What is FI/RE? It stands for Financial Independence/Retire Early. The short version is you buy assets to generate enough income that you no longer need to work.

The long version? Well, every human will have a different path. No one’s budget, spending, investments, and risk tolerance look the same. But here are some broad buckets:

Traditional FIRE:

You save and invest until your portfolio is worth somewhere between 25-33x your annual expenses. Then if you’re using the 4% rule, you can withdraw 4% each year to live on. If you want to be more conservative, you can withdraw only 3% or 3.5%. For example!

Your expenses  =  $40,000 per year  

25x = $1,250,000

33x = $1,650,000

Lean FIRE:

Same idea but with really low expenses. What’s low? It depends on your definition, but I’d say anything under $40k/year for sure. Think lots of beans and rice. Thrifted clothes. No adding guac. A paid off house probably helps here, or you live in a low cost of living city. The upside is you can reach your FIRE goal much faster. The downside is you don’t leave a lot of room to cut your expenses if you need to down the road. 

I have hit Lean FIRE! I’m zero percent interested in living an extremely frugal life, but it sort of feels like the ultimate emergency fund.

Fat FIRE:

Same math, higher expenses. What you think of as Lean or Fat will be personal, but generally expenses over $100k would fall here. That means you’d need somewhere between $2.5M and  $3.3M on the low end.

Barista FIRE:

A close cousin to Lean FIRE, you supplement your income with a part time job that offers health insurance. Starbucks is one company that offers health insurance to people who work part time, but so do Costco, Lowe’s and plenty of other organizations. 

Coast FIRE:

You spend a handful of years saving and investing aggressively, then let time and compound growth do the heavy lifting. Let’s say you think you want $1.2M to retire at 67. If you have $100k invested by the age of 30, you could never invest another dime and still hit that number. (I’m assuming 7% returns.) So if you’re 30 and have 100k, you only have to earn enough to cover your living expenses. That might free you up to take a lower paying job or to work part time between now and then.

I have hit Coast FIRE! In fact I’ve hit some combination of Coast and Traditional: if I stopped investing now in my 30s, I’d still probably have enough to retire early, likely in my early 50s.

Liz FIRE:

This is a very important and official method. Every year you say you want to retire in 5 years. And you do that for 10 years. But every year you also remember you like your job a lot, your lifestyle gets a little more expensive, and you discover that maybe you don’t want to retire early after all. Maybe you just really love your financial spreadsheets? Can your full time corporate job just be your Barista FIRE job? 

What’s your goal? Has it changed or have you had your eye on the same target for a while?