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Lean FIRE: Financial Independence On A Budget (With Calculator)

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Lean FIRE is one of several types of Financial Independence Retire Early (FIRE).  Lean FIRE is best defined as the minimalist way of reaching FIRE.  It involves retiring with a “lean” budget.

This allows you the freedom to quit your job earlier and live the lifestyle you prefer.

Let’s take an in-depth look into Lean FIRE and see if it’s right for you.

 

What Is FIRE?

FIRE represents Financial Independence/Retire Early.  The central idea behind the FIRE movement is to facilitate financial independence and early retirement earlier than expected.

The FIRE Community uses tactics like:

  • Saving 50% to 70% of their income
  • Practicing frugal living
  • Investing in low-cost index funds

The plan uses the proceeds from the investments to cover living expenses.

So investment returns become your new income instead of working at a traditional job.

 

What Is Lean FIRE?

Lean FIRE seeks to achieve financial independence through conservative spending and a minimalist lifestyle.  As a result, Lean FIRE usually involves living on less than $40,000 per year.

If you are familiar with the Fat FIRE idea, Lean FIRE is the opposite—no high living standard post-retirement.

Lean FIRE is the fastest route to financial freedom.

Lean FIRE:

  • Easier Path To FIRE
  • Involves Embracing Frugality
  • Living On Less (< $40,000/year)

While there are various FIRE versions, LeanFIRE is an extreme version to reach FI fast.

Lean FIRE seeks to achieve early retirement before the conventional age minimum of 60 using a minimalist lifestyle or frugal living approach.

LeanFIRE can be a sacrifice.  Living extremely “lean” can mean sacrificing your comfort and luxuries so you can save more.

The benefit of LeanFIRE is being able to reach financial independence much quicker.

Here are some ways people in the FIRE community have reached Lean FIRE:

  • Living with parents
  • Living in a van, trailer, or studio
  • Moving to a low-cost area
  • Having subsidized healthcare
  • Not having kids

 

Your Lean FIRE Number

To find your Lean FIRE number, you need to know how much you would like to spend each year in retirement.  The amount you need would include only the basics like living expenses and some small discretionary spending.

Your Lean FIRE number will most likely not include many luxuries.

You can start by finding out how much you spend each year.

I use Personal Capital to track my expenses.  (Get a $20 Amazon Gift Card With This Link)

The formula to calculate your Lean FIRE number is the same as regular FIRE.

However, your LeanFIRE number will be smaller.

The number is smaller because you would be living below America’s average living standard.  (~$40,000)

LeanFIRE numbers are typically around $20,000.

However, there are a few examples in the FIRE community of people living on only $7,000 per year.

Lean FIRE Number = 25 x (Yearly Spending)

Let’s say after using Personal Capital; you find a comfortable yearly spend is $20,000/year.

Then your calculation would look like this:

$500,000 = 25 x ($20,000)

What this means is that once you accumulate $500,000, you can withdraw $20,000 every year.  This 4% withdrawal rate comes from “The Trinity Study.”

So in this example, once you accumulate $500,000, you would have reached LeanFIRE. 

Lean FIRE is subjective, depending on your lifestyle and desired amount of spending.

For example, some might feel comfortable with $20,000/year, while others need $25,000.

The appeal of LeanFIRE is being able to retire early much sooner because you can reach your FIRE number quicker.

 

Calculating Your Lean FIRE Number

Your Lean FIRE number is the amount of money (in savings and investments) for a sustainable long-term income in retirement.  It should cover your minimum monthly expenditure.

Simply put, the money you need in retirement will sufficiently sustain your lifestyle.

Calculating Lean FIRE will depend on two factors:

  1. Yearly Spending In Retirement
  2. Current Savings Per Year

These two values will tell you how long it will take to reach LeanFIRE.

The standard formula for calculating your LeanFIRE number comes from the Bengen rule.

The Bengen Rule calculation says to multiply your minimum yearly expenses by 25.  (aka the 4% rule)

You can use my FIRE Calculator to calculate your FIRE number easily, accurately, and for free.

This is the same FIRE calculator I’ve been using on my financial independence journey.

It’s one of the easiest ways to calculate your Lean FIRE number.

JL Collins FIRE Calculator

Calculate Your FI Number With My Free FIRE Calculator

Here Is An Example: 

  • Yearly Spending In Retirement ($25,000)
  • Current Savings Per Year ($40,000)

 

Lean FIRE Number = (25 x Yearly Spending)

$625,000 = (25 x $25,000)

Lean FIRE Number = $625,000

Now we use the FIRE calculator to determine when we will reach this amount.

It will be quicker than regular FIRE.

Lean FIRE Number

If you saved $40,000/year, it would take 11 years to accumulate $625,000.  This is with 7% returns each year.

You can adjust the numbers to best fit your situation or preferences.

 

What Are The Benefits Of Lean FIRE?

Lean FIRE is beneficial in many ways; these include:

#1.  Quick Way to Financial Independence

If you like quick results, then LeanFIRE is designed for you.  This is by far the fastest way to reach financial independence.

If you are willing to embrace a bit of frugality, you could find that Leanfire is a great way to make work optional.

#2.  Lower Stress Levels

Lean FIRE could be of help in managing financial stress and anxiety.

LeanFIRE is about embracing a simpler lifestyle where time and relationships are more important than material items.

#3.  Opportunity to Build Generational Wealth

The goal of Lean FIRE is not just to help you retire early.  You can also add the plan to have money left over to pass down to your children.

You will most likely have enough to accomplish that goal by avoiding lifestyle inflation even during early retirement.

#4.  Less Reliance on the Government

Lean FIRE is a type of financial independence.  It gives you freedom from work and government.

If you are skeptical about the future of social security, you won’t need to worry about that with LeanFIRE.

The FIRE movement is about taking control of your financial life and becoming less reliant on others to support you.

#5.  Independence of Time

You won’t need a boss if you follow the Lean FIRE movement.

This allows you to spend your time and energy the way you want, not trying to catch up with rush hours or 9-5 jobs.

#6.  Promotes Creativity

Minimalism can promote creativity.  I’ve read about many families finding creative ways to have fun on a budget.

Since LeanFIRE still involves sticking to a “budget,” you may need to get creative with travel or entertainment.

You can also take a look at “travel hacking.”  For example, I was able to fly my family from Florida to Italy for free using travel rewards!

 

Different Types Of FIRE

The FIRE movement is growing and now has many types of FIRE.

Here are the different types of FIRE in order from easiest to hardest to achieve:

  • CoastFIRE (Coast FIRE)
  • BaristaFIRE (Barista FIRE)
  • LeanFIRE (Lean FIRE)
  • TraditionalFIRE
  • FatFIRE (Fat FIRE)

Each type of FIRE has its pros and cons and comes down to balancing money and work.

  • Coast FIRE is having enough invested to stop contributing and still reach FIRE in the future.
  • Barista FIRE is working part-time for supplemental income or health insurance.
  • Lean FIRE is the minimalist way of reaching FIRE and retiring with a “lean” budget.
  • Traditional FIRE is retiring early after accumulating 25 times your annual expenses.
  • Fat FIRE is having a large amount of money to retire early.

This gives us options to pursue the type of FIRE that best matches our lifestyle goals.

Here Is An Illustration I Made To Remember The Different Types Of FIRE:

Lean FIRE Graphic

 

Negatives Of Lean FIRE

Lean FIRE is not for everyone; consider these downsides:

#1.  Lifestyle Restrictions

LeanFIRE stresses suspending luxury and prioritizing minimal spending.  Unfortunately, this may result in more financial pressure.

You’ll be forced to think about ways to save all the time.

#2.  Reliance on Passive Investments

LeanFIRE relies on passive investments to generate money.  If the stock market goes down, it can mean going back to work.

Being ready for that possibility is essential.

For example, 2020 was an extremely volatile year for stocks.  The stock market crashed by as much as 40%.

These situations don’t happen often but can put a pause on your LeanFIRE plans.

#3.  Easier For Those Without Kids

LeanFIRE may work better for single people or couples with no kids.

According to Spendmenot, on average, an American parent spends $233,610 to raise a child until 17.

Low-income parents spend as much as $172,200 to raise a child from 0 months to 17.

I think we in the FIRE community can do better than this but still, raising kids can be expensive.

It’s also harder for some to live frugally with kids.  It’s easy to get caught up in giving your kids “the best.”

However, if you’re single or without a plan for kids, LeanFIRE can be a surefire way to achieve financial independence.

 

Alternatives To LeanFIRE

  • Fat FIRE

Fat FIRE is when you retire early with a higher standard of living.  A general definition is having enough money to spend at least $100,000/year in retirement.

Following the 4% rule, this would mean having a portfolio of at least $2.5 million.

  • Barista FIRE

Barista FIRE is when you aim to retire early with enough money invested that the 4% rule covers a part of your yearly expenses.

You would then switch to a part-time job to provide you with health insurance and cover the additional expenses.

  • Coast FIRE

Coast FIRE is when you aim to invest enough money to let it grow without any further contributions and have that money be sufficient to cover a traditional retirement.

This growth would come from capital gains and dividend reinvestments.

Compound interest does the magic here.

 

Lean FIRE Financial Independence

As you can see, you can reach FIRE in various ways.  Lean FIRE is one of the easiest paths to financial independence.

If you achieve LeanFIRE and don’t enjoy it, your worst-case scenario is simply going back to work.

You’ll likely still be in a good place.

 


Disclaimer
This post may have affiliate links, which means I may receive commissions if you choose to purchase through links I provide (at no extra cost to you). Thank you for supporting the work I put into this site!

This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
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