Within the FIRE movement community (remember, FIRE is an acronym for financial independence, retire early) there are different types of FIRE that people are pursuing, outside of the traditional one.
Deciding on which type of FIRE you're pursuing can make a big difference not only in what your eventual financial freedom number is, but also how fast you'll be able to FIRE yourself.
Remember that nothing you decide here is set in stone.
If you were already on the traditional FIRE path and feel inspired to take on, for example, the Lean FIRE path, that's completely fine! No judgment here. And if, in a year or so, you'd want to go from Lean FIRE to Coast FIRE, or Fat FIRE…that's fine again.
You're not a tree. You can change.
Traditional FIRE
This is the one pretty much anybody who has heard of the FIRE movement knows.
Calculate the annual expenses you'd have in retirement, then multiply those by 25, to ensure a safe withdrawal rate of 4%.
If you expect your annual expenses to be $60,000 during retirement, you'd need to have $1,500,000 invested in a simple low cost index-fund like the S&P500. Then each year, you'd withdraw $60,000 from your investment portfolio (Rule of 4%).
That is the simple version and explanation of Traditional FIRE. In a nutshell, this is a solid strategy, but there are absolutely some complexities behind it, though.
For example, this calculation is based on 25 years of retirement. Meaning that if you'd FIRE yourself at 35, you'd run into some issues around the 60-year old mark.
I'll tackle some myths and misunderstandings in another post.
But, if you're early on your FIRE journey, doing this calculation will already give you a good idea of where the puck (your portfolio) will roughly need to land in order for you to be able to FIRE yourself.
Most of the other types of FIRE I'll dive into now are defined both by portfolio invested and guesstimated annual expenses.
Lean FIRE
Also know as Minimalist FIRE or minimalFI (cause camel casing is a thing now), those that pursue Lean FIRE usually plan to live off ~$40,000 per year in retirement. Sometimes even a lot less.
Taking the calculation from traditional FIRE, they'd be able to FIRE themselves on $1,000,000 (40,000 * 25) vs $1,500,000 in the example above.
Living off $35,000 annually would mean a financial freedom number of $875,000. Which is almost half of the example above.
The ethos is simple: “Save/Invest aggressively now, live off less later as well”. In essence, to achieve Lean FIRE, most already live a minimalist lifestyle, which is what they'll also be doing once they've FIREd themselves.
A clear and substantial benefit of this FIRE path is that FIRE can be achieved a lot quicker when your calculated annual retirement expenses are considerably lower than that of most.
Playing your cards right, living off of a modest $30,000 annually can definitely be done.
Fat FIRE
Quite the opposite of Lean FIRE, Fat FIRE is where you want to spend at least $100,000 annually during retirement.
So, by taking the 4% rule, that tells us that the minimum to have invested when pursing Fat FIRE is $2,500,000.
In contrast to Lean FIRE, pursuing Fat FIRE will take a lot longer to achieve, but once it's achieved you can live it up.
You can cut down some of the time it'll take you to achieve Fat FIRE by learning a high-income skill. You then take that skill and find a job that has great benefits + start a freelance business where you offer other companies that skill.
Obese FIRE
Researching for this article, I'd never heard of this one before. I promise the next ones aren't weight/food-related.
Obese FIRE is for those wanting to retire with $5 to $10 million in the bank. Most likely, these won't be starting from scratch and had the privilege of having access to family capital.
With this path, you may only retire like 5 or 10 years earlier from your country's official retirement age, but you're spending and living that last chapter of your life as if you were royalty – nothing wrong with that if that's your jam!
Coast FIRE
Coast FIRE is when you have enough money saved up that, without any additional contributions, the growth on your initial nest egg will be enough to fully support your desired retirement lifestyle. This can happen because of the powerful concepts like time-in-the-market and compound interest.
With Coast FIRE, you save to a target number by a certain age and then stop saving and let compounding gains “coast” you to your ultimate target retirement nest egg, whatever that may be.
When you are close to your financial freedom number, maybe 80% of the way there, then you can make a big change like quitting your main job. Then, you can take on some side projects and/or build passive income streams so your basic expenses pre-FIRE are still covered.
Either way, you save half or potentially a lot more than that for a handful of years so you can jump-start your investments and take full advantage of compound interest. Then you only need to earn enough money to cover your expenses since saving and investing are no longer a factor.
Barista FIRE
Before I Continue
Before I go into Barista FIRE, it's important to mention that Financial Freedom doesn't mean you can never work again. It's giving you the option never to work again, if that's what you really want to do – and there's nothing wrong with that!
Financial freedom is making work optional
Foe example, I'm a Type 1 Diabetic, a TV & movie fanatic, and a screenwriter.
So, when I'm FIREd, I can definitely see myself taking up some caring or research job for a hospital or center specialized in T1 diabetes, or even take an unpaid internship at Marvel Studios.
When the burden of “I have to work” falls away, you can dedicate and spend your time however you wish. Even at taking on a part-time job, for example.
So, Barista FIRE
Now that that's out of the way, Barista FIRE is very similar to what I described above.
It's having enough saved up or invested that you're able to quit the job that you have to do, and maybe taking a part-time job at, for example, a Starbucks (hence the ‘Barista') for health benefits.
The majority of your living expenses are taken care of, and you have a lot of time on your hands to dedicate on creating new income streams.
The difference between Barista FIRE and Coast FIRE
This sounds very similar to Coast FIRE doesn't it?
The big difference is in that someone on Coast FIRE doesn't already withdraw from their portfolio, while someone on Barista FIRE does.
Your Why to FIRE yourself?
When choosing one of these types of FIRE, doing all kinds of calculations, reading up on books and other resources, scouring this blog, scrolling endlessly in subreddits, there's one element in the equation that you can never forget: you!
Do not get bogged down by any of these broad definitions. Do what makes sense for you. Do what helps your emotional reactivity when being in the market. Do what helps you and your family sleep at night.
If whatever plan that works for you has no label, or can't be smushed into one of these types – that's totally fine.
Keep sight of why you're doing all of this, and why you're putting in the work.
What type of FIRE hadn't you heard about before? And which type of FIRE are you pursuing? I'd love to know in the comments!
Additional Notes on The Different Types of FIRE
These 6 different types are just broad definitions, and some are heavily dependent on other factors like location.
In a LCOL (Low Cost of Living) area, traditional FIRE may be enough to actually be Fat FIRE. In a (V)HCOL area, Fat FIRE may not even cut it.
Some other types of FIRE
These are some other types of FIRE I've found when doing the research to write this post. I'll link to the Reddit post specifically, where the comments just turn into a big zone of LOLs.
HustleFIRE: start up a business side hustle and establish it until it can sustain you.
SEAFIRE: achieve LeanFIRE and move to South East Asia where the cost of living is very low.
ExpatFIRE: Same as SEAFIRE but you can move wherever you can. Remember; the nicer the country, the higher the cost.
HouseFIRE: invest in real estate, and live off the rent and the increase of the properties' price.
GovFIRE: FIRE for those who work in government. Uses advantages from pensions and contributions.
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