FIRE (Financial Independence, Retire Early) is a lifestyle movement where you are able to retire in your 30s or 40s by gaining financial independence through means other than your Nine to Five job. They are able to achieve this through a combination of frugal living and early investing. The idea came about in the early 2000s, but the movement had not picked up momentum until recently when more people decided to actively pursue it or at least consider it.
We decided to work towards the FIRE movement in 2021 when we finally started accumulating wealth. We were able to build home equity and build a brokerage portfolio through simple money-saving tactics and consistent saving and investing (read: 10 Ways to Save Money at Home)
People often believe that people who aim to reach FIRE are not living their life to their full extent. Although it's not entirely untrue, there is a spectrum in the FIRE community. While the more frugal group called "Lean FIRE" may live a simpler lifestyle that requires less spending, many people in the FIRE community live a more moderate lifestyle focusing on making smart financial decisions (read: Smart Money Habits We Try to Follow).
Common FIRE types
As mentioned above, there is a various spectrum in the FIRE community. The order from extremely frugal to the people who want to retire with abundance is below:
1) Lean FIRE: Lean FIRE achievers typically want to retire as early as possible by living on less than $40K per year. They are okay retiring with less than $1M as their spending is already low and do not have to wait longer. This group tends to retire in their thirties.
2) Barista FIRE: Barista FIRE is a type who is retired from their day jobs and mostly has the freedom to do what they desire. However, in order to cover additional, or non-essential expenses, they can supplement their retirement distribution with side income or occasional part-time jobs.
3) Regular FIRE: This group of FIRE achievers follows the traditional methods of needing a typical annual distribution of $40K - $100K. In order to achieve $40K per year for living expenses, you will theoretically need $1M dollars in savings/brokerage account to withdraw 4%, if that is the only source of income. Due to this high dollar amount requirement, it takes longer than the first two groups.
4) Fat/Luxury FIRE: This group of FIRE achievers is for people who want to live the upper-middle-class lifestyle and need more than $100K in distribution per year. They want to afford a nicer home, expensive holidays, or even to cover the expenses of others like parents or children. Typically you will need to have more than $2.5M in savings/investments.
5) Coast FIRE: Lastly, the Coast FIRE achievers are a group who have achieved a retirement amount early on and does not have to invest any more into their account. Therefore, they are able to earn just enough to cover their current expense. This is similar to being semi-retired or Financially Independent.
Our Plans
Our goal is to achieve a hybrid of the Regular FIRE and Coast FIRE categories. We want to be financially independent of having to work the nine-to-five grind, but we also want to stay active in our future endeavors. By reaching financially independent status, we can freely pursue careers or companies that we enjoy or work on other ventures like real estate investment or small business.
Regular FIRE
In order to reach FI, we are currently working towards paying off our two rental properties by the mid-thirties followed by paying off our primary residence by our late thirties. In addition, we are simultaneously building our brokerage accounts. When we no longer have a mortgage payment, our expected monthly living expense will be $3000 ($36K per year).
Living Expense | | Income | |
Grocery | $700 | Rental 1 | $1,000 |
Shopping | $300 | Rental 2 | $1,000 |
Restaurants | $350 | Dividend | $1,000 |
Gas / Insurance | $200 | | |
Misc. | $450 | | |
Prop. Tax | $1,000 | | |
Total | $3,000 | Total | $3,000 |
Our two rental properties will be able to generate a cash flow of $1,000 each while a distribution from our brokerage account will be able to generate another $1,000 per month in living expenses. At this point, we will have reached "Financially Independent" where our passive income will be enough to cover our living expenses (read: How to Buy an Investment Property every 3 Years).
$12,000 (desired yearly distribution) = $300,000 (required
0.04 (safe distribution rate) savings/investment)
Coast FIRE
Once we have reached the Financial Independence stage, we plan to continue acquiring additional rental properties while pursuing careers in companies that we enjoy working in.
Living Expense | | Income | |
Grocery | $700 | Rental 1 | $1,000 |
Shopping | $300 | Rental 2 | $1,000 |
Restaurants | $350 | Dividend | $1,000 |
Gas / Insurance | $200 | Rental 3 | $1,000 |
Misc. | $450 | Rental 4 | $1,000 |
Prop. Tax | $1,000 | | |
Total | $3,000 | Total | $5,000 |
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