The FIRE movement (Financial Independence, Retire Early) works on a simple premise. Save and invest enough money and eventually, you’ll have enough that your investments can support your lifestyle. As the FIRE movement has grown and evolved over the years, different sub-categories of FIRE have been defined. I’ve written about two of my favorite types of FIRE in previous posts – Barista FIRE and Coast FIRE. Another type of FIRE – and what I’m writing about in this post – is Lean FIRE.
I often think of Lean FIRE as a bit of a shortcut to financial independence – a way to pull the plug and escape the working world sooner, rather than later. The gist of it is that if you need less money to live on, you can hit your FIRE number sooner. Lean FIRE comes with an obvious tradeoff though. If you opt for this route, you have to be okay with living on less – perhaps far less than what you might have expected.
Depending on your situation, this is a tradeoff you might be willing to make. FIRE often acts as an escape hatch for people who are unhappy with where they are in life (usually with their job). I know that’s how I felt years ago and it’s what initially drew me to the FIRE movement.
With this in mind, I can see why Lean FIRE can be appealing to some. If you’re already a low-spender or someone who doesn’t need much to be happy, then Lean FIRE is a potential FIRE option for you. A few years ago, it could have been a path for me. But as often happens, life happens and things change.
What Is Lean FIRE – The Low Annual Spending Definition
The generally accepted definition of FIRE is that you’ve reached financial independence once you’ve saved up 25 times your annual expenses. There are a lot of studies that show that you can withdraw 4% of your portfolio annually and theoretically have it last forever. So, once you’ve saved up 25 times your annual expenses, you theoretically should earn enough from your investments that you don’t have to work again.
The problem with FIRE is that it can take a long time to save 25 times your annual expenses. Even for the most aggressive savers, brute force saving that much can take a decade or longer. If you’re in a job that you hate, the idea of saving your way to FIRE can be daunting. And the more you need to support your lifestyle, the longer it’ll likely take you to reach your FIRE.
Lean FIRE attempts to solve this problem by dramatically reducing your annual spending. The less you need to spend each year, the faster you can reach FIRE. The tradeoff, of course, is that you have to live on less than what you might otherwise spend normally.
There isn’t any set definition of what constitutes Lean FIRE, but it seems like most people consider it as spending less than $40,000 per year. That means for most, you’ll need to save less than $1 million. Depending on what you need, you might be able to save just $500,000 to $1 million to find yourself financially independent.
How Does Lean FIRE Work?
Many of you reading this might already understand the numbers behind Lean FIRE, but I think it’s still worth putting here so you can get a good visual of what you need to save to reach this point.
In general, I assume that for most people, Lean FIRE means saving less than $1 million. If you had $1 million, that would generate $40,000 per year of income. Thus, for most people, Lean FIRE probably means living on between $30,000 and $40,000.
That means most people aiming for Lean FIRE need to save the following to generate this amount of income:
- $30,000 Per Year of Income = $750,000
- $35,000 Per Year of Income = $875,000
- $40,000 Per Year of Income = $1,000,000
Depending on your situation, you can aim to live on even less. However, realistically, most people (not all, but most) will need fairly unique situations to live on much less than the above numbers for long periods. There are people out there that are living on $500,000 portfolios. But whether that’s possible to do forever remains to be seen.
I personally think $40,000 per year is realistic and comfortable for many to live on. Depending on where you live, you might not even have to sacrifice much. Once you get under $30,000 per year, you’re looking at living on less than $2,500 per month. That’s doable, but much more difficult if you start having to think of others in your household.
An Alternative Definition – The Basic Essentials Definition
Another definition of Lean FIRE I’ve seen (and this may be more of a sub-category of Lean FIRE, rather than an alternative definition) is that Lean FIRE means you’ve saved enough that your portfolio can cover your basic necessities. Basic necessities typically include housing, food, and transportation.
This definition of Lean FIRE is interesting because if you’re covering your necessities, you’ve set up a great foundation. The problem with this definition is that you’re still going to need some income to cover other costs. And depending on what you consider necessities, the number you have here might not be very different from your normal Lean FIRE number.
In a lot of ways, this definition of Lean FIRE is probably closer to Barista FIRE, which is when you only need to earn a small amount each year to cover your expenses.
My Thoughts On Lean FIRE – A Good Goalpost (But Not The Ideal Endgame)
I don’t have a problem with Lean FIRE as a concept. Indeed, for a long time, I thought I could easily live on $40,000 or less per year forever. The problem is that none of us knows what the future holds and trying to plan our lives under the assumption that it’ll always look the same is a foolish exercise, in my opinion.
That being said, I see Lean FIRE as a possibility for someone who’s single or for a family living frugally that doesn’t plan to have kids. However, if you start adding more people into your household or start having more people rely on your income, it gets increasingly difficult to live a comfortable Lean FIRE life.
To me, Lean FIRE isn’t a good end game. Living frugally is fine and if you are truly happy living on a small amount each year, then more power to you. But for me, living frugally to get to your Lean FIRE number, only to then live frugally for the rest of your life isn’t a great goal. Money isn’t everything. But budgeting and pinching every penny in your life shouldn’t be everything either. All of us, I think, deserve more in our lives.
Still, Lean FIRE can still be a good goalpost to aim towards – another stepping stone on your way to whatever financial goal you might have. It can be a nice initial escape hatch too if you find yourself in a position where you just can’t take it anymore.
I think the best way to use Lean FIRE is to combine it with other types of FIRE. Barista FIRE, for example, is when you put yourself in a position where you only need to earn a small amount each year to cover your yearly expenses. Anyone can earn enough money to enjoy themselves a bit. Think how easy it can be to earn a few thousand dollars each year, especially if you already have your basic necessities covered.
Meanwhile, Coast FIRE is when you reach a point in your saving and investing journey where your money can grow large enough by itself to support your life at traditional retirement age. If you’ve reached this point, you can take chances without a lot of risks.
Combine Lean FIRE with Barista FIRE and Coast FIRE, you can do almost anything you want.
More Recommended Ebike/Scooters
Check out these other ebikes/scooters I've had the chance to do a review for:
- GEN3 Outcross Bike – The GEN3 Outcross is a solid, affordable fat tire ebike that does a good job of doing what I need it to do. It works great for city riding, giving me a smooth ride in all conditions. It’s works really well as a winter ebike since the fat tires give it good traction over snow and ice. Check out my GEN3 Outcross Review.
- Himiway Escape Bike – The Himiway Escape is an interesting bike for anyone looking for a moped-style ebike. If you’re a gig economy worker, the Himiway Escape is particularly interesting and it’s possible to think of it as an investment, especially if you can opt to do deliveries with the Himiway versus using a car. It’s not cheap, but you can definitely make your money back when you compare the mileage you’ll put on your car versus using an ebike. Check out my Himiway Escape Bike Review.
- Espin Sport Bike – The Espin Sport is a good ebike for someone who is looking for an ebike that feels and rides more like a regular bike. There are many ebikes that are really only bikes in name. In reality, they’re basically electric mopeds. The Espin Sport, by contrast, is a bike you could probably ride without the battery and you’d feel like you’re just riding a regular bike. Check out my Espin Sport Review.
- Varla Eagle One Scooter – The Varla Eagle One is an excellent scooter that can make sense for a lot of people. It can work as a primary mode of transportation. You can use it to work on gig economy apps like DoorDash, Uber Eats, and Grubhub. And it can also be a recreational vehicle if you’d prefer to use it for that. Check out my Varla Eagle One Review.
- Fucare H3 Scooter – The Fucare H3 is a fun scooter and I’ve enjoyed testing it out. For a daily commuter or quick trips or errands, the Fucare H3 is probably the scooter I’ll use. It’s portable and easy to maneuver, so it’s just easier to take on the road when I need it. Check out my Fucare H3 Scooter Review.
More Recommended Investing App Bonuses
For additional investing app bonuses, be sure to check out the ones below:
- M1 Finance ($10) – This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $10 for opening an account. Check out my M1 Finance Referral Bonus – Step-By-Step Guide.
- SoFi Invest ($25) – SoFi Invest is an easy brokerage account bonus that you can earn with just a few minutes of work. Use my SoFi Invest referral link, fund your SoFi Invest brokerage account with $100 and you’ll get $25 of free stock. I also have a step-by-step guide for the SoFi Invest referral bonus.
- Moomoo (5 free stocks) – Moomoo is a free investing app currently offering 5 free stocks (usually worth around $75-$100) if you open an account using a referral link and deposit $2,000. Read my Moomoo referral bonus guide for more information.
- Webull (5 free stocks) – Webull also gives you 5 free stock valued between $3-$3,000 each if you open an account using my referral link. Here’s a guide I wrote about how to earn your free stocks using Webull.
- Robinhood (1 free stock) – Robinhood gives you a free stock valued between $2.50-$225 if you open an account using my referral link.
- Public (1 free stock) - Public gives you a free stock valued between $3-$70 if you open an account using my referral link.
More Recommended Bank Account Bonuses
If you’re looking for more easy bank bonuses, check out the below options. These bonuses are all easy to earn and have no fees or minimum balance requirements to worry about.
- Chime ($100) - Chime is a free bank account that offers a referral bonus if you use a referral link and complete a direct deposit of $200 or more. In practice, any ACH transfer into this account triggers the bonus. This bonus is easy to earn and posts instantly, so you’ll know if you met the requirements as soon as you move money into the account. I wrote a step-by-step guide on how to earn your Chime referral bonus that I recommend you check out.
- Upgrade ($100) – Upgrade is a free checking account that’s currently offering a $100 referral bonus if you open an account and complete three debit card transactions. These bonus terms are easy to meet, so it’s well worth doing this bonus as soon as you can. Importantly, this bonus says that it’s now scheduled to end on October 31, 2022. As long as you get your account opened before October 31st, you should be eligible. Here’s a post I wrote with more details: Upgrade $100 Referral Bonus – Step By Step Directions.
- SoFi Money ($350) – SoFi Money is a free checking account from SoFi. They’re currently offering a $25 referral bonus if you open a SoFi account with a referral link and deposit $10. You can also make an additional $300 as well if you complete a direct deposit. This is a good bank that is also 100% free, so you won’t have to worry about managing this account. Here’s a post I wrote with instructions on how to earn your SoFi Money bonus: SoFi Money Referral Bonus: Step By Step Guide.
- Fifth Third Bank ($250) – This offer is limited to customers in the following states: Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, Tennessee, West Virginia, and South Carolina. If you don’t live in one of those states, you won’t be able to open an account online but you can still open an account in-branch if you happen to be visiting a city that has a branch. This is a fairly easy bank bonus to earn, especially since there are plenty of data points showing what will trigger the direct deposit requirement. In addition, you can open the Fifth Third Momentum Checking bank account, which comes with no monthly fees or minimum balance requirements. Read my guide on this bonus here.
- Current ($50) – Current is a free fintech bank that’s offering new users a $50 referral bonus after signing up for an account using a referral link.Current is an easy bonus to earn and also gives you access to three savings accounts that pay you 4% interest on up to $2,000. That means you can put away up to $6,000 earning 4% interest. That’s very good and makes Current an account I recommend to everyone. Check out my step-by-step guide on how to earn your Current Bank bonus.
- OnJuno ($100) – OnJuno is a fintech/neobank that is currently offering a $100 referral bonus if you open an account using a referral link and complete a direct deposit of $250 or more. The account has no fees or minimum balance requirements. Even better, the bonus posts immediately after you meet the requirements. If you can meet the direct deposit requirements, OnJuno is an easy bank bonus that’s worth snagging. Check out my OnJuno referral bonus guide here.
- Varo ($50) – Varo is a free fintech banking app similar to Chime or Current. It’s currently offering a $50 bonus to new users that open a new Varo account with a referral link. The bonus for this bank is very easy to meet, all you need to do is spend $20 within 30 days of opening your Varo account. Check out my step-by-step guide to learn how to earn this bonus.
- Fairwinds Credit Union ($100) – Fairwinds Credit Union is offering a referral bonus for users that sign up using a referral link. Fairwinds has no fees or minimum balance, so this is a particularly easy bonus to earn. Since this is a smaller credit union, my gut instinct tells me this offer won’t be around long, so if you’re in a position to meet the bonus requirements, grab this bonus before it’s gone. Here is my step-by-step guide on how to earn your Fairwinds Credit Union bonus.
- Novo Bank ($40) - Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. In addition to being a good bank bonus, Novo is also a good business checking account. It has no monthly fees or minimum balance requirements and operates a good app and website. Indeed, it’s the business checking account I currently use for this blog. Check out my post on how to easily open a Novo account.
- Spiral ($50) – Spiral is a fintech bank that's currently offering new customers a $50 signup bonus after opening a free checking account with them. The Spiral referral bonus is especially good because it's a free checking account and doesn't require a direct deposit to earn the bonus. Here is my step-by-step guide on how to earn your Spiral Bank bonus.
- One Finance ($50) – One Finance is a fintech bank that’s currently offering a $50 signup bonus if you open an account using a One Finance referral link and have a direct deposit of $250 or more. This is a completely free bank account with no minimum balance requirement, so if you can meet the requirements, it’s worth doing. Check out my One Finance referral bonus guide here.
- Albert ($150) – If you can manage to do a real direct deposit, Albert is an easy account you can use to earn a referral bonus. Here’s a review about Albert I wrote. And here’s a step-by-step guide on how to earn your Albert referral bonus.
- Netspend ($20 + 5% Interest Savings Account) – Netspend is a company that provides 5% interest savings accounts. If you sign up using my referral link, you’ll get a $20 signup bonus once you make your first deposit into your Netspend account of $40 or more. That means you get a 5% interest savings account and a free $20 to start! Make sure to check out my in-depth guide on how to set up these accounts.
Kevin is an attorney and the blogger behind Financial Panther, a blog about personal finance, travel hacking, and side hustling using the gig economy. He paid off $87,000 worth of student loans in just 2.5 years by choosing not to live like a big shot lawyer.
Kevin is passionate about earning money using the gig economy and you can see all the ways he makes extra income every month in his side hustle reports.
Kevin is also big on using the latest fintech apps to improve his finances. Some of Kevin's favorite fintech apps include:
- SoFi Money. A really good checking account with absolutely no fees. You'll get a $25 referral bonus if you open a SoFi Money account with a referral link, and an additional $300 if you complete a direct deposit.
- Upgrade Bank. Upgrade is a free checking account that’s currently offering a $100 referral bonus if you open an account and complete three debit card transactions. These bonus terms are easy to meet, so it’s well worth doing this bonus as soon as you can. Note that it’s now scheduled to end on October 31, 2022.
- Novo Bank. Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. It’s the business checking account I currently use for this blog.
- M1 Finance. This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $10 for opening an account.
- Personal Capital. One of best free apps you can use to monitor your portfolio and track your net worth. This is one of the apps I use to track my financial accounts.
Feel free to send Kevin a message here.
Yeah, I agree. I think you can Lean FIRE if you are single and have a $1M portfolio and can live off of $40K. For couples it would probably need to be a bit more, but I suppose it is all in the finer details of where you chose to live and how you chose to live. For families looking to give their kids well a rounded upbringing with travel, playing on sports teams, museums, etc. I think it begins to become more challenging.
I always get confused if FIRE numbers are for an individual, or for a couple.
Either way if one has a paid off house, $40k/year seems like a huge amount for one, and totally doable for two. And potentially even if not a home owner depending on rent situation.
My expenses are more like $15k a year and in 2 years when house is paid off should go down to $12k/yr (I pay small portion of mortgage which is my husband’s house)…if I stop working potentially even less since transportation is currently the largest portion of my monthly expenses.. I plan to baristaFIRE (like my works, just want more flexibility to say, go hiking for a couple months at a time). I just started saving 2.5 years ago and if you save up a huge part of your income (in my case about 75% a year) it really makes a huge difference.
Some of the big hitters in fire seem to live a great live as a family on way less. MMM a few years ago and root of good (family of 5) puts up numbers each month and is way under $40000 per year. My family of 3 is happily under 40 per year too.