Fat, Lean, Coast, & Barista FIRE [Early Retirement is for Everyone]

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Retirement is like a never-ending vacation. You can’t wait to get there, and you’re perhaps thinking you no longer want to wait until you’re 65 to retire. However, you don’t know how to retire earlier. So, what’s the secret to early retirement? Well, it’s Financial Independence, Early Retirement (FIRE).

The concept of FIRE was inspired by Vicki Robin and Joe Dominguez’s best-selling book Your Money or Your Life. It’s a movement that encourages people to save a large chunk of their income and live off modest withdrawals so that they can retire earlier than the typical retirement age of 65.

Many people assume that FIRE is only for people who earn a substantial living, typically those whose salaries reach six figures. However, anyone and everyone can benefit from the movement’s concepts, which provide a helpful blueprint on how an individual should manage their personal finances and retirement savings in a way that is conducive to the success of FIRE.

What Is Financial Independence, Retire Early (FIRE)?

Financial Independence Early Retirement (FIRE) is a movement that emphasizes the goal of achieving financial independence and retiring early. The idea is to accumulate enough savings and investments so that you no longer need to rely on traditional employment income to support yourself.

Instead, you can use the income generated by your investments to cover your living expenses, giving you the freedom to retire early and pursue other interests or hobbies.

To achieve FIRE, individuals typically focus on saving and investing a significant portion of their income, often 50% or more. They may also look for ways to increase their income, such as starting a side business or investing in real estate. Additionally, many FIRE enthusiasts adopt a frugal lifestyle and strive to reduce unnecessary expenses, in order to save as much money as possible.

While FIRE can be a powerful tool for achieving financial independence and early retirement, it requires a significant amount of discipline, sacrifice, and planning. It’s important to note that not everyone is suited to this lifestyle, and it may not be the best choice for everyone.

Several FIRE retirement variations have emerged, catering to different types of lifestyles that FIRE followers can maintain.

Pros and Cons of FIRE – the Pros

Pros Of FIRE

Being able to successfully manage your time. Those who retire in their 30s and 40s, rather than their 60s and 70s, have more time to pursue and enjoy their hobbies.

Improving the ability to live within one’s financial means. Many working-age adults experience “lifestyle inflation,” also known as “lifestyle creep,” which occurs as their income improves and they spend more. Advocates of early retirement and financial independence must learn to live frugally since this will allow them to save more money in the long run—even if they do not retire early. And those who truly enjoy FIRE love challenging themselves in this regard. FIRE followers are efficiency nerds and proud of it.

Creating a life that is both meaningful and exciting. Early retirement can be liberating since it allows you to break free from work life. There are more opportunities to follow one’s passions when money isn’t a primary concern.

Pros and Cons of FIRE – the Cons

Cons Of FIRE

The unpredictability of the future. Although many people who plan to retire early have carefully arranged their finances, the future is unpredictable. Tax rates might change at any time, or a natural disaster could strike your home, impacting even the best-laid out financial plans.

Professional opportunities are limited. If someone achieves FIRE and then realizes it isn’t fitting for them, or for some reason has to re-enter the workforce due to an unexpected life event, reintegration into “normal” society may be difficult. Without a history of consistent job experience, one’s skill set may not meet the economy’s needs, making job hunting extremely challenging even in the best of conditions.

FIRE is difficult! Even the most hardcore advocates of financial independence and early retirement will tell you that the lifestyle is challenging. You must be able to adapt to some extreme savings techniques required to accomplish it, as well as bear the effects that it has on day-to-day life. Extroverts, for example, may find it difficult to avoid social activities such as dining out or traveling with friends. Others might struggle to develop a sense of personal identity that isn’t centered around a job.

Types Of Financial Independence

Fortunately, there are various types of FIRE types to suit everybody. A lot of people are turned off by the idea of having to be frugal for the rest of their life, but that is not the case. Let’s take a look at some of them.

Types of FIRE #1 – Fat FIRE

This option is for someone who leads a certain lifestyle and wants to save significantly more than the typical worker without sacrificing his or her existing way of living. To make it work, you’ll need a huge salary plus aggressive savings and investing tactics. It’s basically living in luxury depending on where you live, as people who opt for this option spend upwards of $100k or more per year to fund their lifestyle during retirement.

Types of FIRE #2 – Lean FIRE

This necessitates a considerably more constrained lifestyle, requiring a tight commitment to minimalist living and high savings. Many lean FIRE supporters generally live on $25k to $35k per year.

Even though lean FIRE people live on a small amount of money per year, that does not mean they are being frugal with their money. Many followers of Lean FIRE chose to travel all over the world and live as a nomad. Living in certain countries can reduce your cost of living drastically, and we are not talking about pinching pennies, these people eat and do what they want and still spend way less than we do. Something to think about if you love traveling.

Types of FIRE #3 – Barista FIRE

Perhaps you have enough money to retire on lean FIRE, but you’d like to stay a bit safer and have some part-time income coming in whenever possible. This allows you to have the safety net of your retirement savings while also being able to do work you love. Additionally, you won’t be stuck in a traditional 9 to 5 job.

Types of FIRE #4 – Coast FI

Coast FI is not a complete FIRE strategy, but it’s a way to save aggressively for a shorter amount of time and then “coast” along the rest of your journey towards full FIRE. The way it works is you save enough money until you have enough that’ll grow (when properly invested) to the amount you need to retire at the traditional age of 65.

Once you’ve hit that milestone, you can have a bit more peace of mind knowing that you’re set for retirement when it comes. From now on until the age of 65, you just need to make enough money to cover your expenses. If you make enough plus some to save, even better!

How to Manage Your Finances For FIRE

Regardless of your income, when it comes down to it, just one element determines whether you will be able to retire early: Your savings rate. Your savings rate is simply the percentage of your yearly income that’s being put towards retirement, commonly into a mix of stock and bond index funds. The savings rate you are able to achieve determines the number of working years you have left before you can fully FIRE.

Take a look at some examples below:

  • If you save 30% of your annual income, you’ll be FIRE in ~58.3 yrs 
  • If you save 40% of your annual income, you’ll be FIRE in ~37.5 yrs
  • If you save 50% of your annual income, you’ll be FIRE in ~25 yrs 
  • If you save 60% of your annual income, you’ll be FIRE in ~16.6 yrs
  • If you save 70% of your annual income, you’ll be FIRE in ~10.7 yrs 

How do we get to these calculations? Let’s take the middle example, saving 50% per year.

Assume you make $100k per year. Since you’re saving 50% of that, you’re living on $50k per year. In order to retire on $50k per year using the 4% rule, you’ll need to amass a nest egg of:

  • $50k x 25 = $1.25 million

If you’re saving $50k a year, you’ll get to $1.25 million in approximately:

  • $1,250,000 / $50,000 = 25 years


All of these above calculations are very conservative calculations, as they don’t assume any investment returns on the money you’re investing.

That is, whatever money you put into your retirement portfolio is all the money that’s being accounted for. In reality, you’ll probably get to your FIRE number sooner because the stock market historically provides decently sized returns on average.

Tips on Handling Your Money Before And During Retirement

During your saving years, consider a mix of stock and bond indexes. The closer you are to your prospective retirement, the higher your bond indexes should be weighted in relation to your overall portfolio. For example, if you’re 20 years old, you can have an 80/20 ratio of stocks to bonds, and if you’re 50 and nearing retirement, consider something more conservative like a 50/50 or 40/60 ratio of stocks to bonds.

Also, be sure to adhere as much as you can to the 4% safe withdrawal rate. This is hugely important. The Trinity Study shows that in order to have a 95% success rate in your money lasting you for all of retirement, you need to follow this rule closely. That is, for every year during your retirement, only take out 4% of your savings. If you need more than that for the year, you’ve got to find a way to make it outside of withdrawing it out of your retirement portfolio.

Track Your FI Ratio

In addition to your savings rate, you should keep an eye on your FIRE ratio, often known as your FI ratio. It’s the percentage of your current monthly expenses that your passive income will cover. For example, if your monthly expenses are $2000 a month, and your passive income covers $200 of that, your FI ratio is 10%. When your FI ratio reaches 100 percent, you are officially considered to be financially independent.

You can consider retiring if you feel like it. Or if you love your job or would rather play it a little safer, you could always stay in it. However, be aware of “just one more year-itis.” It may never end.

Alternatively, you could always do Barista FIRE and transition to part-time hours at your current job, or even take on a whole new part-time job. Last but not least, pay attention to your asset allocation. As mentioned above, you should go more aggressive in your portfolio the earlier you are along your journey. As you get nearer to your target retirement date, scale back and up your bond holdings relative to your stock holdings.

You’ll want less volatility as you near your goal. If the stock market declines 20% on your very first year of FIRE, your odds of surviving retirement with the money you have go down significantly. Having more bond holdings helps to alleviate these large swings in the market. When you’re at the point of FIRE, income stability and reliability are more important than growth. 

Final Thoughts: Is FIRE Worth The Trouble?

You should know that choosing a FIRE lifestyle means you are giving up certain things. And some people do well with that choice, while others have a hard time with it. You may have to restrain from spending as much as possible so that you can achieve financial stability as quickly as possible.

That includes reducing living expenditures and discretionary spending. You’re essentially holding back on things like extravagant vacations and nights out with friends in exchange for financial freedom.  

Nonetheless, many FIRE advocates find it a very satisfying lifestyle. Yes, there are trade-offs, but learning to budget effectively is a game many around the world enjoy. And you’ll soon learn that a local hiking trip with family and close friends can be just as satisfying as an expensive beach getaway.

The amount of FIRE-related sacrifice you and your family must make, on the other hand, is defined by your income and life goals. It may be worthwhile to strive for a simpler, less expensive lifestyle that values experiences above material belongings, especially if it allows you to achieve financial independence sooner rather than later.

What do you think? Is this life for you? Let us know your thoughts!

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