What Is Barista FIRE?

The “Financial Independence, Retire Early” movement, which goes by the shorthand FIRE, is about achieving financial independence decades before you reach the age of traditional retirement.

The not-so-secret formula? FIRE devotees, often in their 30s and 40s, save up and invest 25 times their annual spending. That’s based on a plan to draw down 4% of their nest egg each year, which allows them to enjoy a workfree—if often frugal—life.

Like any popular movement, FIRE has spawned various iterations, and its adherents have splintered into multiple camps. There’s built-in customization: FIRE provides an adaptable framework that can align with specific retirement needs and goals. With that, meet the moderate cousin named “Barista FIRE.”

Barista FIRE: What’s the Difference?

Despite its reputation for extreme austerity, there’s a spectrum of FIRE approaches, from “Lean FIRE,” which requires saving more and spending less than about $60,000 annually, and “Fat FIRE,” which allows for more flexibility. Barista FIRE falls in the middle of the spectrum, and proponents say it offers the best of both worlds: They can spend more and simultaneously replenish their savings.

Here’s how it works: Like traditional FIRE, adherents achieve their goals by living frugally, sometimes downgrading their lifestyle and making spending sacrifices. But the rules are much less stringent. Instead of trying to save the total amount desired for financial independence, those in the Barista camp save just a fraction of that total.

The trade-off? They supplement their income with a part-time job with benefits (hence the barista part). Here’s what to know if you are considering Barista FIRE.

Do the Math

FIRE success hinges on your budget and your savings strategy. Let’s say you want to have $50,000 available to spend each year in retirement to sustain your lifestyle and budget. Multiply $50,000 by 25, which gives you $1.25 million. That’s the amount you would need to save to stop working completely if you want to draw down 4% every year under traditional FIRE. But if you decide to take a barista-type job that pays $30,000 annually, then you only need $20,000 saved for each year. So, again multiply by 25, you’ll need $500,000 in your portfolio to maintain your budget. That is still a big chunk of money to save, but it’s more reasonable than $1.25 million.

As you’re making your projections, be realistic about minimizing spending. Remember, FIRE is both a financial strategy and a lifestyle choice. Despite the name, you might need to give up your latte. That may mean living simply, downsizing or even rightsizing your financial life and goals. Use our budgeting guide to help you plan.

Finally, don’t forget taxes in your calculations. Remember that if you have less money coming in, you may be in a lower tax bracket, and therefore your tax burden is minimized.

Find the Right Job—for You

Don’t think of your part-time job as a downgrade—it’s an opportunity. For some, Barista FIRE is a way to reinvent their career, earning it the nickname “Financial Independence, Recreational Employment.”

When choosing a part-time job, it’s important to drill down to what you really want. Maybe that’s a flexible schedule so you have more time to pursue a passion or spend with loved ones. Perhaps the social aspect of work is what drives you. Whether you’re selling gluten-free cupcakes or designing websites, transforming your side hustle into a part-time career is also a viable, even enviable, option. Ask yourself: What is going to give me pleasure and meaning in my semi-retired state?

Or maybe your part-time career is all about the practical: What job will provide you with health benefits, a flexible spending account, some 401(k) contributions or vacation days? Finding a part-time job that aligns with your needs is a starting point.

Once you know the why of your job, it’s time to figure out the what. If making lattes isn’t your cup of tea, there are plenty of other part-time jobs that will check all your boxes. It might be taking shifts at a local supermarket or warehouse. You could start freelancing, consulting or teaching an online course in your field. Your “barista” job should fit into your lifestyle, not the other way around.

Remember, no job will be perfect. Maybe working a job you don’t like for 20 hours a week is manageable if you have 20 hours free. Barista FIRE has many benefits, including more flexibility. So make it your own.

Stay the Course Against Headwinds

FIRE is all about control—but that stops with the market. Inflation accelerated to 8.6% in May 2022, the highest since December 1981. With rising prices for everyday items like groceries and gas, as well as big-ticket ones, traditional FIRE devotees might want to rethink their approach in an age of inflation and market fluctuations.

The current job market (a good one for job seekers) won’t last forever. Market volatility might be making you queasy. You might want to take advantage of a sizzling-hot labor market and continue earning. Whether that’s freelancing or taking a side hustle to a new level, it’s OK to pivot—and keep changing if needed.

Network With FIRE  

Your parents, your friends and your current coworkers may have questions for you, or they may voice concerns. Talk to them about your goals and show them the math that proves you can make your new Barista FIRE lifestyle work.

And remember that FIRE adherents are everywhere, including in online forums, which means you’ll find a community that can help you plan (and give you support when you’re wavering).

What are you waiting for? Find your FIRE people and make a plan.

 

Alizah Salario is a freelance writer and editor based in Brooklyn, NY. Most recently, she covered personal finance for CNBC’s Grow magazine.

 

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