Physician on FIRE may not have invented FIRE (Financial Independence, Retire Early) but he certainly introduced it to me. Before his blog I was saving and investing without a particular goal in mind. Bogleheads and White Coat Investor taught me all about living below my means, investing early and often, diversification and tax planning. It wasn’t until Physician on FIRE that it occurred to me that becoming wealthy might mean early retirement. I like my job and the thought of walking away early had never occurred to me.
Financial independence means different things to different people. One person may consider financial independence having enough money to afford a lifetime supply of ramen noodles in their studio apartment. Someone else might consider independence having a lifetime supply of jet fuel to fly to their private island. Since personal finance is personal, it is up to you to decide what financial independence means to you.
Here’s a look at what different levels of financial independence means to me.
Lean vs Fat
Two recently popularized terms in the FIRE community are lean FIRE and fat FIRE.
People in the lean FIRE camp are willing to sacrifice their standard of living to retire early. Think biking 5 miles to the grocery store to use the coupons you cut out sitting in your non-air conditioned 1 bedroom condo.
People in the fat FIRE camp aren’t willing to make those sacrifices. They still want to travel, go out to restaurants and drive to the store. They’re not sailing their yacht to their private island, but they’re also not wearing their winter coat indoors to avoid turning on the heat.
What’s your BMI?
Before we go any further, I need to know your BMI. I’m not talking about your waistline. I’m talking about your checkbook. Your Banked Money Index is a multiple of annual expenses you currently have saved. If you have 5 years worth of expenses saved up, you have a BMI of 5.
I’m a very conservative planner and not a big fan of biking my groceries home so my minimum retirement goal is a BMI of 25.
Lean FIRE (BMI = 25)
Retirement Savings = $3,125,000
4% Withdrawal = $125,000/year
With 25 years of expenses saved I would begin to contemplate early retirement. At a minimum it would change my thoughts about work. I would begin by cutting out the parts of my job I don’t like. If you have ever worked shift work you know that means exactly one thing – night shifts.
There’s a reason working night shifts is an independent risk factor for cancer and cardiovascular disease. I haven’t had a consistent bedtime since 2008. Even on my days off it is rare for me to sleep more than 5 or 6 hours in a row. Night shifts destroy all motivation to exercise. I’ve never once got off a rough night shift and craved a salad.
I will likely continue easy work-from-home side hustles, but it would be in exchange for further cutting back day shifts at the hospital.
I will still max out taxable accounts but my focus will be on padding the kids’ 529s. I certainly won’t retire if any of my 3 junior hustlers aren’t set for college.
Fat FIRE (BMI = 33)
Retirement Savings = $4,125,000
4% Withdrawal = $165,000/year
At this point I would no longer be working for financial reasons. It would clearly be because I like interacting with patients and coworkers. I would eliminate not only night shifts but also weekends and holidays. No longer would I miss Christmas mornings, Thanksgiving dinners or Fourth of July fireworks. My wife wouldn’t have to plan our lives around my weekends off because they’d all be off.
I would likely take extended vacations or travel assignments like international medical volunteer work.
I would even consider (gasp!) stopping all my side hustles and just enjoy having more free time.
Morbidly Obese FIRE (BMI = 50)
Retirement Savings = $6,250,000
4% Withdrawal = $250,000/year
At this point I would have so many rolls (of cash) that a bariatric surgeon would have to trim them off me.
I would have so many rolls that I couldn’t remember the last time I could look down and see my own…..wallet. I would have to buy my money belts at the big and tall store.
Like many people who become morbidly obese I will need to examine the psychology of my behavior. Why am I still packing on the pounds, dollars and euros? Is it even healthy to carry that much extra weight in your wallet?
If I’m still working clinically it is only because I still take personal enjoyment from helping the sick and injured. I will try to find volunteer work that gives me equal satisfaction.
I would also consider starting new business ventures, comforted by the fact that even if I fail miserably I will still have plenty of money to live off of. People need new challenges so they can continue to grow and develop. It’s easier to take risks when you have a 6 million dollar safety net.
How Fat Is Your FIRE?
Everyone has a different vision for their retirement. If you hate your job and you are comfortable taking risks you might be willing to lean FIRE with a BMI of 15. If you love your job and hate risk, you might still be working with a BMI of 60. FIRE is less about retirement and more about living life on your own terms.
These numbers are moving targets but I would suggest sitting down and figuring out what your lean, fat and morbidly obese FIRE numbers are. Next imagine how achieving those different numbers would change your day-to-day routine. You will find those changes to be much more motivating than an arbitrary number on the page.