FIRE, FIRE, FIRE.
So, what exactly is FIRE all about?
TLDR; Financial Independence: Retire Early.
Thus, which FIRE are you working towards?
There are several variations on the FIRE Movement.
First, the classic and traditional FIRE.
The Classic and Traditional FIRE
Some people define financial independence as saving 25 times your annual expenses. While some may argue that it means having enough money in the bank to say “F U” and pursue something you truly enjoy.
In reality, this is quite subjective. Since everyone has unique life goals, there is no one-size-fits-all solution. In theory, the primary aim you are pursuing is to acquire the life you desire by saving it during your youth.
With that in mind, let’s look at the various forms of FIRE.
If you live a frugal lifestyle and wish to continue doing so in retirement, Lean FIRE may be something you’re striving for.
The best way to conceive of this is FIRE on a much smaller scale. You may be living a more minimalist lifestyle because saving money is an important component of your life. You’ve established yourself as a master at managing expenses, keeping costs low, and strategies that capitalize to simplify your life without sacrificing comfort throughout the years.
Many Lean FIRE enthusiasts, according to Investopedia, live on $25,000 or less per year.
Lean FIRE is someone who is exceedingly frugal, whilst Fat FIRE is the polar opposite? Yes, to a certain extent.
People in this category save actively while maintaining their quality of living. Indeed, these folks earn more money and have more money at their disposal to cover bigger costs. Essentially, I see this as FIRE on steroids, where we may achieve Financial Independence while living a more lavish lifestyle.
In recent years, Barista Fire has grown in popularity. Barista FIRE are for those who desire to exist somewhere between the two options listed above (Lean FIRE and Fat FIRE). They abandoned their typical 9-to-5 employment and work a part-time job to supplement their income.
This may be thought of as part-time FIRE. This eliminates the need to work full-time, as you will not be required to work 40 hours a week. Instead of working in a corporate setting, you can work at a coffee shop, participate in the gig economy, or work for a restricted number of hours each week.
The benefits are that you are not working yourself to death in order to attain FIRE, but you may reach some kind of financial independence. This is ideal for those who are unsure about the notion of early retirement and wish to put it to the test. Furthermore, it allows you to explore some of your passions, side hustles that you may want to undertake full-time.
Finally, the Coast FIRE is a lesser-known FIRE.
Coast FIRE is about having enough money invested at a young age that you no longer need to invest since compounding will fund your lifestyle.
Before you submit the letter, you must perform the following calculations:
- What are your currency savings and spending habits?
- A simple rule of thumb for FIRE is to save 25 times your annual costs.
- Calculate a cautious compound interest return (56%).
Is FIRE something for you?
There is no “ONE FIRE” that everyone should follow.
Many people adore the notion of FIRE because they despise their jobs and want to get out of the rat race as soon as possible.
It is a common misconception that retiring early means never working again. It’s more about having the freedom to work when and how you choose. Ultimately, you don’t need a corporate income to enjoy your life, nor are you reliant on a job to make ends meet.
Personally, FIRE to me means
- Having Options
- Doing what you love
- Being in control
- Having a safety net
These are the factors that motivate me to pursue FIRE. What’s intriguing about the aforementioned FIRE kinds is that there are variants that go beyond the fundamentals of FIRE. Furthermore, when others began to embrace and create new varieties of FIRE, it piqued my curiosity even more.
Disclaimer: The information provided by LearnToInvest serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock.