Financial Coaching Blog

Lean FI/RE Strategy….FI/RE Part 2

Jumping back on our latest mini-series with the second (and very popular) financial independence strategy known as “LeanFI” & “Lean FI/RE”.

So what is Lean FI/RE?

In our first post we highlighted “FatFI/RE” where those with high incomes, sold a business, and have multi-millions saved pursue a more luxurious financial independence lifestyle, “LeanFI/RE” is the COMPLETE opposite. In this particular strategy, individuals” pursuing strive to spend $40k or less annually in early retirement. Here’s some other highlights:

1. Think of LeanFI/RE like managing a budget and tracking expenses. In order to achieve early retirement on $40k annually, you MUST know every penny that comes in and goes out.

2. If considering the 4% withdrawal rate rule, people utilizing this strategy need 1 million or less saved, as well as strict guidelines on tracking expenses. Avoiding any and all debt is a hard requirement in order to stretch those funds.

3. Typically, this particular strategy is favorable with younger folks. People who’ve likely just entered the work force, have minimal debt, and likely haven’t diversified their retirement investments yet. (Usually ages 35 and younger).

LeanFI/RE makes up a significant portion of the FIRE Movement…

Truthfully, this has to do with us Millennials who grew up watching our parents spending money on BIG homes, carrying thousands in debt, and saving virtually nothing for retirement. In the middle of LeanFI/RE and Fat FI/RE is termed “Regular FI/RE” that is usually for income earners who make $40k-$100k. I didn’t highlight this strategy, but it also exists as an option.

The struggle with LeanFI/RE…

Consists solely on the annual limit of $40k a year to live off of. With the cost of living, rent & mortgages, and food prices soaring, this creates a struggle for most who may be older and consider this not enough to live off of. Especially if you enjoy domestic and international travel.

What do you think of LeanFI/RE? Could you live off $40k a year?

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