In my preceding post, I described how I learned about financial independence retire-early (FIRE). It is a framework for balancing the main pillars of FIRE: earning, spending, and investing to build a stable financial platform.
The stable platform of financial independence empowers you to live your best life. Whether that is retirement or something else. Many professionals use the power of financial independence to steer their career in the direction they want it to go, and balance that with their family and community lives.
Different ways of balancing those pillars of FIRE have led to many different flavors of FIRE to choose from. Regardless of which flavor you favor now, you can learn something from each approach. Plus, it is likely that your palate will change, as you age and change.
The Main Flavors of Financial Independence
This approach focuses heavily on minimizing the spending pillar. It was popularized by the likes of Mr. Money Mustache and a book called Your Money or Your Life. When you spend more, you need to earn more to support current-you. Plus, you must invest more and achieve better investment returns to support your future self. So, controlling consumption is key.
Lean-FIRE has some valuable concepts.
The best ones are encapsulated by my dogs’ approach to life. Mindfullness to appreciate what we have and savor the moment. It doesn’t need to cost money to build relationships, learn, play, and be physically active.
There are also lots of great life-hacks espoused by Lean-FIRE fans. Live close to work and walk, or bike, or e-bike. Avoid the stress that comes with having to care for a massive house or expensive stuff. Learn new skills and try to be relatively self-sufficient. My lean-FIRE relatives all grew their own food in some form. Some even made their clothes from sheep they had raised. My grandma spun wool from hair of their Siberian Huskies to knit with. My dog mitts were insanely soft, but so warm I could only use them below -20C.
An extreme lean-FIRE approach has drawbacks.
Some people may let their focus on low costs deter them from important decisions that are not purely financial, detracting from their long-term happiness and fulfilment. Naturally, these extreme approaches often attract media attention and are used as fodder to criticize FIRE. They are uncommon and imbalanced. So, that type of criticism is easy to rebut. However, we should be aware of them to avoid falling into an extreme approach.
The lean tail wagging the FIRE dog.
Kids are expensive and could delay FIRE. Even more so, if you need a hand with fertility, as is common amongst professionals that spent their most fertile years building their careers. Some extreme lean-FIRE hacks include couch-surfing (ie mooching off of friends) or living with their parents forever (may synergistically impact the having-kids-problem). Or living off-grid.
Some may use geographic arbitrage and move away from family or job-opportunities in high-cost-of-living-areas to places where real estate is cheaper. For physicians, some may also be limited to large urban centers to have the type of specialized practice that they trained for and enjoy.
All of these decisions to save on financial costs come with non-financial costs that need to be weighed as part of balancing them. We must balance of our financial, human, and social capital. That makes it different for everyone. Some may build a stronger family and help their parents by living with them. I personally enjoy the lifestyle and community of a lower cost city, even at the expensive of further career advancement. The key is to let your values drive decisions rather than simply the money.
Too lean means no fat to trim. Life happens and you need some fat to survive a famine.
Life is full of the unexpected. A Lean-FIRE budget usually cuts expenses to the bare minimum to have food, shelter, and basic necessities. What if you decide to have kids? As you get older, sleeping on an air-mattress or living in a van may not be so great. Harvesting and chopping wood for heat becomes harder – my lean-FIRE relatives all did this. A young lean-FIRE advocate will just say that chopping wood keeps you fit. Their back may disagree later in life.
You can do everything right but still develop a health issue. Also, the longer you live, the more you change. Those who retire very early will almost certainly find that. Unfortunately, they may also have limited financial resources to help them alter course as they change. If life circumstances change, then a lean-FIRE approach may require finding work to make up for the lack of fat. This brave and honest post about a FIRE-reversal is a great example.
The Fat-FIRE approach allows for much more spending than the lean-FIRE approach. Consequently, the earning and investing pillars are much more emphasized with this approach. As high-income professionals, we have the earning part down and I first heard of this rich FIRE-flavor from Physician on FIRE. He arbitrarily increased the annual spending target to $100K/yr (US dollars) to define this level of FIRE. That is well above the median Canadian household income. Of course, there is no upper limit. You could morbidly-obese-FIRE with a much larger budget, if you have enough assets and passive income.
Picking a Fat-FIRE number may simply mean maintaining your current high-income lifestyle. Most physicians that I know are comfortably into the fat-FIRE range in terms of spending. I can also see how it is easily possible, with more time to travel and spend on hobbies, that fat-FIRE could require an even higher level of spending than while working full-time. Morbidly obese FIRE. Sign me up.
Benefits of a Fat-FIRE approach
Well, the obvious benefit is that you have some fat that you can metabolize as your lifestyle changes, you have unexpected expenses, or there is a market downturn. Your risk of having to couch-surf or take an undesirable job to make ends meet is low when you can reign in discretionary spending instead.
Physicians and other high-income professionals are in a good position to earn money and achieve some form of fat-FIRE. Having financial independence as a goal encourages us to also pay attention to the spending and investing parts of the equation. However, the path of least resistance is for us to earn money by working.
A fat-FIRE approach forces us to also develop passive income streams as well. That is generally a portfolio of stocks, bonds, exchange traded funds (ETFs), and/or real estate, and/or a non-clinical business. That diversification of income and interests improves our financial immunity and keeps us stimulated.
Potential Fat-FIRE pitfalls
Since a fat-FIRE approach gives us flexibility, it can also be easy to continually move the goalposts.
“One more year syndrome” (OMYS) is a good thing if you are making changes driven by reflection on your values and happiness. We may decide to continue working, saving, and investing because we enjoy it, it gives us purpose, it will enable us to give more, and it gives us more buffer. Even amongst the very wealthy, those who earn some of their income are happier. Right now, I have five more years syndrome. Then, we’ll see.
OMYS can be a bad thing if it is driven by hedonic adaptation, or by external comparisons. When we join the fat-FIRE club, we will look around the change room and see others who have even more rolls than us. Don’t let that external comparison move your goalposts. In a recent study, millionaires were asked how much more money they would need to be perfectly happy. The answer was consistently 2-3 times more than they currently have.
If we achieve fat-FIRE, then we need to recognize that we have hit this milestone. That allows us to use it as a tool to achieve our goals. We should use our internal values to guide how we use this power to RE-focus how we spend our time and money.
When I wrote my original pillars of FIRE post back in 2017, I described how I was introduced to FIRE before it had a cool name. However, I wasn’t completely enamored with the Retire Early part. Well, over the last few years, FIRE for work-lovers has a cool name too. Coast-FIRE.
The concept of Coast-FIRE is to emphasize the earning, spending, and investing pillars aggressively while young. That builds a nest-egg that you can then just let grow on its own without further contributions. It will grow big enough for financial independence by your goal retirement date. In the meantime, you can coast and adjust your work to a level that is enough to cover your costs of living without saving extra.
This is exactly what I have done. However, I am sticking with my Financial Independence and Re-Focus terminology. Why? I don’t really want to coast. That seems passive. The power of financial independence is being able to actively and frequently reassess where you are spending your time/money. Then, to course correct guided by your values. Steering the ship rather than being pushed around by the wind and currents.
The dilemma of Coast-FIRE
The main difference between Coast-FIRE and traditional retirement planning is temporal. With traditional retirement planning, you save a portion of your income spread out over your career to hit the target. The savings rate usually increases as income increases over a career. In contrast, Coast-FIRE frontloads investing for retirement. An aggressive start takes advantage of compounding returns over a longer time frame. The trade-off is between current-you and future-you.
You are aggressively earning and foregoing spending while young so that you can work less and spend more when you are older. You don’t have much choice while a broke medical student, but it is one of the important decisions for a new attending. For me, it made sense to work extra while I had the physical and mental energy and all of medicine was fresh and exciting. Living like a resident was also easy since my wife and I had never had more income. However, there is also a good counterargument.
You may be giving up some of your healthy years to work and frugality but die before you can enjoy it later. I have seen this happen. Further, that early career time is also complicated by starting the life that you may have put on hold during training – spouse, kids, house, travel, stuff. You can’t do it all, but you also can’t keep delaying it all.
The dilemma of Coast-FIRE is to balance current-you and future-you. That will be different for everyone, but the key is to give it some deliberate thought. I also think an active approach rather than “coasting” is needed because current-you will change over time as future-you becomes more real.
Barista-FIRE is a variation of Coast-FIRE. You aggressively focus on the earning, spending, and investing pillars to build passive income to grow on its own and cover all of your expenses at your target retirement. However, as you approach that Coast-FI portfolio level, you work part-time.
Your cost of living is covered by a combination of your barista income and your passive income. The barista title came is a reference to working at Starbucks – employee health benefits can really help (particularly in the U.S.).
You need not be a barista. You could supplement your passive income with any job that suits you. That could even be contract work or part-time work in your field.
It is important to note that unlike Coast-FIRE, you are still dependent on earning some income. If that is working at a job with benefits, that also means being an employee and still answerable to someone else.
Slow financial independence is another variation on the temporal aspect of working towards financial independence. As the name states, it is a slower pace than traditional FIRE. The destination of financial independence is the goal, but the timing of that is vague. The emphasis is on the journey and balancing between the present and the future. Presumably, it means attending to the pillars of FIRE enough to get to financial independence prior to the traditional retirement age.
There are several aspects of slow-FI that I think are valuable. It recognizes the importance of earning, spending wisely, and investing for the future. Which of those are focused on the most can change over time. Key to all of that is reflecting on the present, appreciating it, and course correcting.
This all seems very similar to my goal of Financial Independence and Re-focusing. Doing this with the goal of FI well before the your 60s is readily achievable in a high-income profession. It is also important because we may not make it working into our late 60s. In a Canadian survey, 48% of Canadians were forced to retire before they planned to. Almost half of those early retirements were before age 55. Common causes are personal or family health issues and job modification. Even physicians are not immune to that. Dr. Latestart gave some great perspective and advice on this from a physician standpoint.
How the flavors of financial independence can help us.
It is easy to put our heads down and work, spend, and invest in some way. However, paying attention to the basic FIRE framework and the different flavors of FIRE allows us to do it more deliberately and effectively. We must have a financial independence goal to guide how we balance planning for the future and enjoying the journey along the way.
The different flavors of FIRE tweak three major variables: future money-spending goal, pace, and time-spending goals.
Future Money-Spending Goal
Our future lifestyle spending goal determines how aggressive we need to be with our earning, spending control, and investing now. Lean-FIRE vs. Fat-FIRE. We can learn from both approaches to perhaps find our own Ideal-Body-Weight-FIRE. Geez, I just made another flavor.
The age at which we want to achieve financial independence determines the pace. That could be front-loaded like the traditional approaches to FIRE, variable like Slow-FIRE, or even more gradual with a traditional retirement date. Your flavor of FIRE depends on the pace you want to set now and in the future. Many people involuntarily stop working before the traditional retirement age. So, some flavor or FIRE seems prudent.
Retirement does not need to be all or nothing. As you approach financial independence, you have the power to adjust your work-life to Barista-FIRE or Coast-FIRE or to retire. Financial independence is just a tool that empowers you to RE-focus how you spend your time. Your flavor of FIRE depends partly on your relationship with your career.
We, as people, change over time as do our circumstances.
So, think about what flavors of FIRE appeal to you currently. Savor the flavor of the present and be sure to sample different ones as your tastes change in the future. Feel free to share your palate preferences in the comments section below.