As with people, FIRE (financial independence retire early) comes in various shapes and sizes. It’s not a one size fits all type of thing.

If you are reading around the subject of FI more generally, you may come across a few variances which the I thought it would be interesting to explain all in one place – this is where things get very millennial! In this post we will look at lean, fat, coast and barista FIRE.

Updated: 26 Jan 2022

Traditional FIRE (tradFIRE)

If you have already read the Start Here post (and if you haven’t already, go check it out here), then you will already know that the traditional definition of FIRE is when you accumulate 25 x yearly expenditure in invested assets. This is your pot of gold which then produces enough passive income each year for you to withdraw 4% (which is broadly considered to be a safe withdrawal rate) each year to cover your annual expenditure.

In this scenario, your pot of gold will keep producing that passive income forevermore (and will continue to increase with inflation) in without depleting the capital. This is backed up by a famous study (the Trinity Study) which ran the numbers and concluded that a 4% safe withdrawal rate will maintain your capital for a 30 year period. Since then, people much smarter than me have reviewed the study and concluded that your pot of gold would actually likely last forever. This is pretty cool!

Lean FIRE

Lean FIRE follows the same principles as Traditional FIRE but your pot of gold is much smaller, meaning you can reach Lean FIRE much more quickly.

The way to calculate Lean FIRE is the same as Traditional FIRE (25 x annual expenditure). However, Lean FIREists reduce expenditure to the bare minimum; most will aim for a passive income of $30k – $40k (some even less). The Lean FIRE lifestyle is defined as being pretty frugal and minimalist.

For the majority of people who still wish to maintain a good standard of living, Lean FIRE is often a milestone on the journey to tradFIRE rather than the end goal itself. A very important milestone at that! Knowing you have enough passive income to cover all of your essential living expenses (rent, food, medical bills, clothes etc.) is really powerful. If you lose your job tomorrow, you are safe and the show will most definitely go on.

Fat FIRE

If Lean FIRE is all about living frugally, then Fat FIRE is the opposite end of the spectrum. Those seeking Fat FIRE will aim for a passive income of much more than their yearly expenditure to enable them to enjoy ‘the good life’. People aiming for Fat FIRE look to achieve $100k – $200k passive income (which is equates to a HUGE amount invested!).

Typically, people who reach tradFIRE in their early years, and then continue to either work their day job (as they now love it as the stress of being fired is gone) or have built their side hustle into a strong business get to Fat FIRE. These people continue to add to their tradFIRE pot and benefit from continued compounding of a large sum of money.

The result is something quite magnificent and is what the MMG is aiming to achieve.

Coast FIRE & Barista FIRE

The final two mainstream FIRE variances are Barista FIRE and Coast FIRE.

Both are interesting concepts and can be either the end goal or other milestones on your FIRE journey. Even if you have only a modest amount saved today, you may already be at Coast FIRE and not know it (especially if you are still young).

• Coast FIRE is where you have saved up enough money that if you now just leave it for a period of time you will get to your tradFIRE number due to the power of compounding. You ‘coast’ to traditional retirement age without needing to save aggressively on the way. For example, if you want $1m at age 60 to retire and are now 30 years old, then assuming an 8% return on average, you only need $100,000 invested at age 30 to get there. A variant of this is Flamingo FI (which is awesome and is the route some of my friends are taking) which involves saving roughly half of your tradFIRE amount, then letting it compound in the background for 8-10 years to reach your tradFIRE number whilst working a job which only covers your lifestyle expenditure.
• Barista FIRE is similar in many ways to Coast FIRE, though slightly different. Barista FIREists save a smaller pot of gold, and then supplement the passive income it generates by taking on a ‘fun’ job (coffee barista being one of them!).

Those who are really seeking Lean, Coast and Barista seem to me to kinda hate their job and are looking for a bit of a shortcut to allow them to quit. I’m all for empowering people and if this gives you enough comfort to go live your dreams then go for it! For me personally, anything less than tradFIRE is too much of a financial risk. I’d prefer to pivot my career and find a job I like and continue on the FIRE journey for longer. What’s right for one person, is not necessarily right for another. Do your own research and calculations and see where you land!

One more thing…finding nirvana

For my mental health, having a specific FI number in mind to shoot towards is really helpful. It now guides my decisions and gives me a reference point. But the real number which you need to hit before quitting may be quite different, and will likely change over time depending on how life goes (for example future kids and spouses may change the dynamic somewhat). Most of the traditional FI blogs miss the human element which is this:

You won’t truly reach financial independence until you feel freedom, you feel you can quit your job and will be happy and you feel that you are free.

Reaching this state of (financial) enlightenment is the true nirvana of the FI movement.

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