LeanFIRE vs FatFIRE: Which One Suits You?

Two individuals focused on their laptops at a table, with a kitchen visible in the background

You’ve probably heard people talking about FIRE. The Financial Independence, Retire Early trend isn’t relatively new but it’s been gaining momentum over the last few years. The basic idea? You save and invest enough money so you can retire much earlier than the usual 65. Pretty appealing, right? But here’s the thing: there isn’t just one way to do it.

You’ve got two main paths: LeanFIRE and FatFIRE. LeanFIRE is all about living frugally and saving aggressively to retire with a basic, no-frills lifestyle. Then there’s FatFIRE, which is more about enjoying a comfortable retirement with a little more luxury. Think of it like this: LeanFIRE is minimalist, and FatFIRE is indulgent.

Both are paths to financial independence, but how you get there and what your retirement looks like depends on the path you choose. If you’re not sure where to start or which one’s best for you, don’t worry, Circadian Capital can help you figure out the right plan based on your goals.

What is LeanFIRE?

Let’s start with LeanFIRE. If you choose this path, it means your lifestyle will be relatively simple and you’ll be focused on saving. Fancy dinners, impulse shopping and expensive vacations are out of the window. The goal here is to save just enough to cover the essentials when you retire.

Think of it like this: You don’t need much to live a happy life. Maybe it’s a small home, a modest budget for the basics and cutting out unnecessary spending. The upside? You can retire a lot earlier. The downside? Well, it’s a minimalist lifestyle, so it’s not for everyone. But if you’re okay with it, you’ll be setting yourself up for early retirement in no time.

Benefits of LeanFIRE:

  • Retire Faster: Because you’re spending less, you can save more and that means you’ll hit your retirement goal sooner.
  • Less Risk: With fewer expenses, you need a smaller nest egg, so you don’t have to worry as much about market ups and downs.
  • Less Stress: You don’t have to worry about keeping up with the Joneses or dealing with expensive products. Simplicity can be a real stress-reliever.

If this sounds like a good fit, it’s worth checking out a tool like the LeanFIRE Calculator to see exactly how much you’ll need to save.

What is FatFIRE?

Now, if LeanFIRE sounds a little too constricting for you, then FatFIRE might be a better fit. This is the path for people who want a comfortable, even slightly luxurious retirement. You’ll need to save up a lot more money to make this happen because it’s all about maintaining a higher standard of living once you retire. Think more travel, better dining, maybe even a second home by the beach.

The beauty of FatFIRE is that it offers more flexibility. You’re not cutting back on things you enjoy currently, and you can afford to live your best life without constantly worrying about money. It will take more time to save, but the reward is being able to fully enjoy your retirement years.

Benefits of FatFIRE:

  • Comfortable Living: You get to retire in style. Travel, dining, hobbies – there’s no need to compromise.
  • More Security: A larger nest egg means more peace of mind, and you’ve got more cushion in case of unexpected costs.
  • Freedom: You’ve worked hard for your money, so why not live well in retirement? FatFIRE allows you to enjoy life without stress.

If FatFIRE is the path for you, you’ll likely need to build up a larger savings goal. Start now with the FatFIRE Calculator.

Which One Suits You: LeanFIRE or FatFIRE?

Here’s the big question: which path is right for you? Honestly, it all depends on what kind of retirement you want.

If you’re happy living frugally and being able to retire early, then LeanFIRE is a good fit. You’ll need to live simply, but the payoff is getting out of the rat race sooner.

On the other hand, if you want to live a more comfortable retirement with plenty of freedom to pursue hobbies and interests, FatFIRE is the way to go. It’ll take more time to save, but you’ll have more flexibility when it comes to your lifestyle.

To figure out where you stand, it’s a good idea to use one of the calculators above. It’ll give you a good sense of how much you need to save for each scenario.


Steps to Take Before Pursuing LeanFIRE or FatFIRE

Before jumping into either LeanFIRE or FatFIRE, there are a few steps you’ll want to take to set yourself up for success:

  1. Take a Good Look at Your Finances: Get a clear picture of what you’re earning, spending and saving. This will help you understand how much you can actually save for FIRE.
  2. Set Clear Goals: Do you want to retire at 40? 50? And what kind of lifestyle do you want? Knowing exactly what you want will help you figure out how much you need to save. Setting a realistic FIRE Goal is an important step.
  3. Make a Budget: Whether you’re aiming for LeanFIRE or FatFIRE, having a solid budget is key to staying on track.
  4. Talk to a Financial Planner: A good financial planner can help you build a plan that works with your lifestyle, goals and timeline.

Conclusion

Whether you choose LeanFIRE or FatFIRE really depends on what kind of retirement you envision. Do you want the freedom that comes with a minimalist lifestyle, or do you want a little extra luxury and flexibility when you retire?

If you’re ready to take the next step, Circadian Capital is here to help you create a personalised financial plan that’ll get you to FIRE no matter what that looks like for you. We’ll work with you to figure out the best strategy for your needs and ensure that your journey to financial independence is a smooth one.