The Truth About FIRE: 5 Types of Financial Independence

Think all FIRE is created equal? Think again. The Financial Independence, Retire Early (FIRE) movement has evolved into many distinct strategies, from Lean FIRE to Fat FIRE. We break down the math, mindset, and general lifestyle of 4 popular FIRE strategies, then share our preferred approach: building your army of dollar bills not just to stop working, but to work on your own terms with purpose. ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Jump start your journey with our FREE financial resources⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Reach your goals faster with our products⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Take the relationship to the next level: become a client⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Subscribe on YouTube for early access and go beyond the podcast⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Connect with us on social media for more content⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠DRINKAG1.com/MONEYGUY Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Welcome to the 50th Hunger Games.

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  Witness the beginning of the revolution.

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• 0:45Brian Preston?

  Help! Somebody grab a bucket of water because this show is on fire!

• 0:51Speaker 04

  Brian, I am so excited because today we are going to explore the financial independence retire early movement. We're gonna break down five different types of fire as well as the math behind them and try to help you better understand if these early retirement strategies are right for you.

• 1:08Brian Preston?

  In all seriousness, you might be dead set on retiring early, but you need to figure out, are you leaning on lean fire, fat fire, or coast fire? With that, let's dive right in.

• 1:24Speaker 04

  Yeah, Brian, the idea or the concept of financial independence is not a new one. We've seen people that are like seeking financial freedom via a specific dollar amount for a long time. But there has been in the past couple of decades, this movement, the financial independence retire early movement, that I think has caught a lot of, no pun intended, fire.

• 1:49Brian Preston?

  Yeah, I mean, it's, this has been fun. And look, we, we have a... I think we have a great relationship with FIRE, but sometimes we're called the FIRE extinguishers. And I think all that we, and that's what we want to do on this show is just highlight to make sure you get a full 360 approach of all the things you need to be thinking about. That's, that's what our goal is, but we ought to at least understand that this is, and I'm glad to see FIRE has kind of caught on, is that one size definitely does not fit all. So there's, there's some key changes that have happened over the last decade that we want to cover today. But first, we need to kind of need to understand, what are the key tenets to what FIRE, the movement in general, believe in, Bo?

• 2:28Speaker 04

  Yeah, when you think about FIRE, people that are proposing that they want to have financial independence at an earlier age, there are some general tenets that they, they like to hold on to. The first is FIRE proponents understand the idea of living below your means. They understand deferred gratification. Oftentimes, someone who wants to participate in the FIRE movement has to have a much higher, much more significant savings rate than their traditional retirement counterparts.

• 2:56Brian Preston?

  And another tenet is that they're investing in diverse, long-term, and, and let's focus on tax advantage investments. That's, I love it because that very, sounds very similar to a financial order of operations type focus with the investments.

• 3:10Speaker 04

  And maybe the, the, the most important tenet, or the most well-recognized tenet of folks that are in the FIRE movement is they have this idea behind living an intentional life. I know that there's some future I want to work towards, and I want it so bad, I want it so tangibly, I'm going to be willing to make very intentional, very strategic decisions today so that I can move towards those future goals.

• 3:34Brian Preston?

  Now, there's something I do like that this is very math-focused, Bo. I mean, in a lot of ways, I think a lot of people who get excited about the FIRE movement, in addition to just they want to be done with working as soon as possible, they've created some formulas, and this is tied into some, some good things, like you hear the 4% withdrawal rule, and we are like, I like math-focused, but I have found in my own experience is that there's actually, the better way to do money is to combine both the math- And the mindset, but we could at least walk through when they talk about the fire movement, how they use math, what, how are they using the 4% and can we put some layers on this?

• 4:13Speaker 04

  Yeah, the traditional fire rule is that they want you to accumulate 25 times your annual expenses in investments. So if you think about, okay, well, how much can I live off of? How to calculate what I can take out of my portfolio? I would just take the amount of money that I have amassed at financial independence and multiply it times 4% or times 0.04. That would tell me what my annual spend could be. Or if I want to reverse engineer this and I know what my annual expenses are, I can take my annual expenses that I need in retirement and I could just divide by 0.04. I could divide by that withdrawal rate and that would tell me how big the pot of money needs to be.

• 4:53Speaker 04

  But when we think about the 4% withdrawal rate, or even now it's been sort of adjusted to maybe 4.7%. All of this study and all this research was based on a traditional retirement timeline. Someone is going to retire at age 65 and live out to their mid 80s, early 90s. When it comes to financial independence, retire early, they're operating on a slightly different timeline.

• 5:16Brian Preston?

  Yeah, this is, this is where we get to be the fire extinguishers, the cold rule, the cold water of the situation is because we often say exactly what you said. The Trinity study was a 30-year traditional retirement. So if you start expanding how long your retirement is going to be, because let's face it, you're leaving the workforce much earlier. You have many more decades to have life. And life has a funny sense of humor is it throws all kinds of crazy things at you. We need to change what the rules say. 4% probably is not going to be enough. And that's why we have adjusted the 4% rule to take into account that the fact that we're prolonging how long you will be living off these assets. So if you retired age

• 5:58Brian Preston?

  Fifty-five, above fifty-five. We think the four percent withdrawal rule is perfectly fine. But if you're somebody who's retiring between forty-five to fifty-five, because you have more life, we need to dial down the risk profile on this to three and a half percent withdrawal rate. If you're somebody who's retiring before forty-five, you have so much life on your side that you probably don't even know. I mean, you think about education of kids, medical of life and kids and everything else is coming your way. You need to be so conservative that you even dial down that safe withdrawal rate to three percent.

• 6:32Speaker 04

  Another issue that we see when it comes to mathematics of the FIRE movement is a lot of people incorrectly underinflate what they need to do. They say, okay, I think I'm gonna need fifty thousand dollars of spending in retirement, so I just take fifty thousand, divide by point oh four, and that's my number. Well, if you are thirty-five years today, fifty thousand dollars today will not be the same as fifty thousand dollars in the future. So the pot of money that you would need to retire today will not be the same as the pot you need in the future. So as we walk through these different kinds of FIRE, we're actually gonna walk you through the mentality, the mindset, but also the mathematics of how you should think about it. And the math matters a ton in this very first type

• 7:16Speaker 04

  of FIRE that we're gonna talk about. And this one is called lean FIRE. This one is not for those folks who like the finer things in life. We're just gonna think about sort of Webster dictionary definition. Lean FIRE is retiring early with investments that just cover your basic living expenses, potentially even dropping your standard of living, and foregoing any excess or any extra spending. Oftentimes, lean FIRE proponents are gonna live on less than like sixty thousand dollars a year. Brian, what are your initial thoughts on lean FIRE?

• 7:49Brian Preston?

  Well, I'm gonna bite my tongue a little bit, because we're gonna talk about what my thoughts are in a few seconds. We ought to at least show them the math on this, but I will just give you the initial thought. Living on sixty thousand dollars for your entire life.

• 8:04Brian Preston?

  Seems like, man, you're locking in how things feel in your twenties to when you get to be an old man on the porch like me in my fifties. And I'll just go ahead and break it to you. When you get to be in your fifties and beyond, you can't handle the things that you could handle in your twenties. And I've made this joke before. I could go in my twenties and sleep in a hotel room with four or five of my best friends. And if you just gave me a corner of the carpet, I'd be perfectly fine. Now,

• 8:29Speaker 04

  Not so much anymore.

• 8:31Brian Preston?

  I want my own bed. I want my own ensuite, you know, bathroom. So you just changed. Trust me. You can put up with a lot in your twenties and thirties, but as you get older, you're going to get bougier and your needs are going to change. So why would you want to lock that in while you're, you know, it just, I'll, I'll, I'll, see, I went and said too much already. Keep going.

• 8:51Speaker 04

  All right. So let's, let's think about the mathematics here. Let's assume that you're a 30 year old and your goal is to reach financial independence by 50. And you know that your spending at age 50 will be $45,000 per year in today's dollars. Well, the formula, the way to calculate what you need would just be your cash flow need divided by the appropriate safe withdrawal rate at retirement times one plus whatever inflation rate you want to assume raised to the power of the number of years until your goal. I know that sounded super, super heady. So I'm going to actually walk you through the numbers here. So your cash flow need $45,000 divided by your safe withdrawal rate, which would be

• 9:32Speaker 04

  three and a half percent because you're retiring at age 50, multiply times 1.03, that's just the inflation rate we want to assume. And we're going to assume that's 20 years in the future. So if you-

• 9:44Brian Preston?

  The exponent's 20.

• 9:45Speaker 04

  If you track this math through, you would need in order to be lean fire at age 50, about $2.3 million saved up to have the equivalent lifestyle of $45,000 a year in today's dollars.

• 10:01Brian Preston?

  So now let's talk about the mindset stuff. I've given way too much, but we'll at least jump in this. This is popular because let's face it, it's a quicker way to reach and exit from the workforce ASAP.

• 10:11Speaker 04

  It also appeals to the growing- Intrigued of people living a minimalist lifestyle. We've seen all these people that want to cut, cut, cut and live at a minimum level. Well, if you're someone who's lean fire and you have the propensity to do that, those two ideals naturally align.

• 10:27Brian Preston?

  Well, and look, the big tenet with fire for a lot of these is you have to be mega savings rates. At least with lean fire, it's because your needs are so small from the portfolio, it actually allows you to have a much lower savings rate than traditional fire people, you know, have when we get into the other types of fire.

• 10:47Speaker 04

  So those are the reasons it's popular. But if you ask us our opinion, when it comes to lean fire, not only does it not sound like a lot of fun, it sounds like, man, you're just living, you've calculated what your basis level living expenses are. If you've watched any of our making a man or episodes, we ask, hey, what are your living expenses? And they'll say, oh, well, I could cut down to 2,000 a month or 3,000 a month. No, no, not, not what can you cut down to? What do you want your standard of living to be? Well, if you're someone who's subscribing to the lean fire movement, you don't get to add those extras, add those pluses, add those luxuries. You literally are planning on living at the basis level of your living needs for the remainder of your life.

• 11:31Brian Preston?

  And I'll just say, life changes. I mean, the, the, the big thing I see with, with lean fire is, do you know how many marriages I've had to consult and help them out with? Because, you know, you can convince you and your spouse, y'all go live this way of life. So we can build up this pot of money. But at some point, life just changes. And there's been marriages I've seen where one spouse is still requiring, hey, let's be as tight as possible. Let's keep all of our receipts. And it starts creating these friction points. I can't imagine, because I was tight as of tight. I don't want y'all to mishear me. Yes, I have changed and you will change too with life. And to set myself up as a 20 something who is tight of tight and saving. And now I'm

• 12:15Brian Preston?

  going to live my life in my 50s, 60s and beyond at this way. I think it's just, I think people don't realize how much life will change on them. How much your relationships will change over time. And that's why I try to give you the combination of. Let me tell you how a tightwad did things, but then why I had to give up my tightwad card. As I started realizing, success is going to create change in your life and you need to plan accordingly.

• 12:40Speaker 04

  All right. So if lean fire is on one end of the frugal spectrum, there is another end of the spectrum that a lot of people fall into, and this is known as fat fire. Again, Webster definition here. Fat fire is retiring early with more income than you need to support yourself. And likely it increases your quality of life. It often provides a mechanism where you get to add luxuriousness to your life. Typically, folks that are in the fat fire movement are counting on having living expenses or income in excess of $200,000 a year.

• 13:16Brian Preston?

  I'm catching on to what we're doing here is we're going to go some leany lean, you know, and now we're going to go fatty fat with the, with the lifestyle. At some point, we're going to land on what is reasonable for people to consider. Cause this is kind of wild. If you think about it, these are people who are saying, hey, I'm going to make, I have a good income. I'm going to make a sacrifice right now so that I can really live the life in the future. That sounds great, but man, oh, man, I, I can't wait to see what the math is on this. But then also I can't wait to give kind of the mindset stuff we want people to focus on.

• 13:48Speaker 04

  Yeah. So let's think about, let's assume that you're a 25 year old and your goal is that you want to retire at age 55. And you want your living expenses or the amount that you can spend to be $200,000 per year in today's dollars. Well, following through the math, you would take your cash flow need $200,000, divided by the appropriate safe withdrawal rate since you're retiring at 55, it'd be 4%. Multiplied by the inflation rate, so 1.03, raised to the 30th power, because it's 30 years from now that you need these dollars. Well, if you track that math through, the total portfolio that this 25 year old will need will be

• 14:27Speaker 04

  12.1 million dollars by the time they get to age 55 in order to live a life with the equivalent of $200,000 today in living expenses.

• 14:37Brian Preston?

  So let's talk about why this is possible. Now, look, kudos to them because I mean, this is one of those where you're providing a luxury retirement. But I would ask at what cost?

• 14:48Speaker 04

  Yeah, what it does is it requires more sacrifice now, but the idea is, okay, if I can make it real, real painful now, in the future, I don't have to make it painful at all. I don't have to have a lot of sacrifice in the future. I can take some short-term discomfort, some short-term discomfort for a lot of long-term comfort.

• 15:07Brian Preston?

  I mean, and who doesn't want to retire rich?

• 15:09Speaker 04

  That's it.

• 15:09Brian Preston?

  I mean, man, oh, man, I just.

• 15:11Speaker 04

  That's a deck of millionaires.

• 15:11Brian Preston?

  Also, I'm trying to always balance, and that's why I guess when we get to the thing, I want you to live your best life now, but I also want you to live your best life in the future. I worry too much that the fat fire might get that priority a little out of shape, too.

• 15:25Speaker 04

  Yeah, well, and one of the things that we recognize is that this is an admirable goal. Having, you know, $12 million is, is awesome, but likely it's only going to be available to very high earners or very prodigious accumulators of wealth. I don't know that I would say every single person has the ability to ascribe to fat fire, because you have to have a shovel big enough that allows you to actually get there.

• 15:52Brian Preston?

  Well, you have to have a good income, and then let's talk about savings rate, because we actually did the math on this. We love doing a good math equation. We wanted to kind of compare a lean fire person to a fat fire, and this is amazing to me, but we took two 25-year-olds. One with the lean fire, now we said, look, this is still a successful person, $100,000 a year income. Fat fire, we said, well, because their goal is so big, this is somebody, we already said they have to be a prodigious accumulator, but they also have a, have a big shovel. We just assumed a $200,000 income at age 25. Wow, that's pretty big what if right there. Then here's the withdrawal goals. The lean fire, we did $50,000 a year.

• 16:35Brian Preston?

  For the fat fire, we did the $200,000 a year. Both of these people, and this is a little different than our earlier example, so pay attention to that. We both put it at a retirement age of 55 for these two individuals.

• 16:46Speaker 04

  Same withdrawal rate number.

• 16:47Brian Preston?

  Same withdrawal rate, um, just but so 55 years of age. The fire number, listen to this, for the lean fire, a little over $3 million. For the fat fire, there's that $12.1 million. So what is the savings rate on the, the person making a hundred thousand dollars that wants to do lean fire is 20%. That seems very reasonable.

• 17:08Speaker 04

  Doable.

• 17:09Brian Preston?

  Now, I, look, I don't know that they're going to want to live off of $50,000 a year, even adjusted for inflation, when they've been making a hundred thousand their entire career. But that's the decision they made. But the fat fire person, look at this, they would have to be saving 40.5% of their income. That's a lot. And like I said, I think it's great that you have this goal of having $200,000 and retiring that much sooner, living off of that luxurious income and being able to spend like you want in retirement. But at what sacrifice?

• 17:39Speaker 04

  That's right.

• 17:39Brian Preston?

  To now is what I get concerned about.

• 17:42Speaker 04

  Cause you think about it, for the entire working career, for this fat fire person, at $200,000 a year of income, you're in a higher tax bracket. So more of your money are going to taxes and you have to have a 40% savings rate. You are living a very likely frugal lifestyle at that stage. And then all of a sudden you get to 55 and your lifestyle is going to magically change and magically blow up. Was it worth it? Was the sacrifice that you put in worth having this fat fire goal? Or might there be another example? Might there be another scenario that might get you to where you want to be? And I think a lot of people recognize that. I want some mixture of the attainability of lean fire, but maybe some of the flexibility of fat fire.

• 18:26Speaker 04

  And so another type of fire burst onto the scene. And I think this is one that's maybe one of the most popular. And this is known as coast fire. And the

• 18:50Speaker 02

  Hey, listen. Power up your play with Nintendo Switch 2 and experience Link's legendary adventure. Now reborn in vibrant detail on our fastest and most powerful system yet.

• 19:03Speaker 02

  And harness the power of the Ocarina with the built in microphone.

• 19:12Speaker 02

  The Legend of Zelda: Ocarina of Time, a Nintendo Switch 2 exclusive. Game and system sold separately. Game rated everyone 10 and up.

• 19:19Speaker 04

  The idea of Coast Fire is that when your current investments, you've saved up enough to grow your current investments to 25 times your annual expenses, buy your additional retirement age without having to contribute any more money. So I'm gonna save early, early, early, build up a pot of money, and then I don't have to save anymore because I know that pot of money will do the heavy lifting for me.

• 19:41Brian Preston?

  Just as name implies, you're going to coast.

• 19:43Speaker 04

  That's right.

• 19:43Brian Preston?

  We even have some experiences. We did a Making a Millionaire with Danielle, and she was a great guest. And she had this goal of doing Coast Fire, but we had to modify her scenario. I'd encourage you, go check out that episode so you can see the actual math, where we kind of created an intersection of giving her her best life where she could do the Coast Fire, but made sure she measured twice, cut once, and didn't sacrifice anything in her life.

• 20:08Speaker 04

  Well, and I think she had some incorrect assumptions going into her planning, going into her equation. Because here's the way the math works. Let's think about, we'll sort of make up a case study here. Let's assume that you have Coast Fire Carly. And let's say that Carly, from age 25 to 35, was able to build up an investment portfolio of $500,000. And she says, okay, I'm gonna stop there. I'm not gonna save anymore, and I'm not gonna actually fully retire until I get to traditional retirement age of 65. So what I'm gonna do is, I'm gonna do something different at age 35, where I don't have to save. Maybe I take a different job. Maybe I pursue a passion. But that $500,000 that

• 20:47Speaker 04

  I built up, I'm just gonna let it grow at 8% compounded over the next 30 years. Well, because she did that hard work from age 25 to 35, that $500,000 that she saved...

• 21:01Speaker 04

  Has the ability to turn into five and a half million without her saving anymore. So I think a lot of coast fire love this idea. I can do hard work early, similar to the fat fire folks, but I don't have to do it forever. I can do it for a season and then I can coast.

• 21:19Brian Preston?

  Well, I mean, it is one. It's an interesting thing, though. When you look at this, you say five point, close to 5.5 million dollars. That's the equivalent when you take in the safe withdrawal rate of pulling out about $218,000 a year. That sounds like a lot, but if we bring this back inflation adjusted, that's only $90,108 in today's dollar.

• 21:40Speaker 04

  Which is great. It's not fat fire, but it's great.

• 21:42Brian Preston?

  But this is why you have to pay attention to inflation. I do like what coast fire does, though. It's just a matter of, once again, we've got to make sure you get the right numbers, because to pull your foot off the accelerator too early could jeopardize your army of dollar bills if you're not careful.

• 21:59Speaker 04

  So why is this popular? Well, I think the main reason coast fire is popular is because people love the idea of taking their foot off the gas. The idea of saving for 40, 45 years at these aggressive levels, 20, 25% might sound daunting, but a lot of folks say, you know what? I can do it. I can go real hard till I get to 30, till I get to 35. I'm okay, again, taking a little bit of discomfort for a small amount of time in order to have more comfort later on. It gives them something to work towards.

• 22:28Brian Preston?

  Well, I mean, because you've got such a head start, there is comfort in knowing that you're actually still going to increase your funding in retirement by just taking your foot off the accelerator. That's a good thing. There's a lot of comfort in knowing that number.

• 22:42Speaker 04

  You know, you've already checked the box. You've done the thing that you have to do. And I think people really like it because being able to increase your lifestyle by decreasing your savings, sounds like a win-win. It's an easy sell. Well, okay, so I can say really aggressively now, but at 35, I can start living the life that I actually want to live and I'm not sacrificing my retirement to do that. I think a lot of people like the idea that it provides a way to live the life I want today and a way to live the life I want tomorrow.

• 23:13Brian Preston?

  So here's the areas of concern. Here's what we think. And these things are kind of interconnected is that.

• 23:19Brian Preston?

  I often worry, are you going to, just because you can, does it mean you should? Take your foot off the accelerator? It's just because it's really, you don't know what life is going to throw your way. So I just want to make sure people are measuring twice, cutting once, doing the homework to actually know what the numbers are saying. Cause I find that too many people are probably cutting off the savings a little too early.

• 23:41Speaker 04

  Yeah. And another thing is it's a long time horizon. Cutting off that savings too early can have a huge impact because there are so many variables that can come into play that can affect if your number was right. You know, in Danielle Sinero, she's done such a great job of thinking through what the short-term strategy was, not recognizing that that traditional retirement number, that big number at age 65, needed to be enough to provide for the rest of her life. And I think far too often, people underestimate that. They do great with the short-term goal, but not so great with a long-term goal. And if you're gonna really do coast fire and you're gonna stop saving and you're gonna miss out on those years of savings, you better make sure that you've done the math correctly.

• 24:25Brian Preston?

  Well, it's also, how many of your variables have kind of like, they firmed up?

• 24:30Speaker 04

  Mm-hmm.

• 24:31Brian Preston?

  I mean, for instance, if you're a single person, when you come up with this goal, and you leave the workforce thinking that in your, you know, 40s, you're going to have this, and then you get a spouse later, your variables are going to change just based upon that right there. What about the fact that maybe you have a spouse, but then y'all have children later?

• 24:51Speaker 04

  Variables change.

• 24:52Brian Preston?

  Variables are going to change. That's the thing that gets me a little nervous. And that's why, once again, I'll say it, you have to measure twice, cut once, to make sure you've really accounted for all the different variables. So you don't get yourself in a pickle of a situation, because time is that valuable with the compounding growth opportunity, that you just don't want to leave anything and have regrets later.

• 25:13Speaker 04

  So I think a lot of people recognize that there are some big implications with coast fire. When you say, alright, I'm gonna take my foot off the gas, I'm gonna back down, I'm gonna leave the high-paying job, I'm gonna fill in the blank. And so another type of fire has become prevalent. Where I think it removes some of that nervousness, it removes some of the unknown and allows you to smooth those variables. And this is known as barista fire. And the idea behind barista fire is you want to be able to quit your day job, similar to what someone who's doing coast fire would do. And you partially want to live off of your investments, but you recognize that I'm still going to go out there and create some sort of income to offset my expenses in retirement.

• 25:55Speaker 04

  I'm not actually planning on a full retirement where I'm never working. I'm always planning on having some sort of job to cover the base level, to cover the difference. And likely that job's going to provide much needed things like access to healthcare and those sorts of things.

• 26:10Brian Preston?

  Now, look, this is why I do love these middle versions of fire that we're doing. I love the fact because they require you to save a lot in the beginning and then, but you're still not committing to the extreme like lean and fat fire dead. But this is, this appeals to the hallmark version of myself. I mean, I watch these things coming through the holidays and I'm like, yeah, it would be fun to work at a bakery or do something like that. I feel like that's what a lot of people, especially if you don't like your current job, this probably appeals to a lot of people. But how does the math with this situation work?

• 26:41Speaker 04

  Yeah, so the math is very similar to some of the other math that we've looked at, except for now, what you get to do is you get to take your cash flow need and you get to subtract out the supplemental income that you're going to achieve. So let's assume that you're a 25 year old that wants to retire at 55 and you're going to need $70,000 in today's dollars to live the life that you want, but you recognize you can get a part-time job or a lower paying job that's going to pay you $30,000 a year in retirement. You would take your cash flow needs $70,000 minus your supplemental income, $30,000. You would divide that by your appropriate withdrawal rate, in this case for a 55 year old to be 4%.

• 27:25Speaker 04

  Multiply it times the rate of inflation raised to the number of years until you need the money. And you can see that for barista fire, if your goal were to just fund that shortfall of $40,000 a year in today's dollars, you would need a portfolio of about $2.4 million.

• 27:42Speaker 04

  At the same time, maintaining a job all through retirement, producing $30,000 a year.

• 27:48Brian Preston?

  Or it doesn't have to necessarily be a job, maybe social security. There could be a bridge where you work until something else fills in what you were making down at the local coffee shop. Or in my situation, being the bakery and making cookies and cakes all day. But it is, it is something that at least allows you to have options because you did so much saving in the beginning. Two and a half million dollars, that doesn't sound crazy. And this is especially popular for people. If you don't like your current day job, I can imagine that this is one that just starts growing from a small idea to a bigger and bigger idea. Because every day you wake up and that alarm clock goes off, like I gotta do something to get out of here. This might be a way to make yourself feel better about that.

• 28:30Speaker 04

  Another thing that it does, it provides greater flexibility while still needing to hit a lower number. You're not trying to chase that huge fat fire number or some of the other difficult coast fire numbers to hit. You can still have a lower number to hit, but have flexibility in how you're going to get there and how you're going to achieve that.

• 28:49Brian Preston?

  Well, and it also, a lot of people, we've been making, and I thought the exchange was going to fix this, but it hasn't. Cause the exchange in a lot of states is, is pretty slim, is it covers health insurance. A lot of people, you can go work, I mean Starbucks has great health insurance. So, you know, a lot of people will go and that's why it fills in the gaps nicely. That you get to pull the income lever, still have some income coming in, but cover the big risk of health insurance. That's a good thing. And that's why even when we think about what we think about this, I do like that it covers that big gaping hole that a lot of fire people. Yes, you've saved well, yes, you have assets, but how do you make sure you don't have something like a medical emergency? Blow up your entire financial situation.

• 29:33Speaker 04

  We see people all the time, clients of ours that say that they want to retire. What happens is they get that volunteer job or that lower paying job or that low benefit job. But it covers their baseline. And so then what the portfolio does is it's able to supplement the extras, the travel, the bonuses, the car replace. Those sorts of things. So it is a really, really flexible way to be retired. But the reality is you may not want to have to work that job even in a part-time capacity forever. So you are going to figure out, okay, if I'm going to step away from the workforce completely at some point, if I am going to lose those benefits, if I am going to lose that income, is there something else that's going to take its place? Do I have Medicare coming up? Do I have social security?

• 30:18Speaker 04

  Do I have some other solution that's going to make up for that gap when I actually do truly leave the workforce?

• 30:24Brian Preston?

  Well, this leads to, and I feel like this brings the culmination of everything. And this is probably going to give you a little context on why we feel the way we do is that, look, this FIRE movement has been branded this way for really the last 10 plus years.

• 30:38Speaker 04

  20 years, yeah.

• 30:39Brian Preston?

  But it's not a new concept. I mean, if I think about my 22-year-old version, I had already promised myself, hey, I want to save a ton of money so that I can leave the workforce when I'm 50 years age, 50 years of age. Well, here's the thing, fast forward, I'm beyond 50 now. And y'all probably noticed, I'm still working. And that's why I like, the next thing that we're going to talk about is the FINE movement or Financial Independence Next Endeavors. Because I resemble this is because I do thank myself for all the sacrifice I made when I was in my twenties. But I've realized I don't necessarily want to retire early. I like to do things on my terms. And that's why I love this concept of Financial Independence Next Endeavor,

• 31:20Brian Preston?

  because it doesn't necessarily make you have to tap out of the workforce necessarily.

• 31:25Speaker 04

  Yeah, what's great is when it comes to Financial Independence Next Endeavor, the math, the way you calculate your number is the same as traditional FIRE. How much do I need to be able to live the life that I want on my terms, the way that I want to need it? So the math is the same as regular FIRE. But what shifts is the mindset. There's a different way that you think about why you're moving towards that goal and why you're saving up those dollars so aggressively.

• 31:54Brian Preston?

  Yeah, we're definitely bringing in purpose and the why factor. What we like about the FINE movement, we've kind of covered this, is that instead of You just saving up a pot of money without purpose. You kind of now get to control the terms of what is your next step look like? You know, shifts the focus from retirement to what's next for what gives me purpose? When I wake up in the morning, this is why I wake up energized. Instead of chasing a dollar value, I'm chasing a greater purpose.

• 32:23Speaker 04

  Yeah, it allows you to be in that place where you're living a truly intentional life. A lot of people think about, oh, well, my job is just this thing I clock into. And it's a means to an end, means to an end, means to an end. Financial independence next endeavor says, okay, I have now solved the money problem. I want to do the things that I want to do on my own terms. That may be still doing the vocation that you do. It still may be being an accountant, being an architect, being a teacher, being a fill in the blank. Or it might be doing something else. But now the reason that you do it is because you want to do it, not because you have to do it. You had to do it to get to the financial number. And now that you solve the math, now you get to focus on the purpose.

• 33:07Brian Preston?

  I mean, and it's worth repeating is that I was saving like I was go retire at 50 back in the nineties and fire didn't even exist back then. So this is not a brand new concept. It's just a very well fine tuned. A lot of people have kind of created this movement where they're really thinking a lot. And I commend them. I know for all the people who think we're fire extinguishers, we're actually not. I just, I want to make sure that people live their best life. And what are the blind spots that you might not be thinking about? Cause we all know money is nothing more than a tool. And I just want you to know, you know, what do you value? What gives you purpose? What gets you out of bed? Because money is a tool can give you security. Money is a tool can also give you the freedom.

• 33:52Brian Preston?

  And then if you do this right, and this is one of the powerful things that fire gets right is if you build up enough. Pot of money, there's opportunities for you to have a choose your own adventure. Anybody who's my age loves those books and loves the fact that you don't have obligations. You don't have commitments unless you want to do something. And if you can build up your resources and your army of dollar bills, it just opens up the world to you. I'm just trying to make sure that you don't sleep on those blind spots or areas that a lot of people just think that it's set in stone, that this is the fire movement that's going to do this for me. And I'm just telling you, life changes. Like I said, you can live in a hotel room with three other friends on vacation and be completely happy in your twenties and thirties.

• 34:36Brian Preston?

  Your life will change and I just want to make sure you plan accordingly.

• 34:40Speaker 04

  Yeah, money can give you these things. It can provide the security and the freedom and the opportunity, but only if you steward it well, only if you begin with the end in mind and you understand, okay, what's the reason I'm making the decisions that I'm making? And you aren't someone who just lets life happen. It's why if you go out to moneyguy.com/resources, you go check out any of our tools, any of our calculators, any of the content we put out there, it's there for you because we really do believe that there is a better way to do money. And the sooner you figure that out, the more useful of a tool money can be for you.

• 35:17Brian Preston?

  Well, and look, I don't mind sharing. We give away tons of free information is because we know no matter how good you are with money, even if you keep it as simple as possible, it's going to get complicated because you're successful. As we've covered, every one of these fire movement choices is going to be the intersection of both math as well as mindset. You've only got one retirement likely, maybe multiples if you're doing this different versions of the fire process, but you have blind spots. We've done this hundreds, thousands of times if you take the whole firm together. And I just want to help you be the best version of yourself. So that's why consider if you reach that level of complication, go out to our website,

• 35:59Brian Preston?

  moneyguy.com, become a client, we'll leave the porch light on for you. That way you can continue to live your best life because you've been so purposeful. Let's just make sure there's not something with your measure twice, cut once, that doesn't derail all that preparation and success. I'm your host, Brian, joined by Bo, Money Guy team, out.

• 36:20Speaker 04

  The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through The Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve an degree of risk, including the risk of loss.

• 36:52Speaker 00

  Welcome to The 50th Hunger Games.

• 36:54Speaker 01

  Witness the beginning of the revolution.

• 36:57Speaker 00

  Hey Mitch, you've been trying to take down these games from the start.

• 37:00Speaker 01

  Filmed for IMAX.

• 37:01Speaker 00

  Make them remember you.

• 37:04Speaker 01

  The Hunger Games: Sunrise on the Reaping, November 20th, rated PG-13.

• 37:08Speaker 02

  Hey, listen. Power up your play with Nintendo Switch 2 and experience Link's legendary adventure, now reborn in vibrant detail on our fastest and most powerful system yet.

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  And harness the power of the Ocarina with the built-in microphone.

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  The Legend of Zelda: Ocarina of Time, a Nintendo Switch 2 exclusive. Game and system sold separately. Game rated everyone 10 and up.