Ep 22 - LeanFIRE or FatFIRE?
What is up, everyone? This is broke millennial financier which your host Mohammad. Khan and your co host. Bahaji. Meal and today we're going to be continuing our discussion all fire so today's topic on episode twenty two is lean, fire or fat fire. We're going to basically give you guys. A breakdown of what is lean fire. What is five fire? Which one you should go for pros and cons and just take it from. There so before we start off. I don't want you to get into like what this is just for anyone who's brand new to fire? What is fire and just? From lean five versus. Short so fires basically financial into independent independence. Retire early right and basically means. Of, saving up your for your whole life just for your retirement so when you retired, you can basically relax all right so the past few episode we have been talking about fire in general, but these two are two specific types of fire. Right and you know you can do either one depending on what kind of lifestyle you WanNa live afterwards. Okay, so lean fire is basically it's a normal fire movement. You know where someone who lives in frugality Ri-, and is willing to continue their lifestyles so. You're living. You're cutting down expenses and you know once you retire. You're basically want to continue that lifestyle or a while that fire is. Someone who doesn't want to change? Or get rid of their lifestyle and wants to retire with the same lifestyle so basically you know spending a lot of money or not even Alaba just spending whatever they want to ray, and then once they retired retired. They want to continue that amount of spending in that lifestyle and yeah, that's a that's a great explanation like the difference between the two and I know like people, the reason why we're. We're specifically doing this episode is not everyone wants to live in a frugal sense. Everyone retirement means different for everyone so this is a great way till I give both of those types of people, the options like hey, you don't have to live the frugality lifestyle if you don't want to. If you WanNa live your lifestyle like you are in either near a city or San Fran or even like an. Expense type area. It's fine you can. It's going to be a little harder to achieve, but hey, it might work for you depending on what your profession and how much work and time and effort, you're willing to commit into those types of things, so in general just give you like a high sense overview, a normal goal for retirement for lean fire or in general. General Fire is supposed to be twenty five times annual expenses meaning like I believe I think of doing the math right if you are expensive forty year twenty five times, that is a million I, did the math, but it's basically supposed to have about a million dollars saved up, so you'll be able to retire essentially the normal or slash lean fire type situation. Just like that's like a general sense of like what this is now we're going to basically get into like. Should you I elise goal lean fire now basically leaned fire if you're trying to go. Into this specific section is your have the mindset that you're going to be basically cutting a lot of expenses from your life. You're going to start having to like very frugal manner now what this means is if you're currently paying one thousand dollars. You're going to try to find a roommate and pay five hundred dollars in rent. If you already have a roommate, get another roommate. Your goal is still basically as much as you can see your biggest expenses down, and then like other expenses like eating out going to the bar drinking all that other stuff and I know this sounds harsh, but that's the goal you're supposed to go for would lean fire. He's supposed to do that. And just to give you. Some statistics based on the average house from this consensus data. The average American household spent about sixty one K per year so like your goal is to like if you're within that range, maybe cut it down even more cut it to half, if possible, and then invest the rest. Yes, so and once you started looking at your spending and budget, right? You'll notice that you spent. People spend things that are very unnecessary. Okay, so you know. People probably noticed I like twenty or thirty percent of what their money is. You know it's just going to. Unnecessary things. And, those things can easily easily be cut out, and then the more difficult part is like you know whether you want to live with the roommate. Cutting down on rent and stuff like that, but you know that's that's. Later on I. You definitely just start with stuff that. Can Be easily taken out. An interesting thing is a lot of people may be may mostly. They're young like a lot of like our audience is, they may be single. They may have a partner, but not like married with children. That's a huge factor that plays into this once star have if you are planning on having children and whatnot, that is extra expenses, so you do have to think like okay. Maybe lean fire can work, but you might have to increase your expenses because certain expenses. You just can't cut from your life. Especially, if you're willing to have a family, those do have certain expenses that you do have to account for. Those things do matter so when you start planning for like that retirement, phase or lean firefighters have to take into consideration of all those things that I've mentioned so yeah, definitely, keep in mind, start tracking expenses. I can leave a link for the other podcast. You guys obviously check them out. We full-blown detail like how to basically prepare what you need to do. Steps you need to take then we can just take it from. There yeah. So so get into what fat fire is and whether you should do it or not. So fat fire off the Bat. One thing that is probably a requirement is having a high income. Yeah, right so you're living your current lifestyle. Right and you want to continue that after retirement. You have to have a lot of money coming it. Okay. That's probably one of the only ways to do it I mean. There are other ways, but those are a lot more difficult to end. You know very risky as well, but you know high incomes definitely. ATOP! Requirement for that right and the second thing is. You don't want to give up your lifestyle. And you know as an end goal. Yeah, okay, because that's what you're trying to basically go for with the fat fire. You don't want to leave what you're doing as is, and I'll give you an example for that. If you're in New, York, city or San Fran people do end up like they don't even feel happy. Making one hundred grand I know if you're living in certain states or cities. You're probably like that's insane. I would be so happy with that in New York City that might not cut it. I, know certain people that pay three thousand dollars in rent. So that's literally half of their income gone like it's. It is crazy you again. There's a lot of taxes in New York as well. There's a lot of new. York City taxes in general. There's a lot of factors that come into play so these people don't you don't again. If you were trying to go for that lifestyle, you don't want to give that up so as I mentioned that high income matters because the goal is. Is like you continue increasing that income, but you also are very smart, would like your investments, your and your investing like a lot more riskier things to achieve. This goal is not just stocks. Maybe you're doing businesses. Maybe you're investing like sir, startups again you try, or maybe you're taking professional risk as well star joining startups, hoping for like that equity goal to like the go public or sell this seldom cells to someone like. Tuber! Cashing out on that because again, that's what these people try to aim for like getting those millions in cash and then boom. They're Kinda sat from there, so yeah, definitely and you know the the goal is to basically get a lifestyle for yourself, and then you want to continue that after you retire your retirement. Yeah, right, so you know, have A. Be Comfortable with the way you're living, and then there'd be comfortable with the income you getting and whatever you're saving and everything once you're comfortable with everything, and then your retirement will follow in that sense. Yeah, and I'll give a conservative example again to certain people. This might not even see him conservative enough if you're in New York. City and your yearly expenses are about one hundred k. a year to use that same example as before to retire. Basically, you wouldn't need two point. Five million dollars investment for you to be able to retire, so you can already see like you're already kicking that off like crazy and. And like previous PODCASTS, we've made her examples. We've given you can retire in Panama per se with like half a million dollars, maybe even less than that. Whereas over here, you're going five times that amount where you could possibly probably live like the one percent. Panama if you wanted to these people, they don't want to leave that specific type of life. Don I completely understand I do understand that they want to take row and continue it from that perspective. I know you shared a red example as well which we will leave in the show notes for you guys to check out, but you want to talk about like. What was happening there, and again I give a conservative example of hundred K., but some examples are I don't even want to see extreme, but that's just how fat fire is yeah. Yeah, definitely and so there's one example. Read it, you know if you read a whole fire community, you guys can join and basically get more information on how to how you're going. You know your lifestyle, your savings and everything and they have the different fire communities as well so. Explicitly Fat Fire Yup definitely so this. This is an example that someone wrote that. They have a net worth of about ten million dollars because they sold their business right so as you guys since. Concede. Ten million. Starting off is a lot of money right and you know he lists out some advantages and disadvantages right. So the disadvantages, let's go into that first. One would be you know there's a low motivation for work right so once. You have a lot of money and you're retired, right? It really depends on now. You're just kind of like. What are you doing with your life? Are you just sitting at home? You don't feel like working anymore because you have enough money, but then again you're just bored at home, so it's really a conflict of feelings on what you WanNa. Do what you're. What the rest of your life okay and then the other things for example, which are more subliminal probably won't notice, but you know once you have a lot of money. Let's say for example. In the millions million dollars say. Some people you won't be able to relate to a lot of people right? Especially people that don't have that much money, so you know that would probably be you know. Depending on where you're living in might be big of a concern, but that definitely could get caught up with you I agree. One of my mentors early mentors in the beginning told me hire the ladder. You climb the more friends and family people you lose, because it gets lonely at the top because you stop relating to more of those types of people because they get less and less on the top, so I definitely agree with you, but kind of like going off of that example gone to advantages. There are like a lot of. Advantages as one. Obviously, you have a lot of money. You know ever have to worry to a certain degree like about spending money. If you've already achieved that point, you're not going to be like. Spending it on stupid things. You're not going to waste ten. Let's say this ten million as an example, you're not gonNA end up buying stupid things, but to. At least you'll have that cash. You'll most likely haven't invested in different like in the market, you certain assets. Investment Properties possibly so you won't ever have to worry about lake money. You'll have a confidence boost ego boost like you'll know. You'll be able to get what you need. Even just getting up to that point, it just builds your confidence in the first place, and just in general like like it's wall subliminal style little things like people probably like bring. You are more be more friendlier to you. Tell you like. Hey, come to this event. Come to that event is just because you're rich is just because you have money. Yeah. It's just interesting like how those certain things happen, but they do they do. So that was just an example Someone, who is doing the fat fire movement, right and you know is. A living example, yeah, right so just some pros and cons on what will you probably encounter? When or if you get there? Yeah, and and we wanted to kind of like ended off with giving certain personal preferences will like. I'll give mine I'll share my example and like give his if it was me. Personally I I kind of I, don't necessarily think of in a fire perspective, but if I if obviously gonNA with definitions I would go with fire. I don't necessarily want to like change my current lifestyle I. do like how it is my goal. Keep my expenses the same possibly, but could continue increasing my net worth and income, so that's the row I try to take it in. I personally I feel like that's how in general you should always have a mindset like keep your expenses the same and I like how my current expenses are, but just continue increasing my possible income revenue stream net worth all those other things. Again I thinking more in the future. I have a lot of places where I wanted to. Retire off passive income personally or like my investments, income and whatnot where I can just easily travel. You know spend some time with my family. Now I'll go do some hiking with. The good stuff, even though that doesn't require any money been gas money, but you know. What about you've you've tried to go to fully and fire fire you just. You don't really have a preference or so for me. I would probably say some kind of a mixture of both I wouldn't want to live my life super frugally right where I'm basically cutting pennies can cause every little thing right, but there definitely are some things currently that I think I can cut down on. And I really don't need it and you know most of the things you're probably worried about. GOING TO CUT DOWN I won't have this once. You cut it down and then you start living like that for a couple of months. You kind of get used to it and you wouldn't really need that anymore. Let's say for example like. starbucks coffee every day right and you know you probably think that's just a couple of dollars every day, but in the long-term adds up right and then. If you start making coffee yourself at home, which is a lot cheaper, you'll probably be used to that and now want starbucks coffee anymore after like a couple of months and I know people hate that coffee example, but it's not supposed to be taken as like. Oh, it was just that one coffee is gonNA. Make millions this the mindset that you start that one expense. That's too high to begin with. This shouldn't just. Be there you're just. Taking that and putting it in other places as well, and you'll see like all those little things will add up and your whole lifestyle does change from that perspective. I agree I I don't. I don't even drink coffee. I like Green Tea's nothing, but at home. Good. So. Yeah, I mean for me. I would say that it's probably. For me like for both of. You know kind of fat fire. Also, but you know I don't think. I have my doubts perfect right now, so you know there's definitely things that I'm doing that I don't need to do so it kind of Michaud both I can help you with that is great podcasts. Called broke millennial finance. You should check it out. See Yeah I think. Was it for this episode? We do hope this was helpful. I know you guys really do like the fire content. We're putting out, so you don't want to give you as much information on that as possible If you guys overall do like our podcast, definitely, give us a rating on Apple. If you want to subscribe, please subscribe to the podcast wall, and if you want to continue supporting us, do check us out on page. theon Our Name is broken hill finance the board, and if you WANNA, see a visual perspective. Subscribe to us on Youtube as well Broke Moinul out piece.