FIRE (or Financial Independence Retire Early) has been a growing theme over the last several years. This movement has been championed by bloggers such as Mr. Money Mustache, and typically focuses on spending less and saving more to achieve a target retirement number (or the amount of money a person needs to save to be financially independent).

This number is usually based around the 4% safe withdrawal rate – and FIRE movement members attempt to live on this for the rest of their financially independent lives. (Some opt for a more conservative 3% rate as well).

It sounds great, but it also sounds constricting. According to the Financial Independence sub-Reddit, at it’s core, FI/RE is about maximizing your savings rate (through less spending and/or higher income) to achieve financial independence and have the freedom to retire early as fast as possible.

However, I’ve found most FIRE advocates focus specifically on the saving more side of the equation. Many FIRE bloggers focus on maximizing their savings rate at their current incomes, living extremely frugally, and planning a lifestyle that will allow for extreme frugality for years to come.

But let’s talk practically, and why that’s not for me, and why I believe that’s not for everyone. Here’s my thoughts on FIRE, and why this “lean FIRE” approach can be dangerous. Furthermore, I’ll share tips and tactics on FIRE for non-frugal people. Because you don’t have to be super-frugal to achieve financial independence and retire early.

Underlying FIRE Themes

After reading countless FIRE blogs, and following bloggers like Mr. Money Mustache for a while, I’ve found a few underlying themes to the FIRE movement. And I’ve found a big divide in people’s philosophies around FIRE.

Before we even get into “true” FIRE, there is a lot of semi-FIRE thoughts. So I want to spend a minute breaking it down.

FI – Financial Independence: A lot of people associate FIRE with financial independence. And while that’s half the equation, it’s not all of it. My definition of financial independence means that you have enough money that you never have to work again. You can choose to work because you want to, or get bored, but you don’t have to.

A lot of FIRE bloggers (and individuals) have a mindset of “well, if I run out of money, I can go back to work or I can supplement”. And while that is true in a financial planning sense, I argue that if you have to supplement your savings, you are not truly financially independent.

RE – Retire Early: When it comes to retiring early, this means stopping work. So, you can be financially independent but not retired. Maybe you don’t want to retire because of boredom. Or maybe you simply left your main job, but not work a bunch of odd jobs. Either way, if you’re working in some form, you’re not retired.

So, when I discuss true FIRE, I’m talking about people that are working towards true financial independence so that they can retire early (and not work). There are definitely hybrids of this in every sense, so keep that in mind as we go.

Now, speaking of FIRE, there are two major branches in the FIRE movement. One is called the “lean” FIRE movement, and the other is the “fat” FIRE movement.

The “lean” FIRE movement is comprised of minimalists and extreme frugality-focused individuals, with less of a focus on earning more. These advocates not only follow strict budgeting and financial goals, but also follow more philosophical minimalist approaches like those advocated by The Minimalists. I estimate that the vast majority of FIRE movement individuals fall into this camp.

On the other end, there is the “fat” FIRE movement, which puts less of an emphasis on minimalism and frugality, and more of an emphasis on smart investing and earning more. While there are fewer advocates in this camp, Todd Tresidder of Financial Mentor coined the term “fat” FIRE and is an advocate on his site. I’m personally an advocate of this approach as well. You can also find more about FatFIRE at this sub-Reddit: /r/FatFIRE.

In almost all cases of FIRE though, these underlying themes exist:

Minimalism – Many people pursuing FIRE are also focusing on minimalism. Maybe it’s easier to combine extreme frugality with minimalist ideals, but it could also be a lifestyle choice as well. 

Extreme Frugality – The “lean” FIRE movement really focuses on extremely frugality and spending optimization. In some cases, it’s almost Machiavellian in that the end goal of early retirement totally justifies the means to get there.

Earning Extra Income – The “fat” FIRE movement is more focused on earning extra income and side hustling, but the goal is simply to boost income to achieve the end financial goals. You’ll also notice many in this crowd are business owners, in the startup world, or heavy into real estate investing.

A Word Of Caution About Typical FIRE Methods

What many people don’t talk about is the financial danger of “lean” FIRE. What’s dangerous about retiring early and achieving financial independence? The assumptions made to get there.

To achieve financial independence, you have to have your retirement number. This is unique to everyone, but it’s basically the amount of money you need so that you can live for the rest of your life without working.

A simple way to get to this number is to take your annual expenses and divide by 0.04. The reason 0.04? Because that is based on the 4% safe withdrawal rate. It’s considered “safe” because it theoretically has a 96% chance of leaving 100% of more of the original principal. 

So, let’s say you want to live on $3,000 per month, or $36,000 per year. Your target retirement number would be $900,000.

But there is danger in these assumptions (and I’m only talking about the financial dangers):

  • Under-Estimating Expenses: The biggest danger in the “lean” FIRE approach is simply under-estimating future expenses. I’ve seen some bloggers and forum-posters attempting live on $20,000 or $24,000 per year. The idea of living on $2,000 per month sounds sexy because the target retirement number is only about $600,000. However, what happens if you encounter unexpected medical expenses? What happens if the health care market changes and health care costs rise unexpectedly? What happens when rents go up? There are a lot of potential changes in expenses over time (think 40 years or more), and in almost no scenarios do expenses drop.
  • Under-Estimating Investment Performance: The 4% rule is a good bet most of the time, but not all the time. It also relies on historical market performance. But things change. If you’re retiring early at 40, you could potentially live another 60 or more years. Will the market perform as expected? Will you need to withdraw more to cover unexpected expenses? Plan accordingly.
  • Becoming Too Dependent On Government Programs: Some “lean” FIRE advocates focus on the availability of government programs to help them achieve their goals. For example, subsidized health care, food stamps and SNAP, WIC, and more. These programs can change or be eliminated, which could potentially cause an increase in expenses. 
  • Planning Based On Today’s Taxes, Not Tomorrow’s: We are at historical lows when it comes to taxes. In 1985, there were 15 different Federal tax brackets, with the highest being 50% on incomes over $169,020 (roughly $377,000 today). Given our country’s deficit and ballooning entitlement spending, odds are taxes will rise again, and this could be harmful to individuals practicing “lean” FIRE.
  • Life Risk: This is a name for a category I made up, but the earlier you retire, the more you have “life risk”. And what I mean by this are simply life events that happen more often when you’re younger or the longer you live. For example, if you’re a female, the younger you are, the more of a possibility you have to get pregnant. Or, the more days you have on this planet, the more days you have to risk being injured – which could seriously change the course of your life. So, the younger you retire, the more “life risk” you have versus someone who retires older. And you can mitigate life risk by either waiting longer to retire (and maintain an income stream), or by having more assets in the bank to pay for unexpected life expenses.

Do You Have To Be Frugal To Achieve FIRE?

This is a loaded question, and I purposely included it as a heading…

Do you have to be extremely frugal to achieve FIRE? No.

Can you be wasteful with your spending? No.

What do I mean by this? You don’t have to live on $20,000 or $24,000 per year to achieve FIRE. You can live on $80,000 per year and still achieve FIRE. But at the same time, you shouldn’t be wasting your money.

Do you enjoy eating out? Then eat out! Do you enjoy going to the movies? Then go to the movies? Don’t want to clip coupons? Then don’t.

But at the same time, you likely shouldn’t be driving a high-end sports car, or flying on a private jet to Vegas because “you deserve it”. I’m not here to tell you how to spend your money, but if FIRE is important to you, you should be focusing on the big expenses to make big progress.

Paula Pant says it best: You can afford anything, but not everything.

Remember, focus on building a high achiever net worth regardless of your FIRE goals.

FIRE For Non-Frugal People

FIRE is completely attainable for non-frugal people. There’s just not a lot of people writing and blogging about it. You can attain FIRE at any income or expenses level – it’s just math. The more expenses you have, the larger your retirement number will have to be.

Going after “fat” FIRE is probably a safer bet over the long run anyway. Remember the cliche – Shoot for the moon. Even if you miss you still land among the stars. If you shoot for a large retirement number, even if you come up short or take more time than planned, you’ll likely have a much more comfortable retired life. 

It’s important that, when considering FIRE, you also consider the dangers above. So, beyond your “normal” expenses, plan for higher expenses in retirement. Plan for higher medical costs and more taxes. Plan for government programs to end, or entitlements like Social Security to start later. Just plan for it!

Yes, the data shows that most people only spend 55-80% of the “working” income during retirement. But just because that’s the average doesn’t me it applies to you personally. 

So, what does FIRE look like for non-frugal people? Here’s some numbers to think about. The target retirement number is based on the 4% safe withdrawal rate.

As you can see, it’s perfectly fine to spend $10,000 per month. It simply makes your target retirement number $3,000,000. That’s also a big driver towards the “lean” FIRE movement – a lower retirement number is simply achievable faster or “easier”. 

So, how could you possibly achieve “fat” FIRE? Can you really save $2,000,000 or more “early”. It’s totally possible – it’s just math!

1. Start Early: The best way anyone will achieve “fat” FIRE is to simply start early. Check out this article on how to become a millionaire by 25. To summarize, it takes $305 dollars per day starting at age 16 to make it to $1,000,000 by 25. Okay, so maybe you didn’t start at 16? Well, if you want to save $2,000,000, it takes $365.29 per day for 15 years. So, if you start at 25, you’ll have $2,000,000 saved by 40. 

2. Don’t Waste Money: How do you get to that magical $365? Well, don’t waste money. It’s fine to live the life you want to live, but if the life you want to live includes early retirement, you can’t be wasteful. What’s wasteful? Big purchases you don’t need, and regular little purchases you don’t need. Don’t buy fancy cars, don’t rent expensive homes, don’t go to Ruth’s Chris when Chili’s will do just fine.

3. Earn More: And no matter what, you’re going to have to focus on earning more. If you’re not into extreme frugality, you have to make up the difference in hustling. Work more at your primary job, and then side hustle or get a second job. Fill you free time with money making activities. Remember the goal – $365 per day. 

The biggest driver of FIRE for Non-Frugal People is going to be earning more money. You are going to have to side hustle. You are going to have to build passive income streams. But it is possible.

Final Thoughts

“Lean” FIRE is easier, more common, and more written about. But it comes with it’s own set of challenges – frugality, potential money shortfalls, and more.

“Fat” FIRE is harder, simply because it requires more money – but it has the potential to give you more safety in your financial lifestyle during early retirement. 

Just because people aren’t writing and sharing thoughts on “fat” FIRE doesn’t mean it doesn’t exist. Early retirement and financial independence is possible at any income level and spending level. Don’t feel like you have to save everything or you will fail. Don’t feel like you need to earn $100,000s per year or you’ll fail.

Financial balance is important – your finances are not an either/or proposition. You don’t have to save OR earn. You can do both. And whichever FIRE path you choose, remember this.

What are your thoughts on the “Lean” FIRE vs. “Fat” FIRE debate?

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