Financial Freedom with F-You Money

If you’re familiar with crafting budgets, then you have probably heard the term “f-you money”. I’ve seen the term described in one of two ways:

  • a SMALL pool of funds allocated for those types of monthly or quarterly purchases that would normally leave us feeling guilty.
  • a LARGE fund that can be used to retire early, take an extended sabbatical, or give us the freedom to leave a job we hate for a better position for lower pay

This post will focus on the smaller pool of f-you money as these purchases occur frequently and might occur as often as monthly.

For the best summary on the large fund, that I’ve ever come across, check out this awesome article from Jim Collins on Why You Need F-You Money.

F-you money, in the simplest terms, is money you can use to do whatever you want.

If we’re struggling to pay off our utility or grocery bills and then find ourselves closing out a $100 bar tab, then we probably should focus on those bills.

But if we’re aiming to put an extra $6,700 away this year to fund our two HSA accounts, then f-you money might be a $60 bottle of scotch we buy to celebrate. My girlfriend and I love all forms of whiskey so we can’t think of a greater way to use our f-you money category.

When used proactively, that is, when we decide weeks or months ahead of time that we’ll make that large purchase, then f-you money can HELP us achieve financial freedom by giving us a strong enough reward for hitting our financial goal.

By coming face to face with the realization that we do make unwise purchases from time to time, then at least we can begin planning around it.

To plan properly for using f-you money, start to save a small amount each month for that large purchase down the road. These savings aren’t considered ‘savings’ in the traditional sense, since we know we will spend it in the near future.

This approach also helps offset some stress that can be caused by diving too deep into frugality. I’m all for savings and eliminating unnecessary luxuries, but we don’t need to compromise on our happiness by dipping into austerity.

Allowing ourselves $100/month to live off of is not what would make us feel happy or financially secure.

As Oscar Wilde summed it up, “Everything in moderation, including moderation.”

From my own past, I had a terrible experience whenever I spent money outside of my budget. I would catch myself going out with friends and racking up a terribly high bar tab or I would join friends out to dinner and be embarrassed by how much the night would cost.

I enjoyed my time with friends or family, but the stress and guilt of careless spending became overbearing.

One approach my girlfriend and I take today is to aggressively save throughout the year, while still enjoying a big vacation once a year.

We know we can reach financial freedom sooner if we opt out of the vacation, but we also feel like we’d be less motivated to save throughout the year.

We often catch ourselves wanting to go out for a nice dinner instead of cooking on a saturday night, but we remind ourselves that we’re only X months away from a nice vacation. On vacation, we let loose a bit with our routine budget.

Do you splurge on any “unnecessary” items throughout the year? Do you allocate a small portion of f-you money towards larger purchases down the road?

Master Distiller

29 comments… add one
  • The Green Swan May 3, 2016, 6:11 am

    One of things we’ve always tried to do is vacation and we make room for this in our budget. We are relatively frugal otherwise, but we say to ourselves that life has to be worth living too. So whether it is a few long weekend getaways throughout the year or one longer vacation, we’ve kept our budget a little flexible.

    • Distilled Dollar May 3, 2016, 6:57 pm

      I heard a quote from somewhere along the lines, “Travel is the one thing you can purchase, that leaves you wealthier.” Somewhat cheesy, but I liked it!

  • Apathy Ends May 3, 2016, 7:21 am

    This is a constant battle for the frugal folk – cut out spending money on things you don’t care about and don’t feel guilty about things you truly enjoy

    • Distilled Dollar May 3, 2016, 7:02 pm

      Yep! I’ve found that purchasing experiences tends to be the easiest way to rationalize an expensive item. If I bought tickets to see a show, I receive the benefit of the show the night of, and I’ll always have the fond memory to look back on. Technically, the expense might not be efficient in my weekly budget, but at least I gained some efficiency and utility in the long run on the purchase.

  • FinanceSuperhero May 3, 2016, 7:46 am

    This is a constant battle for me and Mrs. Superhero. We are each allotted a set dollar amount for this kind of spending. I rarely spend all of mine, but just knowing it is there has helped us to stay on track. For a while, we didn’t budget this money, and it was much easier to grow apathetic and overspend on items that were not in the budget.

    To date, our biggest battle is similar to what you described, Matt: dining out.

    • Distilled Dollar May 3, 2016, 7:09 pm

      Dining out can be a dangerous trap! Same goes for us, knowing we set aside some money makes the experience much more enjoyable.

      Lately, we’ve cut back a bit on our dining out hobby as I’ve rediscovered reasons I love to cook. Cooking has become a double learning experience in terms of preparing good food WHILE ON a lean budget. It becomes double the challenge and double the reward when pulled off.

  • Jim @ Route To Retire May 3, 2016, 7:53 am

    Similar to the Green Swan, we’re also pretty frugal on most things while still leaving room for vacations.

    I’ve probably been a little looser with money over the years, but lately, I’ve got my game face on and I’m just focused on the prize at the end… financial independence. So I’m really pushing things to just edge every nickel into savings and investments.

    — Jim

    • Distilled Dollar May 3, 2016, 7:16 pm

      That sounds like a common path towards FI. The beginning stages can a rocky road but you end up hitting 100% spot on with a budget. Then as the years go by, things tend to loosen up. As the end nears, things almost go into hyperdrive.

      I’m not sure if you’re noticed the same trend, but I wonder if it is the norm or just a few cases I am stringing together?

      • Jim @ Route To Retire May 3, 2016, 7:58 pm

        Might be worth setting up a poll on your site to find out!

        — Jim

        • Distilled Dollar May 4, 2016, 7:45 pm

          Great idea! I forgot about this whole polling option, but it worked out better than expected on my Emergency Fund post the other week.

  • Amy May 3, 2016, 8:53 am

    As others have noted above, travel is a big one. It makes me an immensely happier human to be able to visit people I love and aimlessly explore.

    If I ever need a little pick me up, John Goodman’s The Position of Fuck You is a great reminder!

    • Distilled Dollar May 3, 2016, 7:19 pm

      That’s such a great point Amy! When I think of travel, my first though is exploring someplace new, but I do have some family members and close friends around the country. Those trips are always worth it in my book!

  • Stefan @Mllnnlbudget May 3, 2016, 10:27 am

    This is my argument to people who live cheap lives rather than frugal lives. A cheap life can lead to unhappiness as money dictates your life. We buy the cheapest food, clothes, rent, vacation (if that is allowed), all to achieve financial freedom. But is it worth it? I personally do not think so and judging by your post neither do you. We need to balance saving and happiness. It is a constant battle but one that needs to be well thought out. My biggest battle is bar tabs… us accountants always need a drink, or two, or more 😉

    • Distilled Dollar May 3, 2016, 7:22 pm

      Agreed! Booze can be a big dent in our budget, but even then, there are ways to offset some of the cost. Even though the scotch is $60, if we drink it responsibly, then it lasts us a couple months. Each weekend toast basically becomes another celebration of hitting our earlier financial goal.

  • amber tree May 3, 2016, 3:16 pm

    “splurging” is an essential part of our plan. We have different budgets for that. We each have our monthly fun money for personal clothes and any other item we want. No questions asked, none at all. If there is left over at the end of the month, we usually save it for a bigger splurge. IT is that system that paid for last weekend kids free weekend!

    Next to that, we have dedicated holiday funds. Yes, not having holidays will get us faster to FI. The price to pay now would just be too high…! I then prefer not to have a big fat car, not to have a 6 bedroom, 4 bathroom house…

    • Distilled Dollar May 3, 2016, 7:25 pm

      Great point with holiday funds! That was one category of my budget that I learned about…only AFTER my first budget went through the winter holidays. It happens once a year, but smart budgeting means you can properly plan for those routine once-a-year expenses.

  • Financial Slacker May 3, 2016, 4:07 pm

    Until I got better at budgeting and tracking our spend, I always felt guilty when I made a large purchase. Now, I have a line item in the budget and the guilt is gone. Even if I decide to go over the budget, I am making the choice and I know I may need to sacrifice somewhere else to balance it out.

    • Distilled Dollar May 3, 2016, 7:26 pm

      Removing the guilt was probably what made us move to action with our own budget. I hated ruining a good moment by having that pinch of guilt creep in.

  • The Practical Saver May 3, 2016, 7:03 pm

    Balance between saving and spending is something frugal people like me always think of. My wife and I keep a fund exclusively for vacation. We love to go on vacation. We believe that we are saving a lot that we can reward ourselves with vacation. This doesn’t mean that we spend a lot of money on vacation. We use ways to save some more money like cashing out our rewards dollars, doing some side hustles over the weekend, among others. We used the money not directly taken out of my paycheck.

    • Distilled Dollar May 3, 2016, 7:43 pm

      I feel like most people become spending machines when on vacation. I’m not sure what it is, but I still try to go grocery shopping while in a new place. I find it exciting and part of the adventure. We don’t stick to as many groceries while on vacation and we do splurge quite a bit on dinners out, but we plan ahead for that via our budget.

  • Mr. PIE May 3, 2016, 7:38 pm

    One of my rules of living is making sure the balance is always in check, for the most part….

    I also live by….

    ” Moderation in everything, including moderation”

    Now, where is that 16 year old Laguvulin…?!

    • Distilled Dollar May 3, 2016, 7:52 pm

      That quote summed it up so well. I almost felt the post had written itself when I wrote the quote, but then I only had 5 words and needed some filler.

      Cheers to Lagavulin!!

  • Preston @TheDrunkMillionaire May 4, 2016, 8:02 am

    We try to always have a small f-you fund. Similar to you, we usually spend part of it on a vacation, and the other part on some “big” purchase. This year, I bought a huge lawnmower so that I don’t have to spend hours mowing our 3 acre yard! 😉

    • Distilled Dollar May 4, 2016, 7:49 pm

      Damn, 3 acres! Here I was feeling pretty good about my ~48 sq. ft. balcony covered with some moss…

  • Vicki May 9, 2016, 7:02 am

    Love the post from @TheDrunkMillionaire Your time definitely matters! As I read others’ posts – the dining out is always an issue. As we get older, we notice that the dining out also becomes not just a financial burden but a “waistline” burden too! It is incredible how much food you get when you eat out (and we never order appetizers or dessert). We are trying to buy better quality food and try new recipes at home and we are really satisfied with the results! Tastes great, lower cost and time spent together. All “wins” in our book!

    • Distilled Dollar May 10, 2016, 6:06 am

      Cooking is so much more rewarding. You mentioned a few great points in that you can cook healthier meals that cost less AND you can have spend that time together as a couple. I also enjoy the process of learning new dishes or trying out different spices.

      When I share my thoughts with others who frequently dine out they usually don’t understand. They view cooking at home as a burden. Having shifted away from eating out and into cooking, I would say the hardest part of the transition is in the first 30 days. After that, I became more efficient and prepping, cooking and cleaning after meals. Small tips along the way help, such as measuring everything out before cooking or cleaning dishes as you cook.

  • Frugal Familia Jul 1, 2016, 4:21 pm

    I love that quote “everything in moderation, including moderation”. Like everything in life it’s all about balance. I make sure to treat myself to the things that make me happy. It just so happens whiskey is one of them for me as well. Speaking of such I think I’ll go start my weekend and pour me a glass of some Whistle Pig. Cheers

    • Distilled Dollar Jul 3, 2016, 4:50 pm

      I love that quote as well. It represents much of what I practice.

      Although I have never had Whistle Pig, I’ve heard good things. I recently finished off a bottle of Angel’s Envy that was great.

  • Lily @ TheFrugalGene May 11, 2017, 2:27 pm

    My only temptation is dining out. I can whip up a decent dish but eating out is just better. The mark up is about 75% more than if you buy the groceries (trust that I did the math in my head waiting in line for teriyaki :p) and make it yourself but ah, Matt, what is money if it’s not for some cheap thrills..

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