FI, FIRE, & FIBER – Choosing Your FI Adventure:
There are many varieties of the FIRE movement, but they all share the same basic requirement to prioritize the saving of income early in your career. Focus on this aspect before worrying too much about how you’ll retire early. Once you have a good savings plan, shop around the FIRE types to find a strategy that works for you.
I vividly remember when it occurred to me that abundant wealth was truly obtainable for even someone like myself. It was life-altering.
The idea that I could realistically reach a point in my life where work may become optional (before I was like 100) was enthralling. From then on, my financial decisions were made with that end goal in the back of my mind.
I didn’t know it, but the term financial independence had been coined to summarize my newfound approach to money.
Though it isn’t a new idea, the internet has provided a platform for a new crusade of financially independent-minded folks to join forces, share ideas, and even develop various flavors of what is now commonly known as the FIRE Movement.
F.I.R.E. is an acronym for Financial Independence, Retire Early. Basically, in its purest sense, the idea is to accumulate as much money as possible, as quickly as possible, with the ultimate goal of walking away from traditional work forever.
For a lot of people, this is an ideal circumstance, but you don’t need me to tell you that we’re all different.
For the purposes of this post, we’ll assume the readers all want more wealth.
However, not everyone wants to stop working.
Some people are appalled at the idea of living a minimalist lifestyle on a relatively low income just to avoid having to report to the office each day.
Some people may want to work, just not at the job they have now.
Some people want financial independence, but they want it to the extent that they’re never limited on how much they can spend.
You see, there’s a different brand of FIRE for all of us. And, as you might imagine, the list of acronyms and types of FIRE has grown to account for all of these unique scenarios.
What follows is a description of the ones we know about so that you can think through your own approach and goals for financial independence.
F.I. – Financial Independence
We’ve already touched on financial independence a bit, but we’ll go ahead and define it again for the sake of establishing a basis for the rest of the post.
Financial independence is having enough wealth to cover your expenses for the rest of your life without having to depend on income from an outside source.
For me, this would be the point where my assets are either sufficient on their own or generating enough income on their own that all my living expenses (both wants and needs) are comfortably covered for the remainder of my life.
This is a simple enough concept to understand, but it doesn’t mean financial independence looks the same for everyone.
When my grandfather passed away, he wanted for nothing financially. He had a steady pension income and social security, plus a farm in central Alabama that he lived on for most of his life.
That farm was really the only asset he had. No one would have accused him of being rich, but in his eyes, he was financially independent.
There are plenty of people who are able to live on less than $30,000/year and are equally content to do so.
Then, there are others who want nothing less than a six-figure income even in retirement.
They can both reach FI, but the actual net worth for each would need to be drastically different. So begins the alphabet soup of FI acronyms for most versions of financial independence that are being pursued today.
F.I.R.E. – Financial Independence, Retire Early
Easily the most commonly known form of FI types, FIRE has exploded in popularity over the last decade.
The FIRE concept was first introduced in the popular book “Your Money or Your Life” by Vicki Robin and Joe Dominguez in 1992.
The idea was to motivate readers to align their financial goals with their lifestyle goals in order to achieve a higher degree of happiness and satisfaction.
It may not seem revolutionary now, but at the time very few people envisioned, much less realized, a lifestyle that would allow them to effectively exit the workforce before their 60s. People just didn’t do that sort of thing back then.
Well, as Bob Dylan would say, “the times they are a-changin”.
In a 2021 study, Vanguard found that 22% of millennials had ambitions to retire before age 60. Another study by Goldman Sachs revealed that 25% of Gen Z adults plan to retire before the age of 55.
It’s safe to say that FIRE has moved beyond the “fad” phase and is now a mainstream idea.
Yeah, yeah, so what is it?
I’m generalizing, but for the most part FIRE followers seek to save most of their income (usually at least 50%, but up to 80% or more in cases) in order to fund an early retirement.
The idea is to sock away as much savings as possible, forgoing many of the “fun” expenses common amongst one’s peers, for the sake of retiring in your 30s or 40s. (Though some manage to pull this off in their late 20s.)
Why?
Well, I guess there are millions of answers to that question. Based on the FIRE blogs I’ve followed and read in the past, most seem to either hate having to answer to a boss each day or are eager to be independent of someone else for their income and thus, funding their lifestyle.
For many, the goal is to save 25 times one’s annual expenses in order to step away from their traditional employment. So, if one has monthly expenses of $5,000, they’d need $60,000 annually ($5k x 12) or $1.5M ($60k x 25) total to reach their FIRE number.
One characteristic that was historically common among this group was the tendency to also live a very frugal/minimalistic lifestyle. As varieties of FIRE have appeared, the lean approach to FIRE came into its own classification.
Lean F.I.R.E.
The hallmark of Lean FIRE is minimalistic living in order to advance one’s retirement date even more.
Naturally, the less you spend in retirement the less you’ll have to save before retirement. If you don’t need to build as large of a nest egg then it won’t take as long to get to your goal.
Again, I don’t think the FI piece of the Lean FIRE acronym is all that controversial. What some people have difficulty stomaching is the idea of living the remainder of their lives on a minimal income.
Typically, those who retire early in this method have no debts, spend very little, and are careful budgeters.
Since Lean FIRE-ees are focused on having just enough to cover essential expenses like food, shelter, and basic utilities, they don’t typically apportion funds for vacations or expensive entertainment.
Many live less traditional lifestyles and may seek out uncommon measures for saving money like growing their own food and choosing to ride bikes over using cars for transportation.
And I say more power to them. I think there is a lot to be learned from the hyper-efficient way Lean FIRE-ees tend to live.
It may not be for me personally, but who am I to judge? Et vivere, reservate, you know?
Fat F.I.R.E.
On the opposite end of the spectrum is Fat FIRE.
As you might have guessed, Fat FIRE is characterized by much higher levels of spending in retirement.
The approach to saving is similar, but Fat FIRE-ees must build a much heftier nest egg in order to fund, not just basic living expenses, but also a standard of living that may exceed even that of their working years.
Typically, Fat FIRE-ees have goals to travel frequently and enjoy life on their terms, without having to worry about money.
Naturally, since this requires a larger nest egg it also means it will typically take people longer to reach Fat FIRE goals.
Another helpful feature of Fat FIRE is the flexibility that comes with having a larger nest egg.
While there may not be much margin in the budget of a Lean FIRE retiree, Fat FIRE-ees can more easily absorb shifts in economic stability and their retirement savings.
Barista F.I.R.E.
One of the challenges to early retirement is figuring out how to cover some basic, but expensive needs like health insurance.
Barista FIRE is a method by which early retirees can obtain some of these benefits by working part-time, even if they have enough money to retire.
Barista FIRE is also for those who may want to retire and are pretty sure they have enough to do so but have difficulty overcoming the mental challenges of not bringing in regular working income.
By working part-time or in a lower-paying but less stressful job, Barista FIRE-ees can sample a little of both worlds without fully committing to either.
Coast FIRE
Coast FIRE is a strategy that calls for workers to save very aggressively early in their careers, then less so over time.
The idea is to build a large chunk of savings quickly that will provide enough momentum for one to “coast” into their retirement years without having to sacrifice throughout their careers.
Naturally, the dollars saved earlier in life have more time to compound than those saved later. By focusing on saving on the front end, Coast FIRE savers do the heavy lifting early in order to take it easy later.
Coast FIRE-ees may save up to 80% of their desired savings goal before stepping out of their present career for something less stressful or even part-time.
Some are known for starting a business or launching some other endeavor for which they have a deep passion to pursue. By having a strong start, they can go after these other goals without having to worry about saving quite so much.
Other Forms of FIRE
I had seen all of these acronyms before writing this post, as well as a few others. However, as I conducted my research I found that there are many, many more. (Traditional FIRE, Obese FIRE, Slow FIRE, Flamingo FIRE, FIBER, and Baby FIRE to name a few.)
Ultimately, all of these acronyms are rooted in some version of financial independence which happens to be the focus of this blog.
It was our primary motive in creating the Next Dollar Roadmap and I hope you’ll glean something from it regardless of which brand of FIRE you choose to follow.
In any event, it’s up to you. Take this post as an opportunity to think about what fits best into your own personal goals and formulate your own strategy to meet them.
But remember, you’ll get there faster with a plan. Naturally, we recommend that you follow ours.
F.I.A.S.A.P.R.W.I.G.A.R.
This is a really terrible acronym, but since there are so many what is one more going to hurt?
Financial independence as soon as possible, retire when I’m good and ready is my own personal FI approach (and I suspect for many others).
The truth is none of us know what the future holds. While I agree goals are useful and can be helpful tools for motivation, they can also change; and the distance between my age now (41) and retirement is significant enough that I suspect my goals will change in that time.
When I was in my 20s the idea of being able to walk away from traditional work was more appealing than it is now. Age has brought more responsibility, new goals, and more income.
I also actually enjoy the work I do now and have a degree of concern that not working would leave me feeling restless and useless.
The truth is I’m not sure I’d quit working even if I had the financial opportunity to do so.
On the other hand, not being financially independent is an unsettling position for me. If I were to be laid off like I was in 2015, I would have to find another job to replace that income. Financial independence would mean that I don’t have to carry that concern anymore.
So, my goal is to get to FI as quickly as possible. Not because I want to quit working, but I want to be able to work (or quit) on my terms.
Ultimately, money is a tool. It won’t make you happier, but it can certainly provide you with options and flexibility that can significantly improve your quality of life.
So, there you have it: F.I.A.S.A.P.R.W.I.G.A.R.
Just rolls off the tongue, doesn’t it? Maybe I should go with FIRO (Financial Independence Retirement Optional)?
Challenges to F.I.R.E
The concept of early retirement certainly sounds enticing, but even if you obtain the cash to pull it off, there are a couple of other hurdles to navigate in order to retire early.
Medical Insurance
You’ve probably noticed that medical insurance is expensive. Well, it’s less expensive than a major medical event.
If you’re retired and living on a relatively inflexible income, a major medical expense could be devastating to your FIRE plans.
You have to have some sort of coverage to mitigate that risk and without a job ad group insurance, it can be very expensive to obtain.
Your options are usually going to be limited to an insurance exchange created for your state. These plans can be costly, but if your income is low enough (here’s looking at you lean FIRE folks) the federal government will subsidize much of this cost.
Early withdrawal problems with tax-advantaged accounts
A secondary issue people run into is the fact that many retirement accounts that have tax savings features like an IRA or 401(k), also restrict withdrawals before the age of 59.5.
There are some methods around this requirement which you can read about here.
Regardless of which path you choose, if much of your wealth exists in these accounts the earlier you can make plans for tapping these funds, the better.
Boredom
I’m just throwing this in here because in most cases the people I’ve followed who realized their FIRE dreams later returned to the workforce.
I’m not saying it will happen to you, but you should spend a lot of time thinking about what exactly you plan to do with all of your newfound free time should you retire early.
Even if you don’t want to work at a traditional job once you retire early, you might have some backup plans for how to make productive use of your free time.
If you retired at 40 and have a life expectancy into your late 70s, you’ll have 35+ years of free time to fill. This can be more difficult than some people expect so take some time to think it through.
