what is lean fire, lean fire explained

What is Lean FIRE? How to Retire with a Minimalist Lifestyle

There are many different paths to financial freedom, and you don’t have to be a tech worker who only owns three shirts in order to reach it. People have expanded the definition of financial independence widely over the last decade. If you’re a minimalist, or can live on a low income, you are probably interested in knowing about lean FIRE.

What is Lean FIRE?

Lean FIRE is for the frugally minded folks interested in leaving work earlier than age 65.

As a reminder, financial independence is a movement of people aiming to be able to cover their financial needs without having to work a full time job. This means they have enough money in assets, like stock market investments, or passive income, to cover their lifestyle spending and they don’t need to go to work every day.

Lean FIRE is a specific sub genre of this idea. As you can tell by the name, this is for people who want to live “lean” aka , who are not high spenders. It’s perfect for minimalists or people who are into slow living.

The general rule of thumb is to live on $30,000 or less a year in early retirement to be considered lean FIRE.

To have officially reached it, you must have saved 25x your annual expenses. So for example if you plan to live on $30,000 a year after retiring early, you would need $750,000 to have achieved lean FIRE.

What is Lean FIRE Good For?

Lean FIRE is what most people think of as the first level of true financial independence. Other forms, like Barista FIRE, still require you to work, so you’re not fully independent of a job. Lean FIRE does mean you don’t have to work if you don’t want to.

Reaching lean FIRE gives you options. It means you can leave work full time if you want to and can live off of a small amount of money each year.

If you don’t want to live off $30,000 or less a year, lean FIRE still opens more doors for you. Reaching it might mean you can leave a high paying, high stress job for a lower paying one. It might mean you can leave a high cost of living area and move somewhere cheaper to work part time. It might mean you can stop investing and start spending more of your income! The possibilities are endless!

Let’s say you have $650,000 invested by the time you turn 45. That is enough for you to retire on and live lean, but you don’t want to quit just yet.

If you stop investing altogether and just let your $650,000 compound for the next decade, your investments will reach $1,278,648.38 (at a 7% annual return). And in that decade you can spend almost everything you earn!

Who is Lean FIRE Best For?

Beyond knowing what is lean FIRE, you have to decide if it’s right for you. It’s gotten very popular in recent years with single people, and dual income households with no kids (referred to as DINKs.)

This makes sense! Kids can be expensive, if you are frugal. Kids gotta eat, kids grow out of clothes and need new ones, and healthcare in the US is a true nightmare. So lean FIRE is usually more appealing to people who don’t have kids.

It’s also appealing to people who want to live more simply. I consider myself a minimalist, and lean FIRE appeals to me. I already use minimalism to save 30% of my income annually, so the idea of a small annual income doesn’t bother me.

Tools to Reach Lean FIRE

Like any other form of financial independence, it takes dedication and money skills to reach lean FIRE. Here’s a four step strategy for you:

Budget aggressively and spend minimally.

Since lean FIRE is all about being a low spender IN retirement, you have to build those skills on your way TO retirement!

That means budgeting aggressively during your working years. You can use a free app like Empower to both help you budget AND track your net worth on your path to financial freedom.

I use Empower myself, and here’s a screenshot of my dashboard. You can see in the top left that there is a net worth tracker, which will help you see your progress towards financial independence.

There is also a budget tracker, which will track all your spending across your debit card and credit cards.

Budgeting is the path to financial independence of any type. Everyone who reaches FIRE is a budgeter!

Invest Aggressively

What does “invest aggressively” mean? It means investing consistently, month after month, and investing as much as your income will allow.

So if you make $100,000 a year, investing aggressively would mean investing $25,000 or more a year.

If you make $50,000 a year, investing aggressively would mean investing $12,000 or more a year.

For those who want to reach lean FIRE, the more you can invest earlier in your career, the earlier you can retire! Additionally, the longer your money has to grow into more money.

If you have $700,000 invested by age 45, that will compound into $1,931,322.08 over the next 15 years EVEN IF YOU DON’T CONTRIBUTE ANYTHING ELSE TO IT. That’s the power of compound interest baby! (This is at a 7% interest rate.)

We have an investing 101 course called HOW TO NOT DIE BROKE which will help you open the right accounts to reach financial independence.

Find and Use Free Things

People who find success at lean FIRE are interested in low waste lifestyles, or are good at finding things they need for free or very discounted.

We have a list of 19 sustainable living tips that will save you money, which is perfect for anyone pursuing financial independence.

You can also use groups like Buy Nothing, Freecycle, and gift exchanges to get items you need for free!

Build a Cash Buffer

It’s my personal opinion that a cash buffer is more essential to people pursuing lean FIRE than any other type of FIRE. That’s because I want lean FIRE people to leave their money invested as long as possible, so it can grow as much as possible.

A cash buffer is therefore necessary so that if emergencies come up you can pull from that instead of your investments.

I would say that you should keep one year’s living expenses in a high yield savings account. I like Atmos as an earth friendly HYSA!

An Example of a Lean FIRE Budget

If you’re thinking “there’s no way someone could retire on $750,000 in the US of A”, let’s take a look at an example of a lean FIRE budget.

Remember, the whole idea behind lean FIRE is to live simply and minimally, and to not have high expenses. This is not a Kardashian kind of retirement!

For our example, we’ll say you have $2,500 to spend a month, or $30,000 a year.

Look, we even came in a little under budget!

This budget would be what you spend once you REACH lean FIRE and are no longer working full time. You can see that it covers the basics of life, with some fun things thrown in at very reasonable monthly rates.

It does not include a lot of things that people consider “basics”, like restaurants or travel. While there are other categories, like “fun” and “entertainment” that you could absolutely apply to something like going out to eat, so there is flexibility built into this budget.

What do you think of lean fire? Are you interested in this form of financial independence?

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