There are several types of FIRE including FatFIRE and LeanFIRE, but I’ve recently discovered two other types; Coast and Barista.
CoastFIRE is where you invest heavily in the early years and then let the investment compound without too much emphasis on adding to the investment pot during the coasting period. An example of this would be saving heavily in your 20s and 30s, before winding down the money invested each month. The total pot accumulated would then be allowed to compound until retirement.
BaristaFIRE is similar to LeanFIRE, in my opinion. You invest enough so that your assets can cover your basic living costs. Then, you can work part-time, as a barista for example, to give yourself some spending money.
Whilst it’s useful to have different terms for the different strategies in the FIRE community, it ultimately doesn’t matter what you call it as long as your strategy is realistic and budgeted.
When I started my FIRE journey, I set the ambitious goal of FIRE by 40. I was 36 at the time. I’m now approaching my 39th birthday and I’m not as far along as I’d hoped, but I’m not too disheartened. A lot has happened since I set my goal that was outside my control, and this will give me an extra safety net as it pushes me to work longer to accumulate a solid financial foundation.
As I stood on the cruise ship looking out at the ocean in late 2019, thinking about my plans for the future, Covid-19 was still months away. The war in Ukraine was still over a year away. Brexit was still up in the air. Inflation was much lower than it is now. Although the cost of living was biting those in the more vulnerable sections of society, it was not something impacting the majority. Had it not been for all these things, I would be further on in my FIRE project.
I don’t have an expensive lifestyle, and my girlfriend and I lack two of the main expenses that most couples have; children and cars. We like the simple things, and we don’t do alcohol or other recreational drugs, unless you count caffeine. The point I’m making is that our expenses are few. Our FIRE figure is low as a result.
Our dream is to retire to Madrid once our finances are in order. Using a few sources online, and talking to people who live in Spain, we believe that 4,000 Euros per month will allow the two of us to have a fairly comfortable life. My girlfriend wants to continue working, and I want to study and write. Assuming we each bring in 2,000 per month, current exchange rates assume that we need £1,700(ish) per month. Obviously, these numbers are constantly fluctuating.
As I look at my progress so far, it’s going to take a bit longer than I’d hoped to hit my target for FIRE by 40. So, what are my options?
BaristaFIRE is probably the best fit for my plans. There’s nothing stopping me from doing some casual work in Spain to earn a bit of pocket money whilst the value of my assets compound over time.
Last year I had a passive income of £3,771. This year I’m on track for £4,700 – £5,000. The lower end of that projection is still a 25%(ish) increase on the previous year. Taking that projection and applying it to the future, it looks like this:
Now, I know that my working out doesn’t include inflation or changing currency exchange rates. Including every single variable is counterproductive for this situation. Either the numbers will work, or they won’t. The only deadline here is my own self-imposed deadline, and if I don’t meet it, I can just extend it. It’s not a big deal.
One thing for certain is that I need to get that second BTL purchase completed as soon as possible.
Assuming I decide to go down the BaristaFIRE route and work whilst in Spain, it could bring the FIRE date forward. Based on the current minimum wage in Spain, if I was to work 10 hours a week, for 46 weeks a year, it would reduce the amount I would need from passive/investment sources by just over £200 per month.
All of the above calculations have been completed as cautiously as possible, but I thought I’d end things on a more hopeful note. Assuming the following:
- My BTL tenant continues to pay on time, in full for the rest of the year.
- My income funds perform as usual for the rest of the year.
- My estimate for the final dividend of the year from the stock I own is paid as projected by sources online…
Assuming all that, I could finish the year with £5,618 of passive income. Projecting that forward would see my FIRE target achieved by year-end 2025.
However this all works out, the important thing is that I’m planning for the future and not just relying on a state pension.
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Mortgage Advisor on FIRE. 