Have you heard of the FIRE (Financial Independence, Retire Early) Movement? 

Or are you just curious about how people like you can retire early without worrying about money?

Read on to learn more about FIRE and how YOU can get started on the path to Financial Independence and Retiring Early!

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What Is FIRE?

FIRE is based on the concept of financial independence. 

What is financial independence? It depends on who you ask.

In terms of FIRE, financial independence simply means that you have saved enough money to live off of your funds in retirement for the rest of your life. 

For the average American, the expected retirement age is in their 60s, when Social Security benefits start.

FIRE flips the idea of retiring in your 60s on its head and tells you that you can retire at any age IF you can reach your financial independence number sooner.

What Is My Financial Independence Number? 

The most basic way to calculate your financial independence number is using the “4% Rule.” 

This rule aligns with a 4% withdrawal rate for your entire retirement, giving you the highest probability of never running out of money. 

To calculate your financial independence number, simply plug your expected expenses at retirement into this formula: 

Your Expected Annual Expenses at Retirement x 25 = Your Financial Independence Number 

Pretty easy, right? 

If you don’t have a set number for your expected expenses at retirement, give your budget a quick look and just remove the expenses you don’t expect to have when you retire. 

Maybe you’re going to retire after you’ve paid off your house, so take that out. 

Or if you’re going to retire after your kids graduate, take out their related expenses. 

Now you’re all set! 

For example, let’s say you believe you can live comfortably on $60,000 per year at retirement. Your formula would look like this:

$60,000 x 25 = $1,500,000

Okay, adding dollar signs makes it look REALLY scary! 

But don’t worry! We can work with that!

Remember: This does NOT mean you need to save one million dollars of your own money to achieve financial independence. That’s what compound interest and time will help you with! 

Types of FIRE 

Now that you’ve figured out your financial independence number, let’s talk about the types of FIRE. 

Traditional FIRE

Traditional FIRE is exactly what you see above. 

You reach financial independence and can retire early when you’ve reached 25X  of your annual expenses saved. 

If your annual expected retirement expenses are $60,000, then you’ll need about $1,500,000 saved to retire. 

Lean FIRE 

Lean FIRE is living on a tighter budget during retirement, which means you need less money saved to retire early.

Let’s say you plan on moving to a low cost area and live on a tight budget with very low expenses.  

If your annual expected retirement expenses are $40,000, then you’ll need about $1,000,000 saved to retire on Lean FIRE.


Fat FIRE is the exact opposite of Lean FIRE.

For some people, they believe they’ll need $100,000 or more each year to retire. 

Using the 4% rule, these people would need $2,500,000 saved.  

Barista FIRE

Barista FIRE lands somewhere in the middle of Lean FIRE and Fat Fire. 

Essentially, Barista FIRE focuses on retiring early from a conventional job BUT taking on a part-time job for supplemental income and (most often) health insurance. 

Barista FIRE works well for people who aren’t completely set on the idea of full retirement or need health insurance to keep their expenses low. 

To calculate how much you would need to retire on Barista FIRE, subtract your post-tax income from your expected annual retirement expenses. 

Use that number in your 4% calculation to figure out your financial independence number. 

For example, let’s say you get a part-time job as a barista at Starbucks. Your hourly rate is around $10/hour, and you work 20 hours each week. 

You’ll take home about $167/week or $8,684 per year.

Let’s put that into the 4% rule calculation: 

($60,000 expected annual retirement expenses – $8,684 part-time income) * 25 = $1,283,650

If your Traditional FIRE number was $1,500,000, you just cut $217,100 from your goal number. 

Plus, if your part-time job provides health insurance, you might be able to decrease your expected expenses too. 

Other Kinds of FIRE

There are many other types of FIRE, including Coast FIRE, FIOR (financial independence, optional retirement), Military FIRE, and others.

If the types of FIRE listed above sound close but not perfectly suited for your life, I would recommend doing some digging on the internet to see if there’s a type of FIRE for you.

How Can I Actually Achieve FIRE? 

I am VERY well-aware that the financial independence numbers are SCARY. 

And I’m sure you’re wondering “with numbers that big, how are people my age ALREADY retired??”

Most people will look at the big financial independence numbers and start thinking “what if I cut my expenses, live tighter, and lower that number?” 

But do you really want to retire early, live on a SUPER tight budget, and always worry about running out of money? 

Probably not. 

There’s one big secret that the FIRE community knows very well, and it’s the easiest way to decrease your financial independence number WITHOUT living like a pauper during your retirement. 

It’s called passive income. 

What Is Passive Income?

Passive income is ANY side income that you can use to supplement your retirement savings. 

It’s like Barista FIRE above, but ideally less active. 

For example, if you own one or more rental properties that make money, that passive income can help you bring down your financial independence number. 

If your single rental property brings in $300 after expenses and saving each month, then you could subtract $3,600 from your expected annual expenses. 

($60,000 expected annual expenses – $3,600 rental income) x 25 = $1,410,000

If you have 3 rental properties that bring in $300 each after expenses and saving each month, then you could subtract $10,800 from your expected annual expenses. 

($60,000 expected annual expenses – $10,800 rental income) x 25 = $1,230,000

Chances are that if you’ve ever met someone who has retired early, they will tell you about their passive income. 

People who FIRE find ways to lower their retirement number by increasing their annual retirement income, not by decreasing their standard of living. 

Passive income can be anything from investment opportunities like rental property, REITs, and dividend stocks to passion projects like an Etsy shop, writing a monetized blog, selling an Ebook, or another creative project. 

If you can find something that makes you money on its own, the sky’s the limit with passive income!

What do you think about FIRE? Is it something you want to pursue? Or do you think it wouldn’t work for you? If you’ve already FIREd, what’s your best tip for someone who’s interested? 

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