives the freedom to pursue other interests full time, travel extensively as desired, or even go back to work if missing purpose.

Why does JL dislike the term 'retirement'?

He feels it causes people to get hung up on definitions, when the reality is most pursue engaging work in some form after leaving their career jobs. He prefers focusing on the flexibility and options unlocked by FI rather than retirement specifically.

How does investing help withstand inflation?

Stocks have historically performed very well over longer periods despite inflation. Investing savings primarily in the stock market will provide inflation protection compared to holding cash.

What financial advice does JL have around home ownership?

Don't buy unless you truly need to, and buy the least expensive house that meets your needs. Houses are lifestyle expenses, not investments, so buy only what is affordable to you.

What first step does JL recommend for paycheck-to-paycheck living?

Take an honest look at current spending and make the hard choices to cut expenses where possible in order to spend less than you earn. This may include lifestyle downgrades to free up money to build savings.

What inspired JL's new book Pathfinders?

The many stories he received after The Simple Path to Wealth from people all over the world adapting his FI principles to their unique situations and cultures, despite humble beginnings in some cases.

What cross-section of people achieved FI in Pathfinders?

The book shares stories from child migrant farm workers to Silicon Valley tech workers all reaching FI, putting to rest the myth that FI is only for the privileged.