FIRE (Financial Independence Retire Early)


FIRE or Financial Independence Retire Early is a movement that has gained a lot of traction in recent years. The movement is focused on people achieving financial independence prior to the typical age of 65. Many people dismiss the movement due to the amount of work and dedication required to achieve the goal of FIRE.

Those who practice FIRE tend to give up luxuries in the short term to achieve their long-term goal at a faster rate. The overarching theme of FIRE is to cut back on spending and eliminate wasteful uses of money. Although not a one-size-fits-all movement many people go to extremes such as saving ¾ of their annual salary to retire at an early age. The end goal of FIRE is to utilize the 4% rule to make your money last forever. The 4% rule is how much a retiree should withdraw from their account for their money to last forever. In FIRE this amount should be able to cover your yearly expenses. Thus, achieving financial independence.

FIRE isn’t the same for everyone and in fact, there are many different subcategories. The 3 most common are:

  1. Fat FIRE
  2. Lean FIRE
  3. Barista Fire


Fat FIRE is the most luxurious of the FIRE culture. This subcategory has practitioners spend north of 200k per year. At a 4% withdrawal rate those who practice Fat FIRE have invested ~$6 million at approx. an 8% return. Unlike many other subcategories of FIRE, this subcategory does not require the person to be frugal. In many cases, they are able to enjoy many luxuries in life and not sacrifice any part of their lifestyle.

Fat FIRE also allows for the greatest margin of error. As previously stated to be able to maintain a lifestyle of withdrawing ~$200,000 per year an 8% return on ~$6 million is necessary. As we know stock markets, housing markets, or whatever means you are using to achieve this rate of return are impossible to predict. Fat FIRE allows practitioners to cut back on spending when necessary to reflect the types of returns they are noticing.

The downside to Fat FIRE is very evident. The average person makes nowhere near 6 million in their life. It is possible to achieve Fat FIRE through doing work on the side and maintaining a low-key lifestyle but without a high-paying job and significant dedication Fat FIRE is very difficult to achieve.


Lean FIRE has the same infrastructure as Fat FIRE. Cut back on needless spending, save more, etc… The difference is that Lean FIRE requires practitioners to live a minimalist lifestyle, spending south of $40,000 per year. To achieve this goal those who practice Lean FIRE have invested ~$1 million at approx. an 8% return.

This method only allows people to cover their basic living necessities as well as transportation and other minor expenses. Achieving this lifestyle requires far less commitment and is achievable by many regardless of income. This frugal lifestyle tends to be appealing to people that already live a frugal lifestyle and prefer not to work for the remainder of their lives.

Barista FIRE

Barista isn’t so much about the retire early part of FIRE but instead the financial independence. Those who practice Barista FIRE are attempting to acquire enough money to now have to work their typical day job. Instead after acquiring enough money, they leave their day job to live the lifestyle they want while working part-time. To supplement their income they may take on a job as a barista hence the name. This method is also appealing to many who have jobs that provide healthcare or offer life insurance. If they were to fully retire this would require them to carry this burden on their own.

This method not only requires less initial investment but also allows people to maintain a happy lifestyle that can often be provided by a job that you enjoy. Often in retirement people can become bored or lack things to do. This method allows a good balance without the commitment of having to work to pay the bills.

Whether or not you end up pursuing one of the subcategories of FIRE it is definitely worth your time to look into them. Each category can teach you lessons applicable to personal finance that help you achieve your goals.

For more personal finance information make sure to check out Instagram @therichcollegestudent. If you have any suggestions for topics make sure to leave them in the comments and leave a like if you enjoyed reading.

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