The FIRE Movement

The Newbie’s Guide to Understanding FIRE Finance

As more people become aware of and join the FIRE movement, the definition of FIRE continues to evolve.  So just exactly what does FIRE stand for in finance terms?  Well, that really depends on who you ask.

FIRE Finance has many components

What is FIRE Finance?

Originally FIRE was accepted as ‘the point at which your living expenses could be covered by the revenue generated from your investments.’  Personally, I feel like this definition works just fine for most people.

This traditional definition works well because it’s flexible enough to cover everyone. For example, if you’ve got a lot of expenses it goes without saying that you’ll need a bigger portfolio in order to have those expenses covered by your portfolio returns.

The inverse is true if your expenses are minimal.

Financing Your FIRE

Regardless of your financial needs, the way to calculate how much you’ll need for retirement is the same.  FIRE people use the Rule of 25 to figure out how much they’ll need to save for retirement.  And they use the 4% Rule to figure out how much of that portfolio they can spend without ever running out of money.

But you can just use this calculator.

Financing Your Retirement

Takes an additional retirement balance of $91,310.63

  • To use the calculator start by entering the amount of your expense in question (by default this is $100).
  • Next, use the drop down menu to choose whether this expense is daily, weekly, monthly or yearly.
  • Finally, use the slider at the bottom of the calculator to choose your safe withdraw rate. 4% is the default, but some plan on withdrawing more or less from their portfolio. Pick the SWR that works for you.

Using the Rule of 25 and the 4% Rule to figure out your retirement numbers is simple enough. Still, new FIRE terms and definitions keep popping up.  In addition to the traditional definition, the other two types of FIRE that you’re most likely to hear about are Fat FIRE and Lean FIRE.

More on these two terms below.


How Much Money Do I Need to FIRE?

You are considered “FIRE” when your expenses are covered by returns generated from your investments.  At that point you are financially independent because working for a paycheck is optional and an early retirement is possible.

Because everyone’s expenses and lifestyle expectations are different, it’s impossible to pinpoint a one-size-fits-all number.  People of the FIRE movement have three main types of FIRE that are loosely defined by your lifestyle costs and needs during retirement.

Most people chasing FIRE will retire with an average lifestyle, which can be financed for $50,000 – $100,000 annually.  This is “Traditional FIRE” and it looks something like this:

Traditional #FIRE is the Goldilocks of #TheFIREMovement. It's not too lean, not too fat - it's just right! $1.25 - $2.5 million is required for #FIRE

A portfolio of $1.25 to $2.5 million is required to meet this Traditional FIRE lifestyle.  A portfolio in that range would generate between $50,000 to $100,000 per year, plenty for most people to live on, especially if you’re debt free.

But what about people what want to live a fat or lean lifestyle?  They’ll need a larger or smaller portfolio to fund their respective lifestyles.  These other two groups are known as Fat FIRE and Lean FIRE.

What is Fat FIRE?

Fat FIRE is for the early retiree that wants a bit more out of their retirement.  Perhaps they plan to travel more, maintain multiple homes, have toys like boats, dirt bikes, or other hobbies that will inflate their annual expenses.

People that want Fat FIRE will need to retire with a portfolio of at least $2,750,000 – $5,000,000.  A portfolio in this range will generate $110,000 – $200,000 annually, and should be enough to live a fat lifestyle.

Fat #FIRE is for those that want to live large in their #EarlyRetirement. Rice and beans are not on the menu ... unless they're slow traveling through Spain. $2.75 - $5 million is required for #FatFIRE

What is Lean FIRE?

Finally, there are a group of people that want their freedom more than anything else.  Even if that means sacrificing their lifestyle a bit. The idea of owning their own time and livin’ the FI Life ASAP is more appealing than living a fat lifestyle later on, which would require them to continue working, saving and investing for many additional years just so they can have more money to spend each month once retired.

People pursuing Lean FIRE will need a portfolio of $250,000 to $1,000,000 in order to generate $10,000 to $40,000 per year.

Lean #FIRE is for those that want to #RetireEarly more than they want to live large once they reach #FinancialIndependence. $250,000 - $1 million is required for #LeanFIRE

Personally, I don’t want to attempt a $10,000 per year lifestyle, but if that’s your thing then you’re definitely lean and mean and I wish you the best of luck.

The Different Types of FIRE

Whether you’re going after Lean FIRE, Fat FIRE or a more Traditional FIRE, the end goal is the same: financial independence.

The more money you need to meet your desired lifestyle, the more you’ll need to have saved and invested.

Striking The Right Balance

Lean FIRE can be achieved faster than traditional or Fat FIRE, but you give up the luxury of having more money at your disposal. Additionally, those pursuing Lean FIRE don’t leave themselves with much room for error should an unexpected financial or health emergency show up.

On the other hand, FIRE and Fat FIRE will both have more wiggle room, but both required you to work longer.

FIRE finance, just like personal finance is personal, and nobody’s situation is exactly like yours, so it’s up to you to figure out what it is you want and need.

Chime In

What type of FIRE finance are you going after?

By Ty Roberts

Ty Roberts is the founder of Camp FIRE Finance, and a husband and father of four living in the Seattle area. He's a fan of the 4% rule, 80s movies and music, dad jokes and cast iron cooking.

12 replies on “The Newbie’s Guide to Understanding FIRE Finance”

Very concise and well written article on they different types of FIRE. I went LeanFire (before I knew about FIRE hehe) at first, and spend the last two years growing my netWorth to the FIRE range. My ambition now is to grow my portfolio of passive income sources through diversification and safe investments (mainly real estate) to FatFire range. I believe there are paths to go FIRE early and grow to FarFire over time. Like they say: the first million is the toughest – I think it’s so true.

I want a Fat FIRE lifestyle,and am hoping to find a way to make that work through a combination of Lean FIRE + other sources of income (side hustles, social security, etc). Sounds like I just need to duplicate what you’ve pulled off!

Thanks for breaking that down! I’ve always been curious how people are breaking these down. I figured it came along the same lines as the “what is middle income” debate.

It seems I aim to be clearly into the tradFIRE range. Depending on how I feel my income streams are doing I might aim for a high lean FIRE and see how I do for a bit.

One thing, I’m pessimistic, so, actually estimate at 30x for safety. 25x for motivation to get there though!
Fun stuff!

Great article! I love seeing the numbers laid out like this.

Personally I’m a bit of all three. I’m FIRE now and in “traditional” but living like “lean” (and having a blast doing it). Our net worth is increasing each year and we plan to live “fat” as we get older.

In truth the F.I.R.E. movement is about self-discovery, our authenticity, experiences and our journey towards personal mastery. The mastery of being able to better define, develop and live our own authenticity and to add value to others.

Which brings me to my thoughts and observations of many within the F.I.R.E. movement.


Escapism and its attainment is a fallacy. None of us are escaping, none of us are getting out of here alive.

Financial independence on its own, is not our solution. For many its allure and the effort required for its attainment is like every other form of escapism.

True fulfillment and mastery in life is attained through embracing all of it and its daily challenges including the unknown rather than seeking to escape it..

We are purified, strengthened, polished, attract and are appreciated more by others not for the things we have achieved but for the value we add to them and ways we have improved their quality of life.

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