Got laid off… – Bitcoin New Dad

You know what sucks?
Getting laid off.

You know what sucks more?
Getting laid off AND then not knowing how you are going to pay rent, tuition fees, medical bills, or handle other financial curveballs that life throws your way.

As a Dad, this is my worst fear. And recently, I was reminded how fast financial duress can creep up.

Until a few weeks ago, I had a coveted Product Manager role at Coinbase working in the crypto industry. I loved the work I was doing. And I was good at it. And I was getting paid handsomely to do it too.

But then, all of a sudden, that was gone.

On January 13, 2023, my team, and 20% of the company, was laid off as part of the January 2023 reduction in force.

And with it, a recurring paycheck.

Even though I was bummed about losing a job I loved, I am grateful I didn’t need to deal with the stress of answering, “how am I going to pay for ________ now?”.

Weathering a 10+ year storm

As part of my family’s journey to financial freedom, my wife and I have built an emergency fund that can weather a 10+ year storm. That means even if both or us lost our jobs AND all other passive sources of income too, we could still maintain our current lifestyle for 10+ years.

So, instead of stressing out about losing my job, I’ve been able to spend time playing with my son, reading, writing, relaxing with my wife at night, and planning a last minute opportunistic family getaway to Europe!

Why should you care?

According to CNBC, 2 out of every 3 Americans are living paycheck to paycheck…meaning every month, a lot of people are delicately balancing expenses to make ends meet. It also means if they were to get laid off (like I was), they would immediately fall into financial stress.

Being a parent is hard enough as is. And I believe no parent should have to go through the heartbreaking exercise each month figuring out how to pay rent, cover kids tuition fees, or settle large medical bills.

I also believe every parent can take a few simple steps to start building an emergency fund that can also weather a multi-year storm.

So I’m going to show you you how I’ve set up my family’s emergency fund. That way, you can use it as a blueprint for yours. (trust me, it’s simple to set up and simple to maintain!)

Question 1: How do I think about an emergency fund?

Right away, I mentally segment an emergency fund into a short term part and a long term part. That way, its easier to keep track. I also like to call it the “oh shit fund” and the “f*ck around fund” to make it easier to remember.

Short term emergency fund = “oh shit fund” Losing a job, like I did, would be an “oh shit” type of event. It would potentially trigger tapping into the “oh shit fund” in order to buy groceries, cover rent, pay off outstanding credit cards, or handle other monthly expenses.
Long term emergency fund = “f*ck around fund” Buying a house, going on a nice vacation, upgrading your car, etc., would potentially trigger using the “f*ck around fund”. Of course, if needed, it could also be used to pay for things like unexpected medical bills, ongoing tuition costs, etc.

Visually, it would look like this:

	“Oh shit” fund	“F*ck around” fund
Time horizon	Short term	Long term

Question 2: what goes into the emergency fund?

Within the “oh shit fund”, I keep it simple – I keep cash ($USD) because it is the most accessible. That means in a bind, I can easily go to the bank, get the money out, and immediately turn around to pay for something I need.

To be conservative, we keep roughly 1 years worth of cash accessible.

In contrast, the “f*ck around fund” is made up of investments (whether it be stocks, bonds, real estate, etc). These are things that you’d expect to go up in value when looking over a multi-year horizon. At the same time, they are things that might need to be sold at a discount (or even a deep discount) if you need to sell it in a hurry.

	“Oh shit fund”	“F*ck around fund”
Composition	Cash	Stocks Bonds Real estate

The biggest difference between most parents emergency fund vs. my family’s fund is that I think it’s important to have bitcoin in the mix.

	“Oh shit fund”	“F*ck around fund”
Traditional composition	Cash	Stocks Bonds Real Estate
New composition	^same	^same + bitcoin

With that said, by no means am I saying you should go all in on bitcoin. But I believe staying on 0% is also not smart.

Why? For me, bitcoin started out as a small part of my “f*ck around fund” back in 2013. Over time, because of how much it has gone up, it is now an important part of how my family can weather a 10+ year storm.

Since 2013, I’ve been studying bitcoin, and have developed a strong conviction that bitcoin will 100x from here. Throughout this blog, I’ll share why, but the key idea is that we’re still very early. Put another way, a small investment today matters because it can become a big part of your own “f*ck around” fund in the future.

And so that you know I put my money where my mouth is, the more I study bitcoin, the more bitcoin I buy for my family’s “f*ck around fund”, including when it was down at $16k just a few months ago.

Question 3: how big of a storm can I handle?

Using round numbers, let’s assume your family’s annual expenses are $100k. Of course, every family is different and this is just for illustrative purposes. (For my family, this amount is made up of how much our mortgage is, how much goes on our credit cards each month, how often we eat out, how many vacations we take, and a slush fund for other unexpected purchases).

Using this example, if you have $100k in your “oh shit fund” and $0 in your “f*ck around fund”, you could roughly withstand a 1 year storm.

If you have $1 million in your emergency fund (let’s assume $100k in the “oh shit fund” and $900k in the “f*ck around fund”), you could roughly withstand a 10 year storm.

Now of course, some of the investments in the “f*ck around fund” might not be worth as much as you think, especially if you have to sell it in a hurry. So to be conservative, I take a haircut on it. Even if the numbers show that my family could withstand a 20 year storm, I chop that down in half (to a 10 year storm) just to be ultra conservative.

The big picture

The core idea behind an emergency fund is to be able to deal with curve balls in life without going into financial duress. And the bigger the storm that you can endure, the better it is for your family’s sense of financial security!

2023 has been off to a rocky start already with over 200k tech workers losing their jobs in January alone. And the rest of year is on track to be to even more crazy…which is exactly why it’s important to make sure your family’s emergency fund is set up now.

If you have any questions, come say hi at @BitcoinNewDad on Twitter. I’m just a friendly Dad looking to help other parents get on better financial footing.

Thanks for coming by!

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