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How Does Lean FIRE Work?

How Does Lean FIRE Work?
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Lean FIRE (financial independence retire early) is a term used to describe the concept of financial independence on a budget. There are a few different ways to approach Lean FIRE, but the basic idea is to live as frugally with a minimalist lifestyle and invest as much extra money as possible. So let’s break it down!

What Is Lean FIRE?

The Lean FIRE method is a way to reach financial independence on a budget. The basic idea is to live as frugally as possible and invest as much money as possible. There are a few different ways to approach Lean FIRE, but the most important thing is to ensure that your spending aligns with your personal finance goals.

The Lean F.I.R.E. method is the opposite of the FatFIRE method, allowing more financial wiggle room and still retiring before 60 years old. It often means surviving on around $40,000 per year or less. Typical Lean FIRE involves making investments that will support you in retirement for your most basic needs (food, living expenses, transportation costs, etc.).

Lean FIRE does not set you up for an extravagant retirement, but it will cover the necessities. Many individuals who work towards Lean FIRE do so intending to supplement their retirement income by getting another income like a part-time job. Living a more frugal lifestyle allows you to save up the majority of your money and put money towards low-cost investments so that you may retire early and use that money for living expenses.

what is lean fire

Who Is Lean Fire For?

The Lean FIRE method is a great way to put money away and achieve financial freedom on a budget. If you are someone who can live as frugally as possible and invest as much money as you can, then Lean FIRE may be right for you.

There are a few different ways to approach Lean FIRE, but the most important thing is to ensure that your spending aligns with your financial goals. So, if you are looking to save money, achieve financial independence on a budget, and have an early retirement, then the Lean FIRE method may be right for you.

Real Example of Lean F.I.R.E. 

Here is an example of a real-life Lean FIRE budget. There is a focus here on living a lean financial lifestyle to reach financial independence and retire early.

Income: $40,000


  • Housing: $10,000
  • Transportation: $2,000
  • Food: $3,000
  • Clothing: $1,000
  • Entertainment: $1,000
  • Debt Payments: $2,000
  • Retirement/Investment :$10,000
  • Emergency Fund: $2,000
  • Total: $40,000

As you can see, this person’s income and expenses are both at $40,000. They have chosen to live a Lean FIRE lifestyle by keeping their expenses low and investing in their future. This person is on track to achieve financial independence and retire early.

How Much Do You Need to Lean FIRE 

There is no one-size-fits-all answer to this question, as the amount of money you need to Lean FIRE will depend on your circumstances. However, as a general rule of thumb, you will need to have a lower than average expenditure to achieve Lean F.I.R.E. This means you will need to live a frugal lifestyle, ensure that your spending matches your goals, and get you to early retirement.

The best way to figure out how much money you need to Lean F.I.R.E. is to create a potential Lean FIRE budget and track your progress over time. The FIRE community mostly agrees on the Lean FIRE method working with surviving on around 40k a year, and from there, you can determine your FIRE number.

How to Calculate Your Lean FIRE Number

Your “Lean FIRE” number is the amount of money you need to have saved up to retire and live off of your investments. When determining your lean FIRE number, you will need to figure out your annual expenses and divide by 4% (or 0.04), also known as the 4% rule.

Lean FIRE Calculator

Let’s take a look at a real-life example of achieving lean fire and financial independence. If your annual expenses are $30,000, your Lean FIRE number would be $750,000 ($30,000 / 0.04). This may seem like a lot of money, but keep in mind that you can achieve your Lean FIRE number by saving smartly with a lean budget, living a frugal lifestyle over time, and investing your money wisely in the stock market.

The 4% rule is a guideline that many individuals have used to calculate how much money they need to have saved to retire. The rule states that you should divide your annual expenses by 4% (or multiply your annual expenses by 25 ) to determine your Lean FIRE number.

Lean FIRE Calculator

Things to Keep In Mind When Pursuing Lean FIRE

It is important to consider interest rates, inflation, and housing costs when pursuing Lean FIRE. This is because these factors can significantly impact your ability to save money and reach early retirement.

For example, if interest rates are low, earning a high return on your passive investments may be difficult. This could leave you with less money toward your Lean FIRE number. Inflation can also erode the value of your savings over time, which is why it is important to consider when planning for retirement.

Lastly, housing costs can vary greatly depending on where you live, so you should consider a low-cost area. If you plan to retire in an area with high housing costs, you will need to account for more money for that expense when calculating your Lean FIRE number.

Pros of Lean FIRE

There are many benefits to being part of the Lean FIRE movement. One of the biggest advantages is a quick path toward retiring early by saving enough money for a sustainable long-term income.

You can save a large percentage of your income not spent on monthly expenses and invest it wisely through the FIRE movement. Another benefit is that you can live a simpler lifestyle and focus on the most important things to you, like relationships and experiences.

Cons of Lean FIRE

While the Lean FIRE lifestyle has many advantages, there are a few cons to consider. First, Lean FIRE can be difficult for some who need to make lifestyle changes. Achieving Lean FIRE means living more conservatively with your money.

Additionally, Lean FIRE relies on having enough passive income through investments. If the stock market crashes, this could harm your stocks, net worth, and overall annual passive income. Lastly, saving money with this method may be more challenging for families with many members.

Annual spending increases with more members in the family due to other food, clothing, and housing costs. For example, the average American household in 2020 had 3.4 people, each requiring money spent on necessities.

Alternatives to Lean FIRE 

If you are interested in other methods in the fire spectrum besides the Lean FIRE lifestyle, there are a few other options to consider. Read on to learn more.


The Fat FIRE method is similar to the Lean FIRE method, but you would likely be living off more than 40k a year and investing more. With the Fat FIRE method, you aim for an early retirement where you can live a luxurious lifestyle and have enough money to cover your high costs and more expenses. Be wary of lifestyle inflation with the Fat FIRE method, so your money will not be quickly spent.

While the Fat FIRE method can provide a more comfortable retirement, it is important to remember that it takes significantly more money to achieve this goal. For example, if you have annual costs of $40,000, you would need to have $2 million saved to reach an early retirement using the Fat FIRE method. This amount of saving takes a lot more time to achieve.

Coast FIRE 

Coast FIRE is a term used to describe those pursuing financial independence and working a part-time job. This method is also known as the surf and turf method, as it allows you to have the best of both worlds. You can work part-time to generate supplemental income while also having the freedom to enjoy your hobbies and travel.

This method is a great option for those who want to enjoy their hobbies and travel more but still have income coming in. It can also be a good option for the average person getting closer to financial independence but is not quite there yet.

Traditional FIRE 

Traditional FIRE is when you retire at the age of 65 with the exact amount of money saved to cover your living expenses throughout your retirement. This method is the most common and is what most people aim for. One of the biggest advantages of this method is that it is a more achievable goal for most people. Additionally, you do not need to make as many lifestyle changes to achieve this goal.

Barista FIRE

The Barista FIRE method is when you retire early with enough saved in your retirement fund. After reaching that goal, you would then find a part-time job to work with the benefit of health insurance. This FIRE method got its name after the company Starbucks began offering health insurance to its part-time employees. This method allows you to retire from your full-time job while still having health coverage.


How Long Does It Take To Achieve Lean FIRE?

The length of time it takes to reach Lean FIRE varies depending on your lifestyle and how much you need to save. For example, if you are aiming for a more conservative retirement, you may not need to save for as long as someone aiming for a luxurious retirement.

Additionally, your annual costs will play a role in how long it takes to reach FIRE. If you have high annual costs, you will need to save for longer than someone with low annual costs.

What Does a Potential Lean FIRE Budget Look Like?

The potential Lean FIRE lifestyle budget will vary depending on your costs. However, some common expenses are associated with this lifestyle. These expenses can include travel, hobbies, and entertainment. Additionally, you will need to factor in the cost of healthcare and inflation. Remember to follow the 4% rule when preparing your Lean FIRE budget.

Assuming you have a lean fire goal of $40,000 annually, your budget might look like this:

  • Housing: $12,000
  • Transportation: $1,200
  • Food: $3,600
  • Healthcare: $1,800
  • Entertainment/Recreation: $2,400
  • Travel: $4,800
  • Misc: $2,400
  • Total: $40,000

Can You Do Lean FIRE With Kids?

There is no one answer to this question as it depends on each family’s situation. However, some tips for doing Lean FIRE with kids include creating a strict budget, setting priorities, and making sacrifices with your minimalist lifestyle. Additionally, families in low-income financial brackets may have access to financial support programs such as subsidized healthcare which can reduce expenses.

What Do You Do After Achieving Lean FIRE?

There are many possibilities as everyone’s post-FIRE lifestyle will be different. Some people may choose to work part-time, while others may pursue hobbies or travel full-time. Additionally, some people may donate their time or money to philanthropic causes.

The options are endless after reaching Lean FIRE. It is important to remember that the whole point of this lifestyle is to have more freedom and flexibility to do what you want. So, once you reach your FIRE goals, be sure to enjoy it!

The Bottom Line

While the Lean FIRE method can be challenging with frugal living and strict budgeting, the results can be quick and worthwhile. By creating a lean FIRE budget, calculating your fire number, and adjusting your lifestyle, you set yourself up for a bright financial future. Financial independence can be yours when you do your research, make a plan, and start investing following the FIRE movement.