Just kidding with the title – here we’re going to look at one of the most popular variants of fire – Coffee House Fire.
This was an offshoot of the FIRE movement born from people that want to get their quicker AND are prepared to do some work during at least part of their early retirement.
The short version is this – for every £1000 you earn during your early retirement that’s £25,000 you don’t need in your early retirement pot. Remember that our standard formula for retirement income is 25x your annual expenses so if you want to retire on £25000/year you’ll need £625,000 invested.
So, you can bring down your FIRE number dramatically by being prepared to work a little during your retirement – and oddly enough most people that reach financial independence do work – it’s just that they work doing things they enjoy to do.
How to calculate your Barista FIRE number?
You’ll need
- Your target retirement income
- A number of how much income you’re prepared to earn in retirement
- Your adjusted target pot
Your Target Income
Though covered elsewhere you work out your target retirement by your expenses – accounting for any adjustment in expenses you might make in the future.
This can be a bit awkward – spending tends to decrease quite rapidly past 65 though many people aiming for FIRE want to travel extensively when they hit fire.
How much you’re prepared to earn
If you worked full time in a minimum wage job you’d earn £15,269 a year. That would be £381,725 less you’d need in your retirement pot – you’d get to work a more relaxed life and still have plenty of investment income to make up the shortfall in income.
But that does mean you’d still be working full time.
However, even if you just earn £5000/year working you’ll need £125,000 less in your early retirement pot.
That opens up a lot of potential opportunities – some light freelance work, a worked ski season, some temp work over the summer. You’d actually be able to work some really interesting jobs and have a nicely relaxing mainly retired.
Work out how much you’d be prepared to earn – and ideally how you’d earn it.
Adjusted Target Pot
So now just take your target retirement income, deduct the money you’re prepared to earn and times by 25 – and then you have your actual FIRE target.
For example –
Target retirement income – £25,000
Money prepared to earn – £5,000
Target retirement pot – (£25,000-5000=£20000. £20000×25) = £500,000 target retirement pot.
You’ve saved an extra £125,000 from what you’ve saved which means you can get to your FIRE data a lot quicker.
What are the Problems with Barista FIRE?
Well there’s an obvious problem with Barista FIRE – you still have to work. This can be pretty painful for devote FIREists but….
Most people work in early retirement – even if they are fully fired. Look at any of the bloggers who’ve reached fire (MrMoneyMustache is the biggest example) they all still work in some form…it’s just that their work is intentional – they do things that interest them.
However, if you set your barista figure too high you might still feel pressured to earn money or have to work for long hours.
But if you set it low you’ll get to work at things that take your fancy whenever they take your fancy….that actually sounds pretty good.
If you work a long and stressful job though pouring coffees or working in a local shop full time might sound like nirvana….and it probably would be!
Who is Barista FIRE For?
I think this is probably the most viable form of FIRE for a lot of us. Having a passion project or taking on some part time work is a pretty healthy lifestyle in early retirement anyway – and it means you can get to that figure a hell of a lot quicker. I think it’s also for people who work horribly long hours or high stress jobs, taking a step back and doing something more relaxing is very good for your health.
How does it compare to other types of FIRE?
Barista FIRE stacks up really well against other types of financial independence as it’s really just a slight adjustment on other strategies you’d consider.
Lean FIRE
Lean FIRE means having very low expenses. If you combined this with some paid work you’re targets for lean FIRE could be incredibly low. However, if you can make a highly lean FIRE you probably wouldn’t need to work at all anyway. But let’s say you scrimp and save you manage to live on £15,000/year your target retirement pot is still £375,000. If you earn £6000/year your target pot is just £225,000 – that’s a few property flips and you’re done!
Fat FIRE
If you’re looking to live a life of luxury once you FIRE then you probably aren’t that interested in work and your retirement fund probably needs to be a lot higher. If you’re looking for 50k/year in retirement you’ll need £1.25 million pounds in your pot. Dropping this by earning money can get this quickly below the terrifying 1 million mark – but for most far FIRE followers they’ll want that big income to life a life of luxury and holidays.
Coast FIRE
Coast FIRE is a little similar to barista fire in that you’re still working once you reach your FIRE number. The difference is that with coast fire you’re putting in all the work up front then letting compound growth take care of reaching your target FIRE number. This means you still work but you don’t have to save – so you get a higher quality of life until you hit the magic number.
I think Barista FIRE is a really great approach to financial independence and it helps bring those numbers down which is really good. The downside is really for anyone who wants to give a swift and final FU to work for the rest of their life – this isn’t the approach for you. For me I see it as a bit of a stop gap solution to have a bit of an easier life as you go along.