Making the Decision: Barista FIRE vs Lean FIRE – Which Is Right for You?
Retirement. Everybody wants it. It has been glorified and highly recommended by Hollywood. It is the life after the 9-to-5 circus ends. Everybody dreams of it. It is the only reason why anyone enters the world of work, either willingly or unwillingly.
However, one cannot simply jump from the working class boat to the retirement boat. You need a plan. If you are aiming to retire as soon as possible, then FIRE is a concept that will become your new best friend. Financial Independence, Retire Early, more popularly known as the FIRE movement, emphasizes leaving the rugged world of lugging work and retiring early while also being financially stable. Being financially stable is essential in all stages of life to survive in this capitalist society. However, pointing out the flaws of our society is a conversation for another time.
Today we will be focusing on the fact that FIRE is a broad term and has many categories. Barista FIRE and Lean FIRE to be more specific. They are like colors in a rainbow, and we will be discussing and comparing them to give you an idea as to which one suits you the most.
What are Barista FIRE and Lean FIRE?
Explaining Barista FIRE
The primary objective of the Barista FIRE movement is to save enough retirement funds to leave your full-time job and work a part-time job or start your own business afterward. According to this concept, your investment income has increased to the point where your annual costs are covered by the 4% rule. This implies that you are free to walk away from your job as it is. However, a part-time employment or side project is employed to generate extra income to cover everything over and above your typical yearly costs.
Achieving Barista FIRE and other FIRE movements requires adhering to the 4% rule. Essentially, this means that you may pay for your annual costs by taking out 4% of your investment portfolio each year. Your retirement savings should last you between 30 and 50 years of age if you treat the money you invest in this manner.
The Barista FIRE method focuses on finding additional revenue. The first thing that might pop into your mind is Starbucks when you think of the term ‘Barista FIRE’. (Everybody loves a good cup of coffee.) It is because this petal of FIRE has evolved around the fact that many people leave their hectic, soul-sucking jobs after retirement and start working in Starbucks. Since Starbucks provides health insurance to its part-time employees, the moniker Barista FIRE was born. Given the expense of health insurance in the US, this is very significant, and it allowed many to transition to part-time employment.
Explaining Lean FIRE
Similar to earlier iterations of the mainstream FIRE movement, the goal of Lean FIRE is to attain early retirement and financial independence before the conventional retirement age of 60. It depends on establishing a nest egg large enough to sustain your necessaries-only retirement lifestyle. A combination of assets, savings, and passive income can help accomplish this.
Lean FIRE often focuses on living a minimalist lifestyle. Just like Baloo from Jungle Book sang to Mowgli about the bare necessities of life. We, too, will follow Baloo and make this song our national anthem when opting for Lean FIRE. Furthermore, if you are a follower of Lean FIRE, it is considerably more difficult to live in a large city or have a minimalist lifestyle with children. As we have mentioned, the foundations of financial independence are planning and budgeting. Both Barista and Lean FIRE also require a great deal of planning.
Core Differences Between Barista FIRE and Lean FIRE
There are differences between Lean FIRE and Barista FIRE. Barista FIRE is considered a child of Lean FIRE and Fat FIRE, which is why even though it might have some similarities in the retirement lifestyle, it still has a lot of changes.
Lifestyle
Barista FIRE
Luxuries are still accessible with Barista FIRE, but you will need to supplement your saved-up income with other sources of revenue to pay for them. Be specific about the kind of life you desire and realistic about your ability to get it. One’s lifestyle may frequently be happier when it’s simpler, so don’t think you have to save millions of dollars.
Lean FIRE
While Lean FIRE will not give the option of having a luxurious living, it has all the expenses for all the necessary things you would require covered. You must have a clear understanding of your financial objectives and the annual income required to maintain a reasonable standard of living. For instance, developing money in your 30s and even 40s will require different skills than those needed in your 20s and 30s.
Saving Up
Barista FIRE
You must be able to cover your living expenses and generate more revenue to cover the extras before you can completely retire. You must choose how much you must spend on necessities and then adhere to that amount. Barista FIRE’s main money-making formula lies after retirement. After retirement, you get to hustle with less stress while living a frugal life. Although, opting for frugality might not be necessary. For better management, you can calculate your target figure on a FIRE calculator to reach it as quickly as possible.
Lean FIRE
Under this category of FIRE, the focus is directed towards savings. Long-term financial objectives may be attained with the help of savings accounts, but you must ensure that you’re receiving the greatest savings rate possible. In addition to account kinds, compare providers. Quick access accounts often provide lower interest rates than those that require you to agree to lock away your money for a predetermined period in exchange for greater rates. Other alternatives may include freelancing, starting small businesses, or renting any free space that you own.
How to Stay Afloat
Barista FIRE
The goal is to do a part-time job to make other ends meet. It is quintessential to gather enough funds for your necessities and emergencies that might occur during your retirement. You must monitor your assets and be ready to adjust course if necessary. There will probably be obstacles in your way while you work towards financial independence, so you must be prepared to adjust your response.
Lean FIRE
The path to financial freedom isn’t always simple, even for Lean FIRE. Individuals who have achieved financial freedom have surmounted several obstacles. The two most influential ones are adopting a simple lifestyle and creating a long-term, sustainable income. Maintaining a laser-like concentration on your goals is essential for earning a living. You must constantly remind yourself of the benefits of living a minimalist lifestyle, such as early retirement and financial freedom, to justify your sacrifices. Locate communities where FIRE enthusiasts congregate and read through their triumphs. This will give you an understanding of how they surmounted the obstacles that FIRE may throw at you.
Remarks
Although both Barista and Lean FIRE might seem similar on the surface, deep down they are vastly different lifestyles. While Lean FIRE focuses on simple and light-hearted concepts such as Less is More, Barista FIRE encourages you to work without having to exert yourself.
The 9-to-5 lifestyle once enjoyed by people and sung by Dolly Parton is not as delightful and indulging as it used to be. It is now perceived as the dark tunnel that everyone has to go through to reach the silver lining of this tunnel, A.K.A. the retirement phase. With FIRE, this tunnel can be shortened easily. Barista FIRE and Lean FIRE, as interesting as they sound, are two different roads that will lead you to two very different destinations. It is up to you to decide which one to take.
