By 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!
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 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.
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.
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 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.
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!