What is Coast FIRE? Compounding Your Way to the Shore!
Are you in your college dorm, walking around, just thinking about what you can do now so that you can be well off in your retirement years? Well, worry not chronic overthinkers of the future. This FIRE method might just be the way for you.
Financial independence is what everyone desires at one point in their life. People think if only they were financially independent, they could retire early and care more about what interests them and focus on that instead of working for money all the time.
Well today, we are bringing you Coast FIRE. This method of FIRE (Financial Independence Retire Early) will allow you to be financially independent with a plan.
Coast FIRE is a method of the FIRE movement where you can coast your way to financial independence. What I mean by this is that it allows you to save money for a while by living a frugal life and then coast your way to financial independence through the 8th wonder of the world, compound interest.
How does Coast FIRE work?
Coast FIRE can be called the earliest way to reach FIRE. Using Coast FIRE, you would not need to spend your whole life living in frugality just so you have enough money for when you retire.
In Coast FIRE, you would have to just save up for a couple of years and live a tougher life where you have to save up as much as you can and sacrifice a lot of things. However, after those years are done, you could spend without worrying about your retirement.
Coast FIRE works by letting you save a certain amount of money, which could be then invested somewhere for an ROI (Return on Investment). Using compound interest, it will grow over the years to a point where you will not have to worry about your retirement fund.
Is Coast FIRE for me?
Coast FIRE sounds like a very good idea, but first, you must find out whether you have the resources to achieve it. Coast FIRE does have a higher requirement than general FIRE methods. Such requirements are:
Higher salary: You would need a higher salary to have large amounts of savings while you are living a life of frugality during your savings period.
No debt: You would need no debt to achieve this method. You can have some debt if you believe you can counter it off with your salary or have a high enough salary to sustain it. However, it is recommended to have no debt while following this method.
Willing to Save A Lot: You should be willing to save a lot of money while you are doing Coast FIRE. You should capture any moment of savings and try to save as much as possible during those years, but afterward, you will have a much easier life financially.
Be young: Now this point might or might not be true depending on various factors. However, it is generally recommended to be in your 20s or 30s. As in this age, you will be able to save up more and live frugally easily and compound interest requires time to run its course towards your retirement goal.
Specialty of Coast FIRE
Coast FIRE is different from other FIRE methods such as Lean FIRE, and Fat FIRE as it is slower than the other methods and takes time for the process to reach the desired goal for your retirement. So here are some points that make Coast FIRE special:
Financial Independence: While Coast FIRE is not the only FIRE method that allows you to gain financial independence, it allows you to gain independence without saving up much earlier. After you have reached your goal of investing a certain amount for your retirement, you can use your salary freely without worrying about that.
Limited Frugality: During Coast FIRE, you do not have to spend all your time focusing on vigorously saving. You do have to spend some years, but afterward, you can just coast towards your financial independence goal and fulfill your dream of being retired without having money problems.
Speed Bumps During Your Coasting
Like every FIRE method, Coast FIRE also has some negatives. Some of these are:
You would need a bigger income: To save a lot in your years starting Coast FIRE, you would need a bigger income. A bigger income would allow you to save more, which will then let you invest more for your retirement. If you do not have a large enough income to save up, try getting another job if possible.
Life of frugality: During the years when you are going to be saving up a lot, you would need to live a prudent life. The more you save up, the faster you can start living a normal life once again without constantly saving up because you have to.
The method takes time: Some FIRE members want to retire as quickly as possible, which could be in their 40s or even 30s. However, in Coast FIRE, you would have to invest by saving up and then wait for the funds to grow with compound interest. This process would take some time depending on how much funds you are going to be investing and how much are you expected to live off of during your retirement.
Don’t be worried after seeing the negatives of the method, though, as these methods are just meant as frameworks for your financial independence journey. You can customize these models to suit your needs.
To Glide Through All of It
Coast FIRE is a unique method for the financial independence movement. It allows you to be financially well off during your retirement using investment and compound interest. It does require vigorous savings, but only for some time, after which you are more financially independent than you were and can live a flexible life utilizing your salary without worrying about retirement.
Coast FIRE might not be for everyone due to its harder-to-enter requirements, but if you can tackle those issues, then this might be the way to reach financial independence for you.
