I talk a lot about our early retirement dream here at The Frugal Cottage. In fact, at one point I did monthly posts updated our ultimate dream fund which will fund our early retirement goal. I have been doing some more reading have discovered some more types of FIRE that I didn’t realise existed! So, what does that mean?
The one movement which we fit into is the FIRE movement – Financial Independence Retire Early. We are aiming to get enough income saved and invested so we can retire at 50.
But, did you know there are actually 5 types of FIRE? I didn’t, until recently!
So, here at the 5 different types of FIRE plus I share which one we are realistically going to aim for.
1 FIRE (Regular/Traditional)
This is the one which most people are aiming for when thinking about FIRE. This one is the one you read about if you Google it! But, do you know what it actually means? So the regularly FIRE method is to have income producing assess that cover your living expenses; similar to your expenses that you have now. For example, if you want to have £25,000 a year in early retirement, then you would need to have enough saved and/or invested to cover that amount every year.
The nice part about this one is that when you FIRE, your everyday life shouldn’t change too much (apart from going to work!) because your income hasn’t changed at all. Most of the time in retirement people see a drop in income but this would mean that you wouldn’t notice it.
2. Lean FIRE.
This is when you are going to retire early but have a more limited, tighter budget. This is particularly prevalent in the frugal living section of FIRE. This type of FIRE means that your living expenses will be significantly lower than average. The bonus to this is that the amount have need to have saved and invested is also a lot lower!
Lean FIRE often is entwined with living more simply, more frugally and have less wants perhaps than other types. That’s because the amount you are giving yourself to live on per year is less. But, it can mean that you might manage the goal sooner? It depends on how much you are able (and happy) to live off. I talk a lot about frugal living in this video, if you want to have a watch.
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3. Fat FIRE.
This is the opposite of lean FIRE, in that you have a much bigger budget than average when you retire early. This means that you can much more of a luxurious lifestyle! Typically, when you read about those mananging fat FIRE, they are aiming for £80k+ in living expenses every year. Often to maintain a lifestyle that they have got used to, or that they aspire to have once retire and not in work.
This assumes two things I think; that you are already living a very comfortable lifestyle which means that you probably earn a lot and that you want to maintain a lifestyle that others perhaps wouldn’t experience at any point anyway! The amount you need to have saved for this is substantial and unless you earn a big amount whilst working, might be unachievable for most.
4. Barista FIRE.
This is one of the ones I only heard about recently! This is where you have to supplement part of your expenses by working – the rest of your expense are covered by income producing assets. So you could work say 12 hours a week and spend the rest of the time doing what you want and the combination of this means you can (kind of) FIRE.
This might appeal if you want a change of career later on and can do something perhaps less pressured; you could get a job in a cafe making cakes for 12 hours a week and enjoy the rest of the time at home. This sounds like a great solution, especially if leaving the world of work completely feels a bit scary. It also gives you some kind of routine and focus, which might be appealing to some.
5. Coast FIRE.
This final one is another type that I only find about recently. Now, we have definitely missed the boat on this one but it’s an interesting concept. To Coast FIRE you need to have invested enough at an early age and then you let the magic which is compound interest earn you the rest. I.E you save enough until the age of 30, then let compound interest work until you’re 40 and then FIRE. The amount invested during the first ten years should then grow enough in value over the next ten years to then sustain you for the rest of time!
This is definitely food for thought! I like the Coast FIRE, though it does presume two things; that you can invest enough in your twenties and that you can earn enough to be able to do that. Often when you start out the pay from your first job(s) is small so it might be a struggle. It also assumes you can do that without having to do other things like save for a house deposit, get married or have children. All of these additional expenses might make that a bit tricky!
Out of all of these types of FIRE, realtiscally we are probably aiming for lean FIRE. This is just down to our income alone, and that is it! Our household income, unless I can think of other ways of increasing it, is low and the amount we can invest every month is smaller than what would be typically considered a FIRE amount. So, lean FIRE is it! But, we are happy living more simply and hopefully that will help us when aiming for FIRE.
Have you heard of these types of FIRE? Which one do you think you could be? Let me know!
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I’d like to say I could pull off Lean FIRE, but with all these kids and our current lifestyle I don’t think it’s in the cards, lol… (Though I admire the $hit out of all ya’ll doing it!!)
I’m a Barista FIRE guy myself. I’ll always be working on *something* until I die, paid or not, so it’s a happy balance of a little productivity mixed with a lot more freedom 🙂 And I literally want to work AT A CAFE one day too! Haha… I get energized being around people, and if by then my wife wants to join me in FIRE (she doesn’t) maybe it would help with health insurance too? Lots of possible perks to this route!
It’s only because we don’t earn enough to reach any of the others! But, I do admit that Barista FIRE is somewhat tempting; I would Loe to work in a coffee shop and just have that type of work/life balance. We’ll see 🙂
Hi, we are in our 50s and have just lean-FIREDd before Christmas. It was 6 months earlier than planned, because my husband was offered voluntary redundancy, which he snapped up! We live in northern England too, and have been living more and more frugally over the past 5 years. We should be eligible for state pension in 11 years, so assuming that doesn’t change, we have saved up enough living expenses till then, plus a buffer.
A year or so ago I started a side hustle matched betting, which has added several hundred pounds a month to our income. Other part-time work in the future is an option too, if needed. Or downsizing our house.
I wish I’d heard of FIRE years earlier. I didn’t know it was possible, but it is!
This is so inspiring! And another person from the north east 🙂 and congratulations on making that leap – I cannot wait until I can say the same! 🙂
I find your posts interesting and like that you are just a normal working mother. Most people who blog on fire are on over 100k a year and it’s so unrealistic for the normal person to achieve.
However could you state the total needed for your £1000 a month divided income. Assuming a 4% yield then you would need roughly £300k invested. I do worry loads of young people are looking for passive income through investing but don’t understand that you need a huge amount invested to achieve this. Of all forms of passive income it’s the longest to achieve.
Ironically the value of my house, is that exact amount I need to invest for passive income to pay off my mortgage.
Finally I would also think you need to take greater consideration to inflation. It’s likely that in ten years time your bills will be more than £1000. Which is why you want your dividends to grow by at least inflation each year.
This is not meant to be critical but I do feel the full picture is not be shown.
In other posts on here, I state that our goal is £306,000 sand and/or invested so it is there, just not in this post.
My apologies I have seen a few of your you tube videos and it was never mentioned.
I am looking forward to escaping the rat race and being financially independent. Sadly, I never discovered the FIRE concept until late in life. I expect to go down the Barista FIRE route as it is the one that most appeals to me and gets me out the house and allows me to meet people.