The Better Letter: F*** You Money

Money money money money money. Money.

We’re going to talk a bit about personal finance at TBL this week. Be careful, please, with the videos. Some are quite NSFW.

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F*** You Money

Tom Hanks is surely America’s favorite actor. He is also probably its best. He holds those unofficial titles partly because his unique persona – the reliable and relatable everyman who succeeds in extraordinary times – fits so seamlessly into how America wants to see itself.

Plus, he’s super-nice and has had a long career but never had to issue a public statement that included anything like the phrase, “I’m sorry if you were offended.” Hanks is so well regarded that the current administration uses him to narrate a new video, released yesterday, touting President Biden’s accomplishments over his first year in office, intoning gravely that the country is “stronger than we were a year ago today.”

Hanks has been in a long line of terrific movies – A League of Their Own, Big, Sleepless in Seattle, Splash, Sully, That Thing You Do!, A Beautiful Day in the Neighborhood, Cast Away, and more – made great in no small measure due to his outstanding performances. He was the first actor since Spencer Tracy to win consecutive Oscars, for Philadelphia and Forrest Gump, yet was somehow even better in later movies like Apollo 13, Saving Private Ryan, and Captain Phillips.

The guts of that resume, the roles that made Tom Hanks a bankable, A-list movie star, are the result of Turner & Hooch. That’s right. Hanks owes his superstardom to a fine but forgettable Disney film wherein a dog shares titular billing.

Before T&H, Hanks was mostly known for television (Bosom Buddies, plus appearances on Happy Days, The Love Boat, Taxi, and Family Ties) and for comedies, largely of the “bro” variety (Bachelor Party, Volunteers, Dragnet, Punchline, The Money Pit, and The ‘Burbs). He was in 15 mostly blah films and showed promise, but he didn’t look much like the best actor of his generation.

Tom Hanks then walks out of the 80s and starts crushing it in the 90s. All because of a cop-buddy comedy where one of the buddies is a dog.

Turner & Hooch wasn’t Tom’s first big payday…

…but it gave him enough money that he could evaluate and recalibrate the direction of his career. The money gave him the freedom to turn down payday scripts to take on riskier projects of higher quality. In the movie universe, and elsewhere, it’s called “f*** you money.” I’ll let John Goodman explain.

The earliest reference to the term I can find is from 1971. The exact definition varies, from having enough money to be able to walk away from a job or situation without having any short-term worries, to the amount of money it takes on a digital jukebox to skip everyone else’s choices and play your song next, to having so much money that you can say “f*** you” to everyone and everything if you want, without consequences.

Maybe it’s the amount of money you’d need to get a face tattoo without it mattering.

Nassim Taleb offers a reasonable starting point. “F*** you money” is “a sum large enough to get most, if not all, of the advantages of wealth (the most important one being independence and the ability to only occupy your mind with matters that interest you) but not its side effects, such as having to attend a black-tie charity event and being forced to listen to a polite exposition of the details of a marble-rich house renovation.”

Taleb being Taleb, he’s contradictory.

Nassim Nicholas Taleb @nntaleb

@digvijoy_c @sothisispietro F u money does not exist. Most people turn money obsessed once they have it.

My friend Brian Portnoy describes (a version of) it as “funded contentment,” – “the ability to underwrite a meaningful life – however one chooses to define that.”

The requisite amount will vary significantly from person-to-person, household-to-household. FIRE-folks have far different expectations than those looking to live their best lives on the Upper East Side of NYC.

The variables are insane, too. Housing costs vary widely across the country (the median home price where I live in SoCal is around $800,000; it’s $150,000 in Davenport, Iowa) and Fidelity estimates that about 15 percent of the average retiree’s annual costs will be used for healthcare-related expenses, including Medicare premiums. That means a retired couple, age 65 in 2022, may need something like $300,000 (after tax) to cover their healthcare expenses in retirement.

Your personal health can change in an instant. So can your job status.

Thanks to decades of low interest rates, most of us don’t worry about how rising inflation might scramble a nest egg, either. The costs of Bengay, barbiturates, and booze can go up and up while the buying power of your portfolio goes down, down, down. A three percent annual inflation rate over 25 years — higher than we’re used to but a lot less than the seven percent we’re seeing right now — would mean you’d need twice as much money to live on then as you do today.

Compound interest won’t look so miraculous in that setting, much less if inflation stays higher for long.

Perhaps most disconcerting about all this is that we have such little control over outcomes. Super-safe investments aren’t likely to outpace inflation, even if current levels are transitory, eroding your buying power, perhaps by a lot. On the other hand, while stocks are generally a great long-term investment, you have no control over when (or even if, truth be told) your returns will show up.

Very roughly, stocks have historically returned about ten percent per year. For example, since 1928 (from whence we have decent data), the S&P 500 has returned 10.12 percent annualized, including dividends (6.90 percent real). However, we don’t see average-ish returns very often. During those same years (1928-2021), the S&P 500’s return was between eight and twelve percent just four times.

Similarly, annualized returns over rolling 20-year periods vary widely – from around five percent to around 17 percent. If you retire at an unlucky time (as the commercials are required to say, past performance is not indicative of future results), and particularly if you see portfolio losses early in retirement while funding your lifestyle therefrom (“sequence risk”), things can get ugly in a hurry.

And no matter how carefully you plan, there’s no telling what might happen to Social Security and Medicare in the future, how estate, inheritance and other taxes might change, how much you think you should or want to leave your kids (if anything), the impact of disasters, natural or man-made, or you might suffer the best possible bad news (or enjoy the worst possible good news): living a lot longer than you have any right to expect (we routinely underestimate how long we’ll live in retirement).

The requisite amounts even vary for the same person over time.

To state the obvious, those of us who think in these terms are crazy privileged. More than half of Americans have less than three months’ worth of emergency savings, much less adequate retirement savings; one-quarter have none at all.

The straightforward lesson here is to save early, save consistently, save more, invest wisely, and plan carefully. A less obvious lesson is to pay attention and, when you have won the game – funded your contentment, irrespective of whether you require some sort of FU amount – to stop playing. Your “f*** you” can be delivered to market risk, too.

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Totally Worth It

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Benediction

This week’s benediction is a beautiful rendition of my much-better-half’s favorite hymn, sung by Carrie Underwood and CeCe Winans.

To those of us prone to wander, to those who are broken, to those who flee and fight in fear – which is every last lost one of us – there is a faith that offers hope. And may love have the last word. Now and forever. Amen.

Thanks for reading.

Issue 98 (January 21, 2022)