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FIRE Guide 101 | Part 1 - FIRE Types and Sample Scenarios

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FIRE Guide 101 | Part 1 - FIRE Types and Sample Scenarios
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Understanding FIRE Types and How to Choose the Right One for You (Part 1 - Types Explained)

Part 1: The Types of FIRE Explained

Introduction: Finding Your Path

Think of your life as a journey. FIRE is your destination, but there’s no single road to get there. Some paths are like hiking trails—narrow, challenging, and requiring light packing. Others are highways—spacious, steady, and designed for comfort. The key is choosing the route that matches your resources, goals, and pace.

Each FIRE type represents a different way to achieve financial independence. Let’s break them down and explore how they work.

1. Lean FIRE: The Narrow Trail

  • Metaphor: Lean FIRE is like hiking a narrow trail with just the essentials in your backpack. You’re light on your feet and move quickly, but there’s no room for extras.
  • Ideal Goals:
    • Live simply with minimal expenses.
    • Save 25 times your annual living expenses to reach your FIRE number (e.g., $25,000/year = $625,000).
    • Prioritize frugality and reduce spending.

Scenario: A Couple’s Lean FIRE Plan
Sam and Jamie want to retire early and live a minimalist lifestyle in a rural area. Their annual expenses are $30,000.
Step-by-Step Plan:

  1. Calculate FIRE Number: $30,000 Ă— 25 = $750,000.
  2. Maximize Savings: Save 50-70% of their income by living in a small home and cooking at home.
  3. Invest Aggressively: Put savings into index funds with an average 7% annual return.
  4. Reach Goal: Retire in 10-15 years by maintaining low expenses and using their investments to cover costs.

Scenario: A Family’s Lean FIRE Plan
The Rodriguez family lives frugally with annual expenses of $40,000. They dream of homeschooling their kids and traveling in an RV.
Step-by-Step Plan:

  1. Calculate FIRE Number: $40,000 Ă— 25 = $1,000,000.
  2. Cut Costs: Downsize to one car, shop secondhand, and minimize entertainment costs.
  3. Boost Income: Take on side hustles or freelancing to save faster.
  4. Invest Consistently: Focus on long-term growth in diversified funds.

2. Fat FIRE: The Luxury Highway

  • Metaphor: Fat FIRE is like cruising on a highway in a luxury car. You enjoy the ride, but it takes more fuel (money) to keep going.
  • Ideal Goals:
    • Maintain or upgrade your current lifestyle in retirement.
    • Save 25 times your desired annual expenses (e.g., $100,000/year = $2.5 million).
    • Work longer or earn more now to afford a more comfortable retirement.

Scenario: A Couple’s Fat FIRE Plan
Sophia and Ben want to retire in a beachfront condo and travel internationally. Their target spending is $120,000 per year.
Step-by-Step Plan:

  1. Calculate FIRE Number: $120,000 Ă— 25 = $3,000,000.
  2. Increase Income: Focus on promotions, bonuses, or starting a high-income side business.
  3. Maximize Tax-Advantaged Accounts: Use 401(k)s, IRAs, and HSAs to save efficiently. TFSA, and RRSP Accounts for Canadians.
  4. Invest Wisely: Diversify across real estate, stocks, and bonds.

Scenario: A Family’s Fat FIRE Plan
The Chens want a retirement where they can cover private school tuition for their kids and live in a large home. Their annual expenses are $150,000.
Step-by-Step Plan:

  1. Calculate FIRE Number: $150,000 Ă— 25 = $3.75 million.
  2. Streamline Savings: Save at least 40% of household income.
  3. Invest in Growth Assets: Include rental properties and index funds.
  4. Scale Income: Focus on career growth or entrepreneurial ventures.

3. Barista FIRE: The Scenic Rest Stop

  • Metaphor: Barista FIRE is like pulling into a scenic rest stop on your journey. You’ve saved enough to slow down, but you keep working part-time for small luxuries or benefits.
  • Ideal Goals:
    • Save enough to cover 60-80% of your annual expenses.
    • Use part-time work to cover the rest.
    • Prioritize a balanced lifestyle with flexibility.

Scenario: A Couple’s Barista FIRE Plan
Emily and Jack want to slow down and work part-time while pursuing their passions. Their annual expenses are $50,000.
Step-by-Step Plan:

  1. Calculate FIRE Number: Save 20 times their annual expenses ($50,000 Ă— 20 = $1,000,000).
  2. Reach Partial FIRE: Save aggressively early to hit the goal by 40.
  3. Transition to Part-Time Work: Jack teaches part-time, and Emily freelances.
  4. Maintain Investments: Continue letting their nest egg grow.

Scenario: A Family’s Barista FIRE Plan
The Wilsons want to work part-time to spend more time with their kids. Their expenses are $60,000/year.
Step-by-Step Plan:

  1. Calculate FIRE Number: $60,000 Ă— 20 = $1.2 million.
  2. Downshift Careers: Transition from full-time to part-time work after reaching savings goal.
  3. Invest in Passive Income: Build a rental property portfolio to supplement income.
  4. Enjoy Flexibility: Focus on family time and hobbies.

4. Coast FIRE: The Downhill Glide

  • Metaphor: Coast FIRE is like riding downhill on a bike after pedaling uphill. You’ve done the hard work of saving, and now compound interest carries you to the finish line.
  • Ideal Goals:
    • Save early and let investments grow without further contributions.
    • Transition to low-stress work for additional income.
    • Let time and growth do most of the work.

Scenario: A Couple’s Coast FIRE Plan
Priya and Arjun saved $500,000 by age 35. They no longer add to their retirement fund, knowing it will grow to $1.5 million by 60.
Step-by-Step Plan:

  1. Save Aggressively Early: Invest 50-70% of income in their 20s and early 30s.
  2. Switch to Flexible Work: Priya tutors online, and Arjun runs a small business.
  3. Rely on Compound Interest: Let investments grow without additional contributions.
  4. Retire Fully Later: Achieve full FIRE at 60.

Scenario: A Family’s Coast FIRE Plan
The Smiths saved $400,000 early by living frugally. They now live on one spouse’s income while their investments grow.
Step-by-Step Plan:

  1. Save $400,000 by 40: Prioritize high savings and growth investments.
  2. Reduce Workload: One spouse works part-time while the other stays home with the kids.
  3. Let Growth Take Over: Allow investments to grow to their full FIRE number.
  4. Achieve FIRE: Reach full retirement when investments hit $1.2 million.

Reflection: What’s Your Trail?

Ask yourself:

  • Do I want a simple life or a luxurious one?
  • How much am I willing to save, and for how long?
  • What does “freedom” mean to me?

Understanding these paths will help you pick the trail that leads to your version of success. In the next section, we’ll assess your goals and priorities to find the right FIRE type for you.

5. Slow FIRE: The Steady Stroll

  • Metaphor: Slow FIRE is like taking a leisurely walk through a park. You enjoy the journey without rushing, focusing on balance and sustainability.
  • Ideal Goals:
    • Build wealth gradually over time without extreme frugality or high pressure.
    • Maintain a steady savings rate while enjoying life along the way.
    • Retire later but with a comfortable nest egg.

Scenario: A Couple’s Slow FIRE Plan
Anna and Mark want financial independence but don’t feel the need to retire early. They prefer balancing saving with occasional splurges, like vacations. Their expenses are $60,000 per year.
Step-by-Step Plan:

  1. Calculate FIRE Number: $60,000 Ă— 25 = $1.5 million.
  2. Save Consistently: Save 20-30% of their combined income.
  3. Invest Long-Term: Use retirement accounts and taxable brokerage accounts for steady growth.
  4. Retire Comfortably: Reach their FIRE number by age 55-60.

Scenario: A Family’s Slow FIRE Plan
The Park family wants to maintain their current lifestyle while saving steadily for retirement. Their annual expenses are $80,000.
Step-by-Step Plan:

  1. Calculate FIRE Number: $80,000 Ă— 25 = $2 million.
  2. Focus on Balance: Save 15-20% of income while allowing for family vacations and hobbies.
  3. Invest Wisely: Use a mix of index funds, bonds, and real estate.
  4. Enjoy the Journey: Retire in their late 50s with a fully funded nest egg.

6. FIRO (Financial Independence, Retire Occasionally): The Flexible Retreat

  • Metaphor: FIRO is like taking periodic retreats to recharge before returning to the hustle. It offers the freedom to step back without fully retiring.
  • Ideal Goals:
    • Save enough to take breaks from work while still having a career or side income.
    • Focus on achieving a balance between work, rest, and financial growth.
    • Use periodic sabbaticals to prevent burnout.

Scenario: A Couple’s FIRO Plan
Ben and Mia save aggressively for a few years, then take 6-12 months off to travel. They enjoy flexibility while maintaining their careers. Their yearly expenses are $50,000.
Step-by-Step Plan:

  1. Save for Breaks: Build a fund to cover 1-2 years of expenses ($50,000 Ă— 2 = $100,000).
  2. Invest for Growth: Use additional savings to build a long-term retirement fund.
  3. Plan Sabbaticals: Alternate between 5 years of work and 1 year of rest.
  4. Transition to Full FIRE: Gradually grow their investments until they can retire fully.

Scenario: A Family’s FIRO Plan
The Thompsons want to travel with their kids while they’re young but keep their careers intact. Their expenses are $70,000 per year.
Step-by-Step Plan:

  1. Save for Extended Travel: Build a $140,000 fund for a 2-year family sabbatical.
  2. Keep Earning: Use remote work or part-time gigs to stay financially afloat.
  3. Invest for Later: Maintain retirement contributions during working years.
  4. Retire Fully Later: Transition to full FIRE in their 50s or 60s.

7. Chubby FIRE: The Balanced Bridge

  • Metaphor: Chubby FIRE is like a sturdy bridge that balances frugality and luxury. It gives you enough financial independence to indulge occasionally without excess.
  • Ideal Goals:
    • Save enough to live a moderate lifestyle with room for small luxuries.
    • Aim for a middle ground between Lean and Fat FIRE.
    • Retire earlier than traditional retirement without extreme sacrifices.

Scenario: A Couple’s Chubby FIRE Plan
Alex and Taylor aim to retire with occasional indulgences, like dining out or taking short trips. Their expenses are $80,000/year.
Step-by-Step Plan:

  1. Calculate FIRE Number: $80,000 Ă— 25 = $2 million.
  2. Save Steadily: Put away 30-40% of their income.
  3. Invest for Growth: Focus on a mix of stock index funds and real estate.
  4. Retire Comfortably: Retire in 15-20 years with a balanced lifestyle.

Scenario: A Family’s Chubby FIRE Plan
The Johnsons want to retire early while still affording occasional family vacations and extracurriculars for their kids. Their expenses are $90,000/year.
Step-by-Step Plan:

  1. Calculate FIRE Number: $90,000 Ă— 25 = $2.25 million.
  2. Boost Income: Use side hustles to supplement savings.
  3. Invest Consistently: Grow their portfolio over 20 years.
  4. Retire Early: Achieve FIRE by their late 40s or early 50s.

8. Flamingo FIRE: The Halfway Mark

  • Metaphor: Flamingo FIRE is like standing on one leg, halfway between working and full retirement. You save half your retirement goal and let investments carry you the rest of the way.
  • Ideal Goals:
    • Save 50% of your FIRE number and let compound interest do the rest.
    • Reduce work hours or take a less stressful job while waiting for investments to grow.
    • Retire fully when the nest egg reaches its goal.

Scenario: A Couple’s Flamingo FIRE Plan
Ravi and Priya saved $500,000 by 40 and are now letting it grow to $1 million by 60. They work part-time to cover current expenses.
Step-by-Step Plan:

  1. Save Half FIRE Number: $50,000 Ă— 25 Ă· 2 = $625,000.
  2. Invest Early: Focus on high-growth investments like stock index funds.
  3. Shift to Part-Time Work: Reduce workload to prioritize lifestyle.
  4. Let Investments Grow: Allow compound interest to double their savings.

Scenario: A Family’s Flamingo FIRE Plan
The Millers saved $400,000 early on and now focus on spending time with their kids while working part-time. Their expenses are $70,000/year.
Step-by-Step Plan:

  1. Save Half FIRE Number: $70,000 Ă— 25 Ă· 2 = $875,000.
  2. Invest for Long-Term Growth: Use diversified portfolios to maximize returns.
  3. Reduce Expenses: Live modestly to make part-time income sufficient.
  4. Achieve Full FIRE: Let investments grow to $1.75 million by retirement age.

Reflection: Your FIRE Type

As you consider these paths, think about what resonates with you:

  • Do you want to move fast or take your time?
  • Are you drawn to simplicity, comfort, or a mix of both?
  • How much are you willing to save, and how long are you willing to work?

Each FIRE type offers a unique trail to financial independence. Choose the one that matches your vision, and let’s move on to the next section to assess your goals and priorities.