The 5 Levels of FIRE (Coast, Lean, FI, Chubby, Fat)

22:12But you want to make sure that you start to think through what this is going to look like. Because if lean fire is your goal, like your goal is freedom, you want to get to freedom as fast as you possibly can and not have to work at all if you don't want to, then you might have a modest home because reducing your expenses is a big, big portion of how this is going to work. It's not living anything lavish. It's not, you know, buying new clothes every month or being able to drive the fancy car. No, lean fire is you're living lean. You're driving a 10 year old car. You're living in a modest house typically, and you're trying to live on your bare bones expenses.

22:42And so your house might be modest. You drive cars way longer than you normally would. You travel economically, like you're thinking about the costs of everything to make sure all of this stuff works, and you really pay attention to your spending. Some people don't mind that at all. They love living that way. And if you're very frugal, this is a great way to live. This is a great goal to have because you don't have an alarm clock and the trade-off is you don't have a boss telling you what to do and you don't have any fear of losing your paycheck. No, you built up this nest egg. You have it in place and you have full financial freedom.

23:13So let's say you do a little math and you say to yourself, you know what? I can spend$60 ,000 per year with me and my spouse and my two kids and we'd be a-okay and I'd be happy as a clam because I'd have my time back. I could read books. I could work in the yard. I could start to garden. I could work on my passion projects. I could do the things that I want to do. And I could be in my 30s or my 40s or my 50s and have the ability to really just be happy, get my life back, be able to spend my time doing the things that I want. And I love, you know, spending time reading at the library. I love, you know, going out and volunteering.

23:45I love spending time doing things at my church or doing things with the community events. Well, this would be a perfect opportunity for you is to do something like Lean Fi. And this is what I thought I wanted. In my 20s, this is what I was working towards. This is what I really was pursuing was Lean Fi because it sounded awesome. It was way better than working a corporate job, way better than working in that cubicle for a boss that you hate. And so for many people, LeanFi sounds like a dream. It's a simple life and you live that simple life. And the trade-off is you get all your time back. And then if you want to pursue, you know, maybe some business ventures that are low cost or you want to pursue doing other things, then you can make money other ways, but you'll figure that out once you hit LeanFi.

24:22That's what a lot of folks' goal is. And many, many people in the FIRE movement, this is where they started. This is where they really, really pursued. And this is the crux of the FIRE movement is this is it, is LeanFi. This is where a lot of people were. And this is how they thought about it, where you're living on less than you make. And when you reduce your expenses, it does two things. One, it reduces the amount that you need to invest long term because your amount that you're spending every single year is less. So if you decide, OK, well, I'm going to move from spending$60 ,000 per year to$40 ,000 per year, I'm going to cut back my expenses$20 ,000 every single year by just cutting out all the extra waste that I don't care about.

25:01Well, if you do that, you move from needing a$1.5 million portfolio to a million dollar portfolio. Well, you can get there years faster by doing something like that, depending on what your income is. And so many people, it does two things. When you cut back, it allows you to not have to have as much in your investments and you're spending less. And so in reality, it just makes it a lot easier for you to not have to worry as much about some of that stuff. So for lean fire people, they're willing to live a simple life or a much simpler life than maybe what traditional people think. And I would encourage you to check out, if you are interested in this, to check out Mr.

25:35Money Mustache. You can check out Jacob Lung Fisker. These are like the extreme versions of this where they went out and they did some really cool stuff that allowed them to reach LeanFi. And I love it. I think it's amazing for people who do that. And if you have reached LeanFi, let me know in the comments below. I would love, love, love to hear from you. So those are levels one and levels two. Now let's talk about level three, which is financial independence. All right, level three is financial independence. And I think this is where most people listening are trying to target. Because your portfolio can reasonably support your current lifestyle without any employment income whatsoever.

26:13Meaning, this is the ultimate goal for a lot of us. You think about, okay, well, how much do I spend right now? I spend 100 grand per year on my family of four. And that's how much I want to spend in retirement. I just want to live the lifestyle I'm living right now, but I want to not have to work anymore if I don't want to. That's traditional financial independence. meaning you are trying to get to the point in time where you have enough money on hand where you can spend what you're spending now or maybe a little more, maybe a sprinkle a little bit more in there and still have the ability to be able to not work.

26:40This is the dream. This is the dream for most people and this is the dream to get to this point in time because it gives you options. It allows you to do a couple of different things. It's the crossing point. It's the crossing point where work becomes optional. You now have F you money where if anything happens in your job that you don't like, you can simply just walk away. Nobody owns your time anymore. Nobody owns you anymore. Because in reality, that's what it feels like sometimes is when you work a job, it feels like somebody else owns you. You got to ask somebody else for some time off. You got to ask somebody else if you could do certain things.

27:10So instead, nobody owns you anymore. You have the ability to be able to spend money the way that you want to spend it. And I think this is a wonderful place to be because what you're going to see is that once you make this one of your goals after you, you know, coast fi, lean fi, and then having the ability to make this one of your goals, all of a sudden your freedom starts to change. You can now have a couple options. One, you can decide, well, should I keep building my career and kind of going above and beyond because I enjoy this? It fulfills me. It helps me fill my time. And it's something that I really, really like doing.

27:43Or you could start something. You could start a business. You could start something that is a low-cost business maybe that you want to get going. Maybe you're working in the corporate world, but you love getting out there and mowing lawns. You're a big lawn mowing fan. And so you want to go out and start a business where you just are a one-person band, going around town, mowing some lawns and making a little extra money on the side. You like to be outdoors. You like to spend time outdoors. Or maybe you want to be a guide and you like to spend your time hiking trails and hunting or whatever else.

28:11You could do some cool stuff like that. Maybe you love Pilates. And so you have a passion for Pilates. You have a passion for helping folks get better at Pilates and you want to help improve their lives. And so you want to go that route. Maybe you want to coach your kid's baseball team and be able to do that. Or you want to travel or volunteer. Financial independence allows you to do whatever you want. It allows you to do whatever you want in life where you don't have to worry about anybody else. And this is what you've all been building towards. This is what everyone's building towards. This is what retirement is.

28:41It's just a fancy name for retirement. But for many of you out there, you may be saying to yourself, well, what if I could do more than just the traditional retirement? What if I could have more money on hand, sprinkle a little more sauce so I can live some dream life stuff and I could be able to do some really, really cool things? Well, that's what the next couple of levels are gonna be all about as we start to talk through this. But if you're trying to think through your financial independence number first, and I want most of you to do this math, I want you to say to yourself, okay, how much do we spend per year?

29:10And if you don't know that number, go look at your bank statements over the course of the last 12 months. You can pull those out and start to add up how much you spent over the course of those 12 months. You can pull a CSV file from your bank. If you're like a Chase or Bank of America or Ally or SoFi or wherever you are, pull a CSV file, which is just an Excel sheet, and add up how much you spent last year in your checking account. Add up your credit cards. Add them all up and put it together and see how much you spent. Whatever that number is, multiply it by 25. So let's do an example. Let's say for an example, you spent$117 ,000 last year.

29:45Some of you may be saying, how the heck do you spend that much? and some of you may be saying, I spend way more than that. This is just an example. If you spent$117 ,000 next last year, you multiply that by 25 and you've got$2 ,925 ,000. That's how much you need in your portfolio to be able to retire. So for folks out there who are thinking about this and they're like, well, how much is that? Just think about it monthly. That's about$10 ,000 every single month. If you spend less than that, then you need less than that in your portfolio. If you spend more than that, you need more than that in your portfolio.

30:15But you just want to make sure that you're thinking through the parameters of what this is and how much you can actually spend. And so for many of us, getting to the point in time where we can get to our living expenses and where we currently are is an easy goal to target because that helps us know and understand, okay, well, at least I'm living how I'm living right now. And maybe things will leave your life. Maybe you won't have a mortgage anymore. At some point in time, if you stay in that house that you own for 30 years, you're not going to have a mortgage anymore. Or maybe you're not going to have kids in the house anymore.

30:44And so at some point in time, those expenses are going to go away. And those are going to be little icings on the top. That's going to help you kind of get through the tougher times. That's going to help you get through the times when, you know, you feel as though, is this plan working? No, it's working. You just got to make sure that you trust the process and go through the process. And then as time goes on, you realize, oh, I get social security. There's going to be other things that are going to help you in play that will help you plan your financial independence. But you just want to make sure you do the math and the quick back of the napkin math.

31:10We have other projections we can talk about that are going deeper and deeper and deeper into your plan, but that's the easy way to get this ball rolling. Perfect. So that's level three, which is financial independence. So, so far we've talked about Coast Fire. We've talked about Lean Fire and we've talked about regular old financial independence. Now let's get to level four, which has a funny name, which is Chubby Fire. So when I started my financial independence journey, I was trying to get to Lean Fire. Then I was trying to get traditional fire. But then I said to myself, what if I want more?

31:41What if during my working years, you know, I'm not, I'm filling my hours with work. I'm filling my hours and time and energy with things that I'm doing day in and day out. But how am I going to fill my time when I get to the point in time where I have lots more time? And so when I started to think about that, I said, I want to have a little more. I want to have a little more on hand so that I can do some cool things and have financial independence with no boundaries. One, it gives me a cushion because I'm a cushion guy. I like to have some extra room on hand for things to go bad or mistakes to happen or things to be in place.

32:16But I also want to be able to spend some money. Your boy likes spending money. I like to spend my dollars on things that I actually enjoy and my interests change, my hobbies change, and I want to be able to do the things that I actually like and spend money without having to think twice about it on some of those things that I really want. Let's give an example of this is one of the things I love to do is being able to like just go to a restaurant not have to think about it I can order appetizers I can order drinks I can order the things that I want to order and not have to worry about anything well that's going to give me some extra discretionary spending or if I want to order a pizza you know because I don't feel like cooking that night or doing dishes I want to be able to do that at any point in time and I feel as though if you're lean fi you can't make those choices or if you are someone who is right on the border of what you're spending now and you don't make those choices currently, then you're going to be at the same point in time when you get to retirement.

33:06And when you have more time on hand, and I don't think a lot of people think about this, but when you have more time on hand, you're going to want to do more things that cost money. At least I will. Not every activity that I love doing is completely free. And so I like to go and hang out with friends. I like to go and do, you know, specific things that are going to cost a little more. Maybe I want to go get a fishing charter. Or maybe I want to go and, you know, take a first class flight with my wife to Tahiti. Well, those are the types of things that I want to make sure that I have a little bit of extra cash on hand and have a little bit of discretionary income.

33:38Plus, if lifestyle changes happen, let's say my kids want to start playing travel basketball or they want to start to, you know, go to a private school or they want to do some things that I think, you know, maybe I wouldn't have on hand if I didn't start to think about chubby fire and the way that this is going to work. then I would really be remiss to not be able to provide those things for them that they wanted. And so for me, chubby fire was the next goal to think through, okay, well, maybe I want to have a nicer house. Maybe I want to travel frequently. Maybe I want to make sure I can go to great restaurants whenever I want.

34:07Or maybe I want to make sure my kids' activities are activities that they can actually do. If they get more and more expensive as they do as they get older, that's something I want to do. Maybe I want to make sure I can generously give to people in need. or I want to drive a car that's a little bit nicer. You know, I don't really usually buy new cars, haven't bought a new car ever in my life, but it could be something that I'd be interested in. Maybe I want to get interested in new hobbies or, you know, maybe you enjoy certain hobbies that could be very, very beneficial to you. And I think all of these different things are important.

34:37Maybe you want to help family. Maybe you want to pay for experiences for your family so you can do more things. Maybe you want to have less anxiety around everyday purchases. Well, Chubby Fire allows you to do that. You're not flying private all the time. You're not like doing all these extravagant things, but you're having a lot of extra room in your life to do the things you want to do without having a give or a take. And I think financial freedom should be that way. I think financial freedom should give you and allow you a little bit of extra opportunity. At least this is my personal opinion.

35:05Your opinion may be different, but I think it should give you the opportunity to do stuff you like, do stuff you enjoy, do stuff you've always wanted to try. And if you don't like it, you have a little extra cash on hand. you could spend it down on other things you think would be interesting. But if you do go this route, you just want to make sure that you're nailing kind of how much extra you want. So let's say, for example, you spend$100 ,000 per year. Well,$100 ,000 per year is about$2.5 million is what you need to invest it. But you say to yourself, you know what? You know what would be really nice is having the ability to spend an extra$40 ,000 per year.

35:36If I had an extra$40 ,000 per year, I could use that on restaurants. I could use that on vacations. I could use that to go get a country club membership and spend time golfing with friends and family. I could use that to join the boat club at my local boat club. I could use that to whatever the list is. An extra$40 ,000 per year means you need an extra million dollars invested. And I think it's worth the time and energy to think about at least because if you're already at the point in time where you have two and a half million bucks invested, how much longer is it going to take you to get to that next million.

36:11How much longer is it going to take you to think through, okay, well, I want to get to that next million dollars. Maybe it's five years, maybe it's four years, maybe it's six years, depending on your rate of return. And is that worth your time and energy? Well, it's going to depend on your age. It's going to depend on where you are. It's going to depend on your job. It's going to depend on all the other things that you're doing. And for some of us, it is worth it. And for some of us, it's not, which is why you can stop at traditional financial independence and be completely fine. You can stop at lean fi and be completely fine.

36:38There's countless examples of people that have done so. But I just think that if you want to live the life you want to live and you don't want to live with regrets, chubby fire is something I'm very interested in. And so for many of you out there, that's going to be a great place to go so that you can do the things that you want to do without having to worry. And I think that's a powerful place to be. Now let's get to the final level, which I think is a really, really cool spot to be, which is fat fire. My relationship with money has changed a lot over the years. Early on, I thought building wealth was about making more money.

37:14Now, I know it's really about having clarity. When you know exactly where your money is going and whether you're on track, you make better decisions. That's one of the reasons I love Monarch. It's the personal finance app that tracks everything from your accounts and investments to your savings goals and spending. So you can see your entire financial picture in one place. One habit that's made a huge difference for me is my five-minute drill every single morning. I open Monarch, check my spending, investments, cash flow, and net worth, and I'm done in just a few minutes. It gives me confidence that nothing is slipping through the cracks.

37:48I also love the AI Weekly Recap because it'll flag spending changes, upcoming expenses, or shifts in my net worth before they become a problem. Instead of reacting after the fact, I can make adjustments early. It really feels like having a financial advisor in your pocket. Write your own money story with Monarch. Use code PFP at Monarch.com to get your first year of Monarch Core half off at just$50. That's 50 % off your first year at Monarch.com with code PFP. It's kind of amazing how much can change in just a single year. Every summer, the kids are a little bigger, a little more independent, and life looks a little different than it did the year before.

38:30And it reminds me that while we can't predict the future, we can prepare for it. That's one of the reasons I like PolicyGenius. See, PolicyGenius isn't an insurance company. They're an online marketplace that lets you compare life insurance quotes from some of America's top insurers side by side for free. And their licensed team helps you compare coverage, prices, and terms, answers your questions, and even handles the paperwork so you can get the right policy without the hassle. For me, having life insurance isn't about expecting something to happen. It's about knowing my family is protected so I can actually enjoy these moments together instead of worrying about what comes next.

39:09And with PolicyGenius, you can find 20-year life insurance policies starting at just$276 a year for$1 million of coverage. Head to PolicyGenius.com to compare life insurance quotes from top companies and see how much you can save. That's PolicyGenius.com. So level five is fat fire. And this is financial independence with a very high end lifestyle. So for a lot of my high earners out there, you may have a higher end lifestyle that you're pursuing or you have a lifestyle that you really want to be able to do the things that you want. And so this is going to be one of those lifestyles where you can kind of live lavishly or live amazing and have the ability to be able to get to the point in time where you are happy with how much you're spending.

39:50So maybe you're spending$250 ,000 per year right now and you want to spend$300 ,000 to$400 ,000 in retirement. because you want to travel more and you want to travel in luxury hotels or you want to take those first class flights or you want to be able to do all the things you want to do. But you don't want to get caught up in some of these universal thresholds. You want to have the ability to kind of enjoy your time and energy. Maybe it's luxury travel. Maybe you want to have multiple homes. Maybe you want to have boats or expensive hobbies. Maybe you want to have private school for your kids or significant charitable giving.

40:20All of this can be had with Fat Fire. And a lot of people who build generational wealth, they start to make this one of their goals as that time goes on. and maybe you want to help parents or you want to help, you know, pay for family vacations, or you want to buy back just an enormous amount of time. Fatfire is the way to do that. And so I've seen a lot of folks make this their goal if they're high income and earners, because that's one of the only ways to do it. And they really, really just want to live this different lifestyle that they never got to live. And so, you know, I see a lot of doctors or attorneys trying to, you know, pursue Fatfire.

40:51I see a lot of tech entrepreneurs pursue Fatfire. I see a lot of tech employees pursuing Fatfire because they're making good money. I've coached many people making over a million dollars per year. And this is one of their goals is to take a huge chunk of their money, live on less than they make right now, and put it towards their investments so they can get to this point in time where they are financially free and can spend money for the rest of their life. And an interesting thought process on this. Let's say you want to spend$50 ,000 per month. You reverse engineer this. Well, that's$15 million in your portfolio to spend$50 ,000 per month for the rest of your life and be okay.

41:23Pretty cool lifestyle to be able to spend$50 ,000 per month over that time frame. Let's say you want to spend a hundred grand per month. We need$30 million invested. And so I think like peak financial independence, like if you wanted to get to fat fire and you feel as though you want to do whatever you want in this life, getting to$30 million with a paid off house is like, that's the ultimate spot to be in because you could spend $100 ,000 per month, $1.2 million per year and be able to do whatever you want. Now, for many of you, that's probably too much money. And for many of you, that's probably just too far and you don't need that much.

41:57But it's fun to dream about. It's fun to think about, hey, what are the ultimate pinnacles that you can get to? Get your mad scientist hat on like I always talk about all the time here and try to think through some of the ultimate pinnacles. 15 million bucks gets you to about 50 ,000 per month. Okay, seven and a half million bucks gets you about 25 ,000 per month. And so these are just great goals to have if you want to spend more. If you want to spend more in your lifestyle and be able to draw down more money so that you can do cool stuff, that fires the way to go. So if you have a high income, try to decide all the things you would want to do.

42:26list out all the things you would enjoy doing and have fun doing in retirement or financial independence. Maybe you want to go skiing every year. You want to do a monthly trip to a different location for a week out of the month. Well, Fat Fire allows you to do that. Maybe you want the vacation home in Aspen. Maybe you want to have a second home in Italy. Maybe you want to have a third home in China. I don't care what it is. But you decide what you want to do in this life, and you have the ability to do it. But you got to make enough income to make it work. It's not going to be for everyone. So again, this is the pinnacle for a lot of folks out there.

42:58Don't get upset if you can't achieve fat fire. This is just a concept that many people try to pursue. And so for many of you out there, I think that the higher levels of fire come with a cost. Because if you get to the point in time where you get to 2 million, and this is my biggest problem. This is personally, let me open up to you guys here. My biggest problem is every time I hit a financial independence goal, I want the next one. And I want the next one. And my goalpost always moves. and it moves constantly. And you got to figure out how to get to the point in time where you're content. Because contentment is a superpower when it comes to personal finance.

43:33It's a superpower when it comes to financial freedom and being able to be financially free. It's becoming content with the things that you have. And sometimes it's not just the things that you have, but the portfolio that you have. If you're an investor at heart and you love watching that portfolio grow, sometimes you keep working just because you like to watch the portfolio grow. Sometimes you keep working because you like to invest. Sometimes you keep working because you feel as though this is a game and you want to win the game as many times over as possible. Well, for many of you out there, getting that goalpost to stop moving is not as easy as it seems.

44:04And if you can't get it to stop moving, you got to set up some parameters, make a manifesto of some sort that says, hey, this is where I'm going. This is why I want to get there. And once I hit this point in time, I'm stopping. Because otherwise, it's never going to stop moving. And if you don't mind that, if you don't mind continuing to work because you think it's fun and you enjoy the game and you enjoy setting these goals, that is completely fine. But you got to make sure that the goalpost doesn't keep moving because you want to consume more. You want to consume more stuff that you don't really care about.

44:32You want to consume more stuff that your spouse doesn't really care about. You want to consume more stuff where you're sacrificing time with your family, you're sacrificing time with your kids to work more to achieve this frivolous goal that you don't really mind. And I think for many people out there, they're like, well, what am I going to do with my time? Well, when you retire, you don't have to spend your time just sitting on a beach, sipping a Mai Tai or a margarita. You can build a company that you are passionate about. You can take on work that you enjoy. You can be a creator. You can start to create things that I think are enjoy.

45:02You can give back. You can be a full-time investor. You can invest your money full-time, try to find ways to optimize that. Maybe you get into individual stocks, things like that. You could teach, you could coach, you can mentor people. There's a lot of ways to fill your time. If you look at retirees now, they're some of the busiest people you'll ever see. So don't worry about your time as much. Just start to identify some of the things that you love and you will fill that time in with things that you need. And financial independence for many of you out there is not simply about just getting your time back.

45:30It's also about a bigger picture. Maybe you really have causes you believe in and you want to give back to those causes. I think more people should build wealth to give back to causes they believe in, to give back to causes they're passionate about, to start those nonprofits. Maybe you're writing a book or you want to do mission work or you want to homeschool your kids so that they actually have an education that you believe in, you feel as though is truth. I think all those things are commendable and why you would want to achieve financial independence. And I think that's really, really important.

45:59So a few notes on this is the gap between your income and your spending is the engine. If you want to start to climb these levels of fire and you want to start to get to some of the next level, your income versus your expenses is the big engine. And that gap is what's going to allow you to get there. Increasing your income is number two. It has no ceiling. There's nothing that can stop you from increasing your income. So the more you increase your income, the faster you can reach these levels of financial independence. The faster you can get to the point in time where you're actually hitting these goals.

46:30Three is watching that lifestyle inflation because the more your lifestyle inflates, the more money you're going to need in your portfolio, the more money you're going to need in your portfolio, the longer you're going to have to work. And it's going to continue to cycle up and up. It's okay to want some more things. It's okay to want to achieve fat fire or to achieve chubby fire or just traditional financial independence. All those are great. But just make sure you know why when you do stuff like that. And coast fire is always going to be your first milestone. If you haven't hit it yet, make that your first goal that you have, then start to think about the other goals.

46:58Now, I want you to let me know down below. What is your financial independence goal? And are you already financially independent or are you still working towards that? Do you want to be coast fired? Do you want to be lean fired? Do you want to be chubby fired? Do you want to be traditionally financially independent? Tell me down below and tell me why. If you're watching on Apple Podcasts or Spotify or YouTube, I would love to hear from each and every single one of you. I think it's really, really fun to hear your feedback and some of the things that you are working on. It's really, really powerful.

47:25It's a really powerful way to kind of get to the point in time where you're trying to achieve financial independence. And are any of these new to you? I would love to hear from you down below as well. Also, if you want to dive deeper with me, if you want to spend some time with me one-on-one increasing your finances and you make over$100 ,000 per year in household income, or you have$100 ,000 that you are looking to get started investing in, reach out with the form down below or shoot me an email and let me know. We'd love you to get to connect it with our folks so you can get more information on the program that we're working on.

47:54And it is gonna be a transformative program that I am so incredibly excited about. We're gonna transform your finances over the course of the next six months. And if you have goals like this to achieve financial independence as fast as possible, this is a great program for you. So we'd love to hear from each and every single one of you. Again, this is not for everyone. It's for folks who are making over$100 ,000 per year. The program that we have for everyone is Master Money Academy. And I would love to have each and every single one of you in there as well if you're interested. The price that you pay for this thing is just unbelievable.

48:20So I would love to see you inside. I'm coaching people every single day in Master Money Academy if you want to see that. So thank you guys so much for being here. I truly appreciate every single one of you. I hope you learned a ton. And I hope this enlightened you to get started pursuing financial independence. My goal is to bring you as much value as possible. If we did that today, consider leaving a five-star rating and review, and I'll see you on the next episode.

49:08featuring Fall's best dressed. Make your move, order on the Sweetgreen app.