Choosing the right path to FIRE for you

These days there are so many types of acronyms and buzzwords related to financial independence that it’s almost hard to keep track. It seems like every financial blogger or podcaster has come up with their own catchy way of reaching FIRE that the space is now overcrowded and almost at the point where it can be hard to decide which way you want to go. In this article I am going to break down some of the more popular types of FIRE and discuss my thoughts on each to help you decide which path is right for you.

Coast FI

Coast Fire or Coast FI is a type of financial independence which involves a few years of hard work and large savings rate, to then sit back, relax and let the magic of compounding work in the background while you “coast” to retirement. For instance, say you were 30 years of age and you had managed to accrue a portfolio of shares worth $100,000, you could essentially stop adding to that portfolio and in 35 years time at the age of 65 retire with well over a million dollars and live comfortable on the return of that portfolio generating about $70-80k per year at at 7%.

The 35 years during this stage would free up time to spend with family, travel, work less, live more and enjoy a better quality of life. I like this kind of financial independence because it puts a greater emphasis on lifestyle compared to the crazy frugal grind associated with traditional FIRE, however this isn’t for everyone as technical you aren’t retiring early, simply having to work and save less in your later stages in life to enjoy those years more.

Flamingo FI

A similar concept to coast fire but deserving on a segment of it’s own is Flamingo Fire. Coined by the financial independence blogger the Money Flamingo it essentially is a hybrid of traditional fire and coast fire with a twist of part time work thrown in. The premise is relatively simple, you aggressively save 50% of your fire number (to keep things simple we will use the same figures as above) so in this case our FIRE number is $1,100,000 and so our goal is to accrue a portfolio of $550,000 as quickly as possible.

Once your 50% target has been achieved, you are free to spend the next 10-15 years working less and in the background that initial lump sum is compounding to hit your full fire number.

Lean Fire

Lean fire is the ultimate frugal end of the fire spectrum. If embracing a life of minimalism, low expenses and simple living sounds good to you, then lean fire is the way to go. Based on rough a rough figure of $25,000 a year expenses, an individual would only need to amass a portfolio of income producing assets of $350,000 to achieve this result. Assuming a yield of 7% in the graph below.

In this particular instance a person of 30 years of age, with a starting balance of $20,000 contributing $250 per week or $1000 per month compounding for 15 years could theoretically retire at the age of 45 living off the income of a $350,000 portfolio. The issue with lean fire is that circumstances change. For instance you may want to start a family so your expenses might change, however the core concepts are still solid. I myself love the idea of frugal and minimalist living, and with no debt, I have seen how easy it is to live on very little each week and still live a happy and full life. However living on such a low income for the rest of my life doesn’t sound appealing to me so this isn’t the method I follow.

Barrista FI

A twist of the last 3 types of fire (see the pattern emerging?) is Barrista Fire. In this case, you use the start of your career to work full time to save your core portfolio and then spend the rest of your working life until retirement working part time to supplement your income generated from your assets. I like this type of fire because as I discovered in my article about why everyone should try a mini retirement before retiring, you may find that you actually miss working. A lot of people on the financial independence path have work and saving so ingrained in their identity that they may really struggle mentally once they hit that fire goal and return to work anyway. I haven’t included a graph in this segment as barista fire is so dependent on income and expenses that the numbers vary greatly for each individual circumstance, however the money flamingo has a great calculator that you can use to help you decide your own numbers here.

Fat FI

For the high income earners and high rollers of the financial independence community. A small proportion because it involves not only generating a massive portfolio in the many millions out of reach for your every day battler earning an average income but also usually includes a lavish lifestyle not usually associated with the frugal living type on the path to financial independence. In his book “Die with Zero”, Bill Perkins notes that individuals on these high incomes with high expenses usually struggle with the idea of “enough”. People on these high incomes tend to want more things, be it a bigger house or flasher car, so need to earn more, save more and are generally rarely happy with what they have. This is a trap that the wealthy are prone to falling into as they are surrounded by people who will always have more and as president Theodore Roosevelt rightly noted “comparison is the thief of joy”.

What path is Fire Straya taking?

The ultimate question, and like many things in my life, I tend to try and take the little things I align with out of the options available to me and make my own path. I was on the path to financial independence long before it was even a thing or I even knew what it was, but after discovering the movement, and experiencing semi retirement for what it is, I soon realised that fully retiring is not for me. I love the benefits of working, I love seeing my money grow and I love the challenge of the “game” of making money. I am one of the lucky people in this regard as I find joy in a lot of things I can make money doing, so my route is most aligned to the path of flamingo fire or Barista fire. I could easily sit back and let my portfolio accumulate in the background and retire comfortably at 65, but I know that I would become restless and without direction over the next 35 years.

Your path may well change, and your values and wants may well change with it, so it is important to review your strategy a long the way. The end goal of fire is to live the best, fullest and happiest life you can. This looks different for everyone so I encourage everybody to sit down and think about the simple things that make them happy and build your life around those things, rather than trying to fit them in to the life they have.