Types of FIRE
The FIRE (Financial Independence Retire Early) movement has started spreading its wings and is inspiring an even bigger group of people to go this route. I wrote about what is FIRE and why FIRE in my previous post here. Let us try and understand the types of FIRE in this one.
What are the different flavors of FIRE?
GPS - Flickr
LeanFIRE - no ice cream version of FIRE, i will make do with fat-free yogurt
I save enough just for basic survival and lead a very simple life in retirement, cut down all unnecessary expenses and lead an extremely frugal life.
Pros:
Smaller retirement portfolio required
Time to save up for FIRE lesser (compared to others)
Cons:
Any small deviation to the plan might jeopardise FIRE
Unplanned emergencies pose a risk
Significant lifestyle compromises
Jon Lin Photography - Flickr
BaristaFIRE - I really want vanilla ice cream, but i just need some more time before i can reach it.
Save a decent sum of money and have it invested, quit your job and pursue another less stressful job either full time or part time before going full FIRE
Pros:
Smaller retirement portfolio required
Time to save up for FIRE lesser (compared to others)
Quit the rat race and feel liberated
Cons:
Still further planning required until you are fully ready to FIRE
Unplanned emergencies pose a risk
chriscom - Flickr
FIRE - Vanilla
Save enough to meet survival needs by a good margin, but have a little contingency against unplanned expenses while maintaining a simple lifestyle in retirement without penny pinching for every single expense.
Pros:
Built in safety margin for contingencies
Ability to eat your vanilla ice cream when you want
Cons:
Longer time needed to FIRE
Need to build a bigger corpus
Some lifestyle compromises
Tina Franklin - Flickr
FatFIRE - I cannot just make do with Vanilla, I need all the different and yummy flavors of ice cream with a cherry on top.
Save and invest a significant amount of money to cover for contingencies, unplanned emergencies, a very comfortable existence without any lifestyle compromises.
Pros:
Fun retirement
No lifestyle compromise
well planned contingencies for emergencies and unplanned events
Cons
Need the longest time to build the retirement corpus
Time to FIRE the longest of the three options
So what does it mean from a financial view for all three options. The question of how much is enough is a tough one, i have tried to address some questions about here. Let us take the scenario of someone planning to FIRE in India with a fully paid house and a family of four - Husband, wife and two kids.
Given that most people who FIRE are not retiring at 60, I prefer to use a different starting point than the 25X annual expenses figure used in most retirement blogs. I would bump the number to 30X annual expenses to retire for FIRE retirees
LeanFIRE
> 300,000 and < 480,000 rupees annual expenses
Corpus - 90,00,000 (90 lakhs or 9 million rupees) to 1,4,40,000 (1.44 crores or 14.4 million rupees) - 30X annual
BaristaFIRE
> 480,000 and < 900,000 rupees annual expenses
Corpus - 1,4,40,000 (1.44 crores or 14.4 million rupees) to 21,600,000 (2.16 Crores or 21.6 million rupees) - 30X annual. Current job supports most of living expenses and possibly contributes towards corpus which is why the upper limit is 2.16 crores instead of 2.7 as per upper limit calculation.
FIRE
> 900,000 and < 1,500,000 rupees annual expenses
Corpus - 27,000,000 (2.7 crores or 27 million rupees) to 45,000,000 (4.5 Crores or 45 million rupees) - 30X annual
FatFIRE
> 1,500,000 and < sky is the limit
Corpus - 5,000,000 (5 Crores or 50 million rupees) - 30X annual
So where do you see yourself in this spectrum and how long do you think you need to reach your goal? Provide your comments below.
