Why Fire?

Jonathan and I are on a path to fire because we want to live life on our own terms. We don’t want to be tied to any job or employer. We don’t want the stress of needing a job. Being stressed out at work sucks!  We don’t want to deal with that anymore.

Our Path to Fire

If you recall from our article on the Fire Fundamentals (and you can read it here if you don’t!) I mentioned that there are four steps to getting on a path to fire. Step 1 is learning about Fire – I think I have that covered. Step 2 is deciding what you will be comfortable with. The third step is to make a plan for getting there, and the final step is to execute that plan.

What type of Fire will I be comfortable with?

I know we want to travel, so lean fire probably isn’t for us. But we also want to have a comfortable, secure traditional retirement (We absolutely don’t want to be in poverty when we are seniors!), so we need to at least get to Coast fire. We want to be financially independent as soon as possible, and we decided that we will probably need about 60K per year to be comfortable. We are also ok with working odds and ends types jobs, so I’d be totally comfortable with a barista fire type of lifestyle (financially independent, but taking an easy part time job to fill any holes that come up or for extra spending money).

How are we going to get there?

Sixty thousand dollars per year without working a full-time job seems pretty daunting. We need big gains and passive income! I got super lucky with real estate – and by getting lucky I mean I bought at a great time in a market that would only increase. My big gains could come from selling the house! But we also knew that meant we couldn’t stay in the crazy expensive metropolis of Los Angeles. We needed to find a new city in order to really capitalize on those real estate gains. 

Passive income is the real key though, so we needed to figure out a way to generate income without working. Blogging and Investment funds for the win!

Executing the plan

The first step to executing the plan was selling the house in a high COL area and moving to a low COL area. Done!  We packed up and moved from Los Angeles, CA to Savannah GA. Next, I used  my new found capital to set up diversified investments and open an account with Vanguard. Third, we dedicated ourselves to working like crazy for these next three years to shore up our investments and ensure that we are 100% ready to take that plunge into early retirement.

Related: Which Vanguard Total Market Fund should you chose?

We also set up additional income streams. We launched this blog, and have dedicated ourselves to updating content and marketing it whenever we can. I went back to my travel blog and updated the content, adding affiliate links and increasing the social media presence. Every little bit helps!  Every cent we can make via blogging gets us one step closer to freedom (full disclosure, we haven’t really made anything blogging yet. But Partners in Fire is super new, so we are hoping to generate some income off it in the coming months!)

I also have my 401K account for additional income when I reach retirement age, a pension, a Real Estate Investment Trust (REIT), and a few individual stock holdings. These different types of holdings should ensure that we are well diversified and should provide dividend income when we are ready to stop working.

Not Your Plan

We get that not everyone owns a home in a high COA area, and not all those who do will make huge gains by selling. That’s why my path may not be your path. Don’t worry, there are tons of other ways! Check out this small list of personal finance bloggers to see their paths to fire. You can take what you like from each and start your own journey!

Other Paths

 Downsize your 2080’s  Path to Independence involves downsizing the amount of time spent working. Some paths are simply about finding that work/life balance! Check out how they do it here!

Fifty Week Vacation is investing in both the stock market and real estate to create short, medium and long-term cash to achieve FIRE. Read about their investment journey here!

Saving Sherpa is perusing FIRE by putting experience over luxury, not having kids, and saving 70% of his income w/o side hustles. Read more about his $26k/yr Boston lifestyle here!

Military Dollar is going to achieve Fire by taking advantage of the programs offered to members of the armed services and creating multiple streams of retirement income. Follow her journey and learn some additional awesome finance tips for service members here!

Tread Lightly Retire Early is going to reach Fire by living an eco-friendly life and cutting spending to maximize their savings rate while minimizing their carbon footprint. Find out how they help the planet while gaining independence here!

What’s your Path to Fire?

As you can see, there are lots of different ways to get to financial freedom. There isn’t a one size fits all approach. And these blogs I listed are just a small sample of the paths different folks are taking, there are thousands more out there. Hopefully you will get some ideas from these and other blogs about what will work for you.

What does your path to Fire include? Do any of these bloggers resonate with you?  Is there a totally different path that I’m missing?  Let me know in the comments!

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Fire FundamentalsBy now, all of you lovely readers should know that we here at Partners in Fire are on a dedicated quest for Fire. Many of my PF friends who tag along with us on our journey are very well aware of the concept of Fire, but this is for my friends in other niches who may not understand it as well. Have you ever asked yourself what the Fire Fundamentals are?  If so, this post is for you!  We’re going to talk about the basic concept of Fire and some of different terms you may see thrown around the PF community. Hope this helps!

Fire Fundamentals

Ok, so let’s start with the basics. What is Fire? You will usually see it written as an acronym – FI/RE. I shorten it to Fire because hashtags don’t understand that a backslash is part of the word; and because it’s easier to type. FI/RE stands for Financially Independent/Retired Early. Basically, it means that you can afford your life without having to work a job. It means living your life on your own terms, not on some employer’s terms. It’s a lofty goal indeed, but I think it’s achievable.

Types of Fire

There are a few different terms that are thrown around the FI/RE world, and they can be confusing. For example, I recently learned that I have enough money in my 401K to be Coast Fire for a Lean Fire. What does that mean?

Coast Fire

Coast Fire means that you have enough money in savings to have a comfortable withdrawal rate when you reach 65 years old. It means that you no longer have to contribute to your retirement account. However, you don’t have enough money to live off before you reach retirement, so you still have to work. Coast Fire is a great goal post, especially because nobody wants to be destitute when they are at retirement age.

Related: Vanguard’s three Total Market Funds explained

Coast Fire is generally calculated based on expected returns. For example, I’m at Coast Fire in my 401K right now, but that’s only because I have thirty years for it to grow. If I magically became 65 tomorrow, I wouldn’t be able to retire. Coast Fire takes expected returns into consideration.

Barista Fire

Many people consider Barista Fire to be basically the same as coast fire. They call it Barista Fire because you just have to go work at a coffee shop to pay your basic living expenses. In my personal opinion, there is a slight difference between Coast FI and Barista FI. With Coast FI, you probably have to stay at your crappy job that you are trying to escape in order to afford your living expenses. In my view, Barista FI means you can take a stress-free part time job to pay for your living expenses. I may be the only person in the world who differentiates between the two though. Some people use them interchangeably.

Lean Fire

Lean Fire means being financially independent on forty thousand dollars per year or less. The people who do this are your frugal warriors, your minimalists, and your extreme couponers. These people are freaking amazing savers! They prove that you don’t have to be rich to be financially independent. Lean Fire is a viable option for tons of people! 

So, when I say that I’m at Coast Fire for a Lean Fire, it means that if I stop contributing to my 401K right now, when I’m 65 years old I’ll be able to withdraw forty thousand dollars per year and be ok. This is assuming that my investments yield decent returns for the next 30 years.

FI/OR

This is the new acronym that you might see floating around the inter-webs. FI/OR means Financially Independent/Optional Retirement. This is for those folks who love their jobs, but also want the security of knowing they don’t need their jobs. They can quit anytime they want. They work because they want to work (novel concept, right?). I actually want to achieve FI/OR. But I don’t want to keep the job I have now. I want to have the financial security to pursue my passions (anthropology, travel, and writing). 

Paths to Fire

There are thousands of paths to Fire. Some people know they want Fire before they even head to college. They scrimp and they save and they work through college, get amazingly high paying jobs upon graduating, and work their tails off for 10 years to call it quits in their 30s. Others are happy being Lean Fire. They work and save and live off the land as much as possible, so they don’t have to rely so much on money. Still others set up side hustles to get there. Everyone’s idea of why they want Fire is different, so everyone’s path to Fire is different. The only thing that really matters is whether or not your path works for you.

This blog outlines our path to Fire. But our goals aren’t your goals, and our path to Fire may not be your path to Fire. That’s ok!  It’s all about sharing in the journey and supporting each other on our different paths. Maybe part of our journey will inspire you, maybe not.

 

 

How do I start?

Well, you are reading a blog post about the different types of Fire, I think that’s a great start!  Step 2 is to figure out what kind of Fire you’d be comfortable with. Step 3 is figuring out how to get there (make a plan!). And step 4 is executing that plan (do it!).

Looking for more information on Fire?  Check on the Reddit page for financial independence, that’s where I first learned about Fire! (feel free to share my blog on Reddit while you are there!)

Did you find this quick break down of Fire fundamentals helpful?  Is there something that I missed? Let me know in the comments!

 

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Hey folks! Transparency Disclosure- Some of the links in this article are affiliate links. That means I’ll receive a small commission if you decide to click on it and buy something. Don’t worry, it doesn’t cost you anything! extra!

Was it Luck?

When I tell Jonathan we got lucky with real estate, he tells me it wasn’t about luck. I know, it wasn’t entirely luck, it was a lot of research, a lot of watching what the market was doing, and a lot of buying and selling at the right times. But did luck play a role?

I bought my condo in Los Angeles in 2011, when the housing market was still struggling and properties were relatively cheap (for Los Angeles, they were still crazy expensive!). I couldn’t afford a single-family home, even then the best single-family homes I could afford either needed a whole lot of work or were in the middle of extremely questionable neighborhoods. If I was going to buy, it would be either a condo or a town-home.

 

I decided to buy a nice two-bedroom town-home in a safe, gated community. The town-home was brand new when I bought it, which was a big plus! It also had solar panels, an electronic water heater, and a bunch of other energy efficient upgrades. It was in a nice community with a pool, a basketball court, and park. It was a great first home!

Related: Are you a Real Estate Agent trying to sell a home? Have you tried Clicky Homes*?

 

lucky with real estate

I loved my town-home, and I loved my life in Los Angeles. I had amazing friends, a great job, and a beautiful town-home. But sometime in 2016, I realized that I was working to basically pay for my house. The mortgage payment and HOA fees ate up more than half of my monthly income! I also realized that the housing market had made a pretty amazing recovery. The homes in my area were selling like hotcakes, at prices 40% higher than what I had paid. Jonathan and I talked, and we decided it was time to move.

 

Hard work can lead to getting lucky with real estate

Getting the house ready for sale was a huge project. Jonathan is amazing at things like this, he helped me so much! I don’t think I could’ve done it without him (Another reason why having in partner in fire is beneficial, wink wink). He said we’d sell the house faster if it was a blank slate, and he worked diligently for a month to get it ready for the market.

We got rid of all our extra stuff (yay for downsizing!), replaced the carpet, re-painted, and power cleaned everything! I paid for the carpeting and the painting, because we wanted the house to look absolutely amazing, and it did. The house was immaculate, it looked like a model home! Our real estate agent (REMCO) was super impressed with all of our work (I say our, but I use that term very loosely. This was mostly Jonathan!). We put the house on the market for 50% more than we paid for it, and within in 5 days had a full value offer. Score!

Hard work and Luck!

I do think luck played a part. It was very fortunate that I was able to buy a home when I did. I credit that “luck” to being a veteran in the Army. But Jonathan is right about that too.  It wasn’t lucky that I joined the Army and served for six years, it was hard work and dedication. But the Army did offer a VA loan, and without that, I would never have been able to afford a home in Southern California, even at the bottom of the market. Check out my post on Military Service and financial freedom to learn more about how the VA loan helped, and to discover whether joining the military can help you in your quest for financial freedom.

But it was lucky that I was in a position to be able to buy when the market was low.  It was also lucky that the market made a great recovery in my area. However,  Jonathan is right too, a lot of hard work went into this real estate success. Sometimes big wins take a lot of effort and a little bit of luck.

Why FIRE 101?

So why is this post in the FIRE 101 section instead of finance or lifestyle? Easy!  One of the best ways to achieve financial independence is to move from a high Cost of Living area to a Low Cost of Living are (HCOL —> LCOL). It was our first major step towards FIRE, and big sacrifice.  We did it though, and maybe you can too!

 

*Links with this next to it are the affiliate links that we talked about above. We appreciate your readership!




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