Financial Independence, Retire Early (FIRE) Explained

I stumbled upon Financial Independence, Retire Early (FIRE) when I was fresh out of the military working my first corporate job. Within three months, I realized how much I hated corporate life. I didn’t imagine myself doing this for 40 more years until retirement! I was living almost paycheck-to-paycheck while bringing in a six figure salary. So I started looking for a side hustle and then I discovered FIRE (pun intended). 

I read all about FIRE and I was immediately hooked. That’s how Millennial Money Veteran came to be. If you’re like old me, let me explain the idea to you.

What is FIRE

FIRE is a movement that has gained popularity over the past few years, as people seek to gain control of their financial futures and retire early. The basic idea behind FIRE is to save and invest aggressively, with the goal of reaching a point where you no longer need to work for a living.

There are different variations of FIRE, each with its own approach and level of financial freedom. In this post, we will explore five popular variations of FIRE: FIRE, LeanFIRE, FatFIRE, BaristaFIRE, and CoastFIRE.

FIRE 

FIRE can be used as the general term that encompasses all the other variations of FIRE or it can be used as a middleground between LeanFIRE and FatFIRE. FIRE aims to achieve financial independence and early retirement, but without sacrificing too much in terms of lifestyle. FIRE practitioners typically aim to retire with a portfolio that provides enough income to cover their basic living expenses, as well as some discretionary spending.

LeanFIRE

LeanFIRE is the most frugal version of FIRE. The idea behind LeanFIRE is to live on as little as possible, in order to save and invest as much as possible. LeanFIRErs aim to retire with a portfolio that provides enough income to cover their basic living expenses. This often means living a minimalist lifestyle, with a focus on reducing expenses and saving as much money as possible.

FatFIRE

FatFIRE, on the other hand, is the opposite of LeanFIRE. It is a more luxurious version of FIRE, where the goal is to retire with a larger portfolio, and the ability to maintain a more comfortable lifestyle.

FatFIRE practitioners are often able to retire earlier than LeanFIRE practitioners, due to the larger size of their portfolios. They may also have more expensive hobbies and interests, and may choose to travel more frequently.

BaristaFIRE

This is a variation of FIRE where you have saved enough money to retire early, but you still work part-time to cover your basic living expenses. The idea behind Barista FIRE is to have more flexibility and freedom in your lifestyle, while still earning some income to supplement your savings.

The term comes from taking a job as a Starbucks barista because Starbucks offers their employees health insurance, which is something that traditional retirees would have to pay for. Individual health insurance is VERY expensive as it’s not employer-sponsored. While a job with health insurance may cost you less than $100 a month for coverage, individual health insurance can cost you hundreds a month. 

CoastFIRE

CoastFIRE is when a person has enough in their retirement accounts that without any additional contributions, their net worth will grow to support retirement at a traditional retirement age. It’s considered more of a milestone since the person will have to continue working until they reach the retirement age they may want to retire. Furthermore, the idea behind CoastFIRE is to “coast” towards early retirement, rather than working hard to reach it as quickly as possible.

Regardless of which variation of FIRE you choose, the key to achieving it is to save and invest aggressively. This often means cutting expenses, living below your means, and investing in assets that have the potential to grow over time. Many FIRE practitioners also choose to increase their income through side hustles or starting their own businesses.

It’s important to note that these definitions are not strictly followed. For example, a person who is aiming for FatFIRE may not be saving as aggressively because that person is a high-income earner who expects to continue earning more and wants to live lavishly in the present and during retirement. You can also read how I’m aspiring to FIRE here.

FIRE Isn’t For Everyone

FIRE is not for everyone. It requires discipline, sacrifice, and a long-term commitment to your financial goals. For anyone who is working towards FIRE, they need to have a solid understanding of personal finance, investing, and risk management. 

There are many reasons why people don’t pursue FIRE. 

1. They don’t mind working until the traditional retirement age. 
2. They don’t think it’s achievable.
3. They don’t want to make sacrifices now for the future. 
4. They can’t delay gratification.
5. Etc.

Regardless of what other people may say, FIRE is achievable as I’ve seen people do it at a young age. 

Final Words

Regardless of which variation of FIRE you choose, it’s important to stay committed to your goals. The key to achieving FIRE is to have a realistic plan, a long-term commitment to your goals, and to save and invest aggressively.

One of the best ways to stay committed is to periodically review your FIRE plan and to stay connected with the FIRE community on Instagram and Reddit. By interacting with the FIRE community, you’re able to learn from others and you’re able to bond over a similar goal. Like the saying goes, “if you want to go fast, go alone. If you want to go far, go together.”