What is Fat FIRE? Fat FIRE is a term that is growing in popularity, especially among those who are looking to retire as early as possible.
It is a combination of the words “fat” and “fire,” and it refers to the act of saving as much money as possible so you can live a comfortable life without having to work anymore.
There is no one-size-fits-all approach to Fat FIRE, as the amount of money you need to save will depend on your personal circumstances and goals. However, there are some general principles that those who are looking to achieve Fat FIRE typically follow.
The first principle is to focus on saving as much money as possible. This means living below your means and making sacrifices in order to put more money into savings and investments.
Here are some ways you can save money:
- Reverse Savings Plan
- 15 Creative Ways to Save Money
- 100+ Simple Ways to Save Money
- How to Save Money in Your daily Life
- 52 Week Savings Plan
- 10 Money Saving Challenges
The second principle is to invest wisely. This means choosing investments that have the potential to grow over time and that will provide you with a comfortable retirement income.
Here are some ways you can start investing:
- How to Buy an Investment Property (I feel real estate is one of the best ways to obtain FAT FIRE!)
- 10 Best Ways to Invest Money
- Best Stock Research Websites
- How to Generate Passive Income
- How to Use Rental Property as Passive Income (again, my favorite!)
The third principle is to have a plan. This means setting realistic goals and creating a roadmap for how you will achieve them.
Achieving Fat FIRE is not easy, but it is VERY possible with dedication and planning. If you are looking to retire early and live a comfortable life, then Fat FIRE may be right for you.
Personally, I am working towards achieving Fat FIRE. While I live a frugal lifestyle with many things, there are many things I like to spend a lot on, like travel. I want to live a very comfortable life where I can do what I want, when I want!
But what does it really mean to be a part of the Fat FIRE movement? And how can you achieve it? Here’s everything you need to know about Fat FIRE.
Your Fat FIRE Number
The first step to achieving Fat FIRE is calculating your “Fat FIRE number.” This is the amount of money (or net worth) you need to save to retire and live comfortably.
For me, this number happens to be $15K/month in passive income (before taxes). This allows me to live the life I want without worrying about money.
Everyone’s number will be different depending on your goals – remember, we set goals first. I live in a very expensive area, and plan to spend 50% or more of my time traveling (in style of course – nice hotels, first class airfare and all), which is why my number is high.
To calculate your Fat FIRE number, you will need to estimate your annual expenses and desired amount of extra spending.
Start by adding up all of your necessary expenses, such as housing, food, transportation, and healthcare. Then, add your discretionary expenses, such as travel, entertainment, and shopping.
Once you have an estimate of your annual expenses, multiply that number by 25. This will give you a rough estimate of how much money you need to save to retire.
For example, if your annual expenses are $50,000, your Fat FIRE number would be $1.25 million.
Fat FIRE Number = 25 x (Desired Yearly Spending)
**Caveat: this calculation assumes a 4% withdrawal rate – meaning that you can safely withdraw 4% of your savings without impacting the principle. If you have other passive income generating assets (i.e. business, real estate), you just need to ensure it brings in the amount that you need.
There are many benefits to reaching Fat FIRE. First and foremost, it allows you to retire early and enjoy your life without having to worry about money.
In addition, Fat FIRE can also help you become debt-free. Once you have enough money saved up to cover your annual expenses, you can focus on paying off any debts you may have, such as student loans or credit card debt.
Finally, Fat FIRE can also give you the ability to take more risks in your career. Once you have a solid financial foundation, you can afford to take chances and pursue your dreams without worrying about money.
There are different types of FIRE, depending on your savings goals.
Fat FIRE: As mentioned before, Fat FIRE is when you save up enough money to retire and live comfortably.
Lean FIRE: Lean FIRE is when you save up enough money to cover your basic expenses, but you don’t have any extra spending money.
The main difference between Fat FIRE and Lean FIRE is the amount of money you need to have saved up.
Fat FIRE requires a larger nest egg because it covers not only your basic expenses but also your discretionary expenses.
Lean FIRE, on the other hand, only covers your basic expenses. Unfortunately, this means that you will still need to work in order to cover your discretionary expenses.
There are a few negatives to the Fat FIRE lifestyle. First, saving up enough money to reach your Fat FIRE number can be challenging. This is especially true if you have a low income or high expenses.
Second, Fat FIRE can make it difficult to retire early. If you want to retire before reaching your Fat FIRE number, you may have to make sacrifices in your lifestyle.
This is where I am. I have made sacrifices of my time so that I can work to generate income for Fat FIRE. I work A LOT and sometimes feel as though it’s not worth it.
That said, I am working to simplify my life every day so that I can get some of my time back as we continue to generate income towards Fat FIRE.
Finally, Fat FIRE can be risky. For example, if the stock market crashes or you experience an unexpected financial emergency, you may have to return to work.
There are a few different ways to achieve Fat FIRE.
The first way is to save as much money as possible. This means living below your means and cutting back on unnecessary expenses. Try to save at least 20-25% of your income each year. **The more you save the faster you will get to FIRE.
The third way to achieve Fat FIRE is to make more money. This can be done by earning a promotion at work or starting your own business.
Regardless of your chosen method, remember that it will take time and discipline to reach your Fat FIRE number.
But if you are willing to make the necessary sacrifices, Fat FIRE can be a great way to achieve financial freedom.
Coast FIRE is another FIRE approach, and it’s gaining in popularity. Coast FIRE involves working just long enough to cover your basic living expenses while saving the rest.
The goal is to reach a point where your investment income covers your living costs so you can quit your job and live off your investments. It’s different than lean FIRE as it includes not just the basics needed to survive, but your current living expenses.
For example, let’s say you need $50,000 per year to cover your living expenses. Once you have investments that generate $50,000 per year in income, you can quit your job and coast on financial independence.
The most significant difference between Coast FIRE and Fat FIRE is how much money you need to save.
With Coast FIRE, you only need enough money to cover your living expenses. This means that you can retire with a much smaller nest egg than with Fat FIRE.
Coast FIRE is also less risky than Fat FIRE because you don’t need to have as much money saved up. If the stock market crashes or you experience an unexpected financial emergency, you can always return to work.
The downside of Coast FIRE is that it can be difficult to find investments that generate enough income to cover your living costs. And if you do find such investments, they may not be very stable.
For example, if you invest in stocks, there’s always the risk that the stock market will crash. And if you invest in rental properties, there’s always the risk that your tenants will stop paying rent.
So while Coast FIRE may be less risky than Fat FIRE, it’s still not without risk.
With hard work and discipline, anyone can reach their Fat FIRE number and enjoy a comfortable life without having to work anymore.
While it will take time and discipline to reach your financial goals, it can be totally worth it once you reach that time freedom! If you are willing to make the necessary sacrifices, Fat FIRE, Lean Fire, or Coast FIRE can be a great way to achieve financial freedom.
Are you working towards FIRE? Comment below and tell us a bit about your journey!