I’ve been around investing and finance for many years, and when I first heard of FIRE and people who studied FIRE, it felt like a cult. A close-knit community of people who were fervently supporting their lifestyles to do something that seemed unreal, can you retire early?
I judged a book by its cover and at a brief glance FIRE looked like a combination of being excessively frugal and minimalist and maybe after 15-20 years of living like a monk you then got to retire… and live like a monk for the rest of your life.
When my friend told me he was “into FIRE”, I didn’t really know what he meant. Two years after that, he retired, at age 33. We worked the same job, and I thought I was the “investing expert”, yet nowhere close to retirement. Obviously, I had missed something.
Let’s break it down, it’s really two separate things.
FI: Financial Independence
Financial independence is the freedom to choose what you do with your time.
Some people think this means being extravagantly rich, vacationing wherever you want, and buying yachts. It could be, but it’s simpler than that. Some people think this means retirement. Financial Independence means you no longer work, right?
It’s simply having the choice to do what you want with your time.
Personally, I don’t think I’ll ever lounge around and sip Mai Tai’s on a beach somewhere. It’s not my style. I will probably continue to work, but I will be able to choose what organizations I work for based on the value I get. I might work part-time.
It means that if I choose to raise kid(s), I can be around for their recitals and sports games in the day and do what I want.
Financial independence is the important part. Everyone likes the choice. You can do what you want — which may be the same thing you are doing today, but now you have the “f!@# you” money to say “no” if your boss asks you to do something you don’t want to do.
A great intro book on this topic is Choose FI.
Retire Early
This means you can quit your job before the “traditional” age of 65 (in the US.) If you get on track with a FIRE plan early, maybe that means mid-30s. For me, at 35, I probably won’t retire before my 40s. That’s still a potential for 20+ years of my life back.
I do want to emphasize again, that retiring early is a choice empowered by financial independence, and isn’t actually necessary, but it is part of the FIRE acronym.
FIRE itself can be subdivided into many types. While traditional FIRE is a lot about saving money and being very frugal, there are many other types of FIRE for different aspirations. Let’s go over them here.
Types of FIRE
Traditional FIRE
This method has a heavy emphasis on frugality and saving 50%+ of your income (can talk more about savings rates in future blog posts). The objective is to save 25-30x your annual spending and withdraw 3%-4% each year (see my post on The 4% Rule).
Lean FIRE
Heavy frugality. This method explicitly forgoes luxury experiences and embraces minimalist living. This will have a smaller nest egg than other forms of retirement. The nest egg here is typically $1 million or less. You’ll likely live in a smaller home in a low-cost-of-living (LCOL) area.
Fat FIRE
This is the opposite of Lean FIRE and seeks to live a lavish lifestyle. This usually requires a high income or exceptional investment returns. This could be living in a large house in a major metropolitan city like New York, Los Angeles, or San Francisco while supporting kids and traveling. Usually, the nest egg is at least $4-5 million.
Coast FIRE
This is an interesting approach where you front-load your investments in your earlier years and then leave the nest egg alone. While the investment continues to grow, you only work enough to cover your expenses, or “coast”. This prioritizes work-life balance and does a better job of optimizing your prime years.
Barista FIRE
Named after the stereotype of a retiree working part-time at a coffee shop. Typically someone spends some years in a high-income (and high-stress) job, but once a solid nest egg is built that can continue to grow, switches to a lower-stress job or one that provides more happiness or meaning.
Chubby FIRE
This is not quite Fat FIRE, but more than Lean FIRE. Often this is a $2-5 million nest egg, often leading a very comfortable life but not quite as lavish as Fat FIRE. Some see this as a balance between financial security and luxury.
The next few are rarer than the types above but worth mentioning in case they appeal to you.
Nomad FIRE
If you like to travel, this one is for you. Often you can save a lot of money by living in LCOL (low-cost of living) places, such as South-East Asia (Thailand, Malaysia, Indonesia, etc.). Some people do this by saving money from a high-income job and then retiring in a LCOL area, or you can simply maintain a remote job while living throughout the world. This philosophically leans towards valuing experiences and minimalism over materialism and possessions.
Flamingo FIRE
Flamingos are known for standing on just one leg, and so this method stands on “one leg” of your finances and investing part of the time. This often means you might work seasonally part of the year, or perhaps you take a sabbatical every few years.
Entrepreneur FIRE
If you manage to create a low-effort business that pays the bills, a business that creates recurring or passive income, this might be your method. It could also be getting to be wildly successful which allows you to retire from selling your company. Essentially, if you are starting a business, this is your approach.
Eco FIRE
This seeks to combine environmental sustainability with financial dependence, and might also be called DIY Fire. This could be farming your own food or finding other ways to live sustainably while reducing consumption.
Which type of FIRE appeals to you?
When I first heard about FIRE, I only knew about Traditional FIRE, and I did not like the frugality mindset so I turned away. That could be my own shortcoming and had I looked a little further, I may have realized that other methods would have been useful, and I could have been retired by now, or at least earlier.
If you’re looking for a way to financial independence, it could be useful to find one of the buckets above. Once you have chosen one, there are many specific resources at your disposal.
So, which bucket most appeals to you?
