Financial Independence, Retire Early (FIRE) is becoming an increasingly popular topic of conversation. The FIRE goal is to save and invest enough of your income to reach financial independence and no longer needing to work to cover expenses. Then you can retire early and enjoy the freedom of being job free. There is no single path to achieving FIRE. There are a few variants for financial independence, retire early. Let’s take a closer look at each of these approaches.
Traditional FIRE involves setting a goal of saving and investing enough money to be able to cover your living expenses indefinitely. This usually requires setting aside a significant portion of your income each month and investing it in stocks, bonds, mutual funds, and other investments. The amount that you need to save depends on your planned retirement age, desired lifestyle, and investments’ rate of return.
The traditional approach focuses on slow, steady growth of your savings over time. It may take several years—or even decades—before you reach your goal of financial independence. This approach is relatively low risk and provides steady and reliable growth over time.
Lean FIRE follows the same principles as Traditional FIRE but your savings and investments are much smaller, meaning you can reach FIRE sooner. This requires reducing expenses to the bare minimum. Being frugal and minimalist are the defining traits of Lean FIRE.
If you want a good standard of living, Lean FIRE is not the final goal but a Traditional FIRE milestone. Having enough passive income to cover essential living expenses (rent, food, medical bills, clothes etc.) is truly empowering. If you lose your job, you are safe and have little to worry about.
Fat FIRE is the opposite of Lean FIRE. This approach aims for passive income that greatly exceeds one’s essential living expenses to enable ‘the good life’ to be enjoyed. Typically, people who reach FIRE in their early years, and then continue to either work their day job or have built their side hustle into a strong business, can achieve Fat FIRE. By continuing to add to the Traditional FIRE pot, you will benefit from continued compounding of a large sum of money.
Coast FIRE is where you have saved and invested enough money that you can leave it alone for some time. You ‘coast’ to your Traditional FIRE target number due to the power of compounding without needing to save aggressively. A slightly different approach is Flamingo FI, where you save roughly half of your Traditional FIRE amount, then let it quietly compound for 8-10 years to reach your FIRE number while working a job to cover your lifestyle expenses.
Barista FIRE is a relatively new approach to financial independence. By combining investment income with a part-time job (usually something “fun” like barista work), you can have raise enough income to sustain your desired lifestyle. With this approach you can enjoy the benefits of financial independence while still having the security of a steady income.
In conclusion, there is no one way to FIRE given the variants for financial independence, retire early. Each has its own advantages and drawbacks, so it’s important to consider your options and find the best fit for your lifestyle and goals. Financial independence can be a great way to have more freedom and control over your own life.
John is a freelance B2B writer, investor, and blogger. A large part of his writing experience has been as a writer/designer in the training department of a large regional retailer based in Portland, Oregon. He currently resides in the other Vancouver (in Washington state) with his wife and two pet dwarf rabbits.