Barista FIRE (Financial Independence Retire Early) is being able to retire before the conventional age of 60+, but taking on a part-time job for supplemental income and potentially health insurance.
Alternatively, Barista FIRE is retiring early but making your spouse work. A lot of men have started to claim they retired early. However, they are really just stay at home spouses while their wives slave away at a job they hate.
It’s the man’s way of not feeling like a deadbeat since men have fragile egos and society still expects men to be the main provers.
* Lives in a middle-to-lower cost city like St. Paul, Atlanta, Raleigh, New Orleans, and Des Moines and not in expensive coastal cities
* Has a working spouse (a lot of prideful men Barista FIRE by saying they retired, but are really stay at home husbands)
* Can only afford to send their kids to public grade school, and their children will likely have to work during college or take on student debt
* Has no kids, a very common phenomenon for those who are Barista FIRE since kids are very expensive. For some families, it’s almost impossible to retire early with kids.
* Works as a freelancer online or does part-time work offline
Barista FIRE Is Half Way In To Early Retirement
Barista FIRE are for those who have basically dipped one foot into the retirement waters, but isn’t entirely sure whether a full-on retirement is the right thing to do.
I’ve been writing about the FIRE movement since I started Financial Samurai in 2009. Back then, there was only one definition of FIRE: when your investment income can covered your desired living expenses. Now, there are so many definitions of FIRE it’s hard to keep straight.
When I negotiated a severance in 2012 at age 34, I was technically Barista FIRE for three years because I had a working spouse. She was three years younger than me, and we agreed that when she turned 34, she could retire early as well if everything went well.
During my Barista FIRE years, I was added to her company’s healthcare plan while I paid for all housing costs. We kept expenses relatively low, and I spent those years writing a book teaching people how to negotiate a severance like me, and also writing on this site.
You never want to quit your job. Instead you want to get laid off so you can collect unemployment and get a severance to help you with your early retirement transition.
Removing The Spousal Financial Safety Net
In 2015, my wife retired at 34 as well after I helped her negotiate a severance. We both turned into the Fat FIRE lifestyle because our San Francisco house had appreciated from $1,600,000 in 2012 to $2,740,000 in 2017 when we sold it.
Further, my book started generating about $3,500 a month in income on top of our $150,000 a year in other passive income sources.
Barista FIRE was a good time period to try out FIRE. I learned a lot, we saved and invested aggressively, and we came up with a set date for my wife to join me.
Barista FIRE To Fat FIRE
When I Barista FIREd in 2012, my passive income was generating about $80,000. Thanks to my wife’s income, we had a total combined income of roughly $200,000.
In 2022, we are more Fat FIRE, with estimated passive income of around $310,000. The key to true FIRE is to keep saving and aggressively until your investment income really is enough alone to cover your desired living expenses.
As a family with two kids now, we desire to earn over $300,000 a year in gross passive income to live a middle class lifestyle in an expensive city. We want to stay in San Francisco or eventually relocate to Honolulu, which is actually about 30% cheaper for housing expense.
Below is our latest passive investment income. The great thing about passive investment income is that it’s taxed at a lower rate than W-2 (job) income.
We used $550,000 of the proceeds to invest in real estate crowdfunding to take advantage of lower valuations and much higher rental yields in the heartland of America. Hopefully we’ll earn at least a 8% annual return, or $44,000 a year in passive income. I think there is a multi-decade trend to migrate to lower cost areas of the country thanks to technology.
How Much You Need To Barista FIRE
Based on my after-tax investment amounts by age, if you want to live the Barista FIRE lifestyle, I recommend one accumulates the following amounts by age. The key is the after-tax accounts that generate passive income for you to live on.
My recommendation is to work until at least 40, if not 45-50 in order to have $1,000,000 – $3,000,000 in after-tax investments generating $40,000 – $120,000 in gross passive income.
Without any debt, $40,000 – $120,000 a year is enough to provide a simple, carefree life for a family of up to four in a medium-to-low cost area of the country.
By taking up part-time work to supplement your income, you can easily generate an addition $10,000 – $30,000 a year working part-time, depending on your skill-set.
It’s not a bad idea to have one partner/spouse continue to work given the sky-high cost of healthcare. The average employer pays $19,500 in healthcare costs in 2020, which you would have to pay for out of pocket if you wanted the same plan.
Barista FIRE Is The Smart Way To Go
I think everybody should follow the Barista FIRE method first, and then eventually work your way up to Fat FIRE. You’ll always want to stay active. Therefore, with Barista FIRE, you can find something you love to do that also pays as well.
Once you’ve experienced Barista FIRE for two or three years, you can then make a more informed decision on whether you want to completely cut the active income ripcord.
I personally just spend time writing on Financial Samurai, which produces a healthy revenue stream. Writing is fun and intellectually stimulating for me. I plan to continue writing until our boy grows up one day and tells us he wants to have nothing to do with making money online. Then we’ll sell and figure out something else fun to do!
Barista FIRE is also sometimes known as Coast FIRE. However, I don’t feel Coast FIRE is really any different from a working person who regularly saves and invests money.
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Recommendation To Achieve Barista FIRE
Sign up for Personal Capital, the web’s #1 free wealth management tool to get a better handle on your finances. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.
After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Definitely run your numbers to see how you’re doing. I’ve been using Personal Capital since 2012 and have seen my net worth skyrocket during this time thanks to better money management.
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About the Author: Sam worked in investing banking at Goldman Sachs and Credit Suisse for 13 years. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income. He spends time playing tennis, taking care of his family, and writing online to help others achieve financial freedom too.
FinancialSamurai.com was started in 2009 and is one of the most trusted personal finance sites today with over 1.5 million organic pageviews a month. Financial Samurai has been featured in top publications such as the LA Times, The Chicago Tribune, Bloomberg and The Wall Street Journal. Barista FIRE is a Financial Samurai original post.