Lean FIRE is the best way to enjoy a frugal but fulfilling retirement

Ah, retirement — the good life! Work hard, and someday you can enjoy the fruits of your labor. At least, that is what we were told. So… how is that going?  

According to the Federal Reserve, 75% of non-retired adults in the U.S. have some retirement savings. And a full 25% have nothing at all. But the average retirement savings for all families is just a meager $65,000.  

This inadequate level of savings is the reason federal and state governments are projected to dole out an estimated $1.3 trillion per year in public assistance by 2040. Unfortunately, food stamps and Medicare don’t match most people’s expectations of “the good life.”

Frustration with a system that requires people to toil away for 40+ years, only to leave them a ward of the state as senior citizens, has given rise to FIRE. Not the “burn it all down” type, but the trending financial movement. 

FIRE (Financial Independence, Retire Early) encourages people to embrace a lifestyle that allows them to escape the rat race. And oftentimes, this can be done a decade or more before the traditional retirement age of 65.

But there are several different flavors of the FIRE movement. And one type that is gaining in popularity is Lean FIRE. This guide will explore what it is, how it works, and why so many people are interested in it.  

What Is Lean FIRE?

The FIRE movement is based on the simple strategy of living below your means so you can save and invest a meaningful portion of your income.

Depending on your goals and your willingness to embrace financial discipline and lifestyle change, there are a few kinds of FIRE:

  • Fat FIRE is for those who want to retire with a more robust lifestyle. This often requires a sizable income and a multi-million dollar net worth at the time of retirement. 
  • Traditional FIRE is for those willing to adjust to living modestly while saving aggressively and maintaining a reasonable lifestyle in retirement. 
  • Coast FIRE is for those who have saved enough to fund their retirement but continue to work to cover their current living expenses. Essentially, they’re “coasting” through without the pressure to save aggressively.
  • Lean FIRE is for the motivated few who want to achieve financial independence the fastest way possible and are willing to embrace a minimalist lifestyle.

Overview of the Basics

Our culture is obsessed with the idea that spending money creates happiness. A symptom of that is the demand for instant gratification and the glorification of over-consumption. That’s why we, as content consumers, are hit with the constant feeling of FOMO (fear of missing out).  

It takes a certain kind of inner strength to turn away from what the crowd is doing and embrace a philosophy built upon:

  • Delayed gratification,
  • Minimizing spending,
  • And maximizing self-satisfaction.  

But that is what the FIRE movement is about. And Lean FIRE adherents are the most extreme adopters. They seek to dramatically cut expenses by adopting a frugal lifestyle to aggressively save up for retirement.

Your Lean FIRE Number

Achieving financial freedom is based upon saving and investing enough to hit your FIRE number. This is the amount of money needed to generate enough passive income to cover all of your expenses (for the rest of your life). It is a number unique to you, based on your lifestyle and consumption habits.

Here are two quick and dirty ways you can calculate your FIRE number:

  • Method #1: Multiply your monthly expenses by 12, and then divide that total by 4%.
  • Method #2: Multiply your annual expenses by 25.

Both methods assume a withdrawal rate of 4% from your total savings to cover your expenses. 

Why 4%? 

Because the “4% Rule” is the safe withdrawal rate published in an influential study in 1998 by professors from Trinity University. Frequently referred to as “the Trinity Study,” this study discovered that “withdrawal rates of 4% are extremely unlikely to exhaust any portfolio of stocks and bonds during any payout periods… in those cases, portfolio success seems close to being assured.”

Since that finding, the 4% rule has become a foundational assumption for retirement planning.  

However, it is not a perfect number. And there have been some legitimate academic critiques of using it. But it does offer a simple way to determine your FIRE number. (Just be sure to recognize that it is a general target and not a magic threshold.)

Lean FIRE Example

Let’s say you take home $6,000 per month and you can comfortably live on half of that. At $3,000 per month, your annual expenses come out to $36,000.

So your Lean FIRE number is: $36,000 x 25 = $900,000

By investing the remainder of your income, or $3,000 per month, at a 6% inflation-adjusted rate of return, you could amass $900,000 in less than 16 years.

The Benefits of Lean FIRE

The benefits of embracing Lean FIRE vary from person to person. But here are 4 key benefits that all advocates tend to enjoy:

Freedom and flexibility

Financial independence means having the freedom to choose what to do with the rest of your life. That could be spending quality time with loved ones, taking on a more fulfilling career, starting a business, or pursuing lifelong dreams. Choose your own adventure!

Increased quality of life

Having more control over how you spend your time allows you to improve your health with better sleep, healthier meals, and more exercise. Plus, you can participate in hobbies and activities that enhance your happiness and satisfaction.


For many, having the freedom to travel and explore the world’s wonders while experiencing new cultures is a significant life goal that Lean FIRE can enable.

Reduced stress

The American Psychological Association (APA) has found that money is the top cause of stress in the United States. At the same time, research from the CDC suggests that 26% of people report being burnt out by work and that work stress is a significant source of health-related conditions. That’s why preventing burnout and enjoying financial freedom are such substantial benefits.

Preparing for Lean FIRE

If you are considering adopting Lean FIRE, here are a few tips and strategies to help you get started. 

Evaluate your current financial situation

Get a handle on where your money comes from and where it is currently going. Track all your cash flows (in and out) to develop a realistic picture of your current lifestyle.

Create a budget

Build a spending plan that will allow you to cover all your current expenses. Then track it closely. Was it realistic? If so, bravo, you are on your way. If not, keep adjusting until you find the budget that works for you.

Reduce costs

Once you find a workable budget that will allow you to cover your current costs, determine how to aggressively cut back on them and save the difference. Our most significant expenses tend to be student loans, homes, cars, children, and travel. If you are serious about pursuing Lean FIRE, you will want to take a long hard look at each of these.

For example, if you work remotely, you may be able to move to an area with a lower cost of living and cheaper real estate. And if you no longer have to commute, you might not even need a car!

Make smart investments

While adopters of Lean FIRE are serious savers, getting to your FIRE number as quickly as possible requires investing wisely too. First and foremost, you should have an emergency fund to cover life’s surprises (medical bills, layoffs, and more). This will prevent you from getting derailed on your long-term game plan.

Then, it would be best to buy stocks and bonds. And ideally in tax-deferred (401k, IRA) and tax-free (Roth IRA) savings vehicles.

Increase your income

If you are doing all you can to cut costs, save, and invest, adding more fuel (income) to the fire will make it burn hotter. Of course, you can always ask for a raise and look for opportunities at work to take on new responsibilities. But if you can’t increase your income at work, seek out a side hustle or find ways to create passive income streams. Lastly, avoid lifestyle creep so you can add any newfound income directly to your savings.

Enjoying Lean FIRE to the Fullest

While it may seem like a destination-oriented grind, Lean FIRE enthusiasts have discovered some of the following joys in the journey.

Pursue passions and hobbies

The happiness you experience from material possessions is often fleeting. Instead, find activities that are genuinely fulfilling to you. These can give you purpose and a community of like-minded friends. Plus, they often don’t require significant investment (beyond your time). Retiring while young will give you even more time to enjoy these rewarding passions and hobbies.

Explore the world

Most people spend their working lives dreaming of the exotic destinations they will visit once they retire. Sadly, many find they don’t have the funds or the health they counted on once they get to that stage. That’s why Lean FIRE adherents should build travel into their FIRE number.

Then, focus on hitting your number early. That way you have the time and the health to enjoy your retirement. Lean FIRE-ers also tend to get used to a more modest lifestyle. This allows them to comfortably travel off the beaten path, away from expensive four-star hotels and restaurants. And as a result, this can mean more authentic encounters with local culture and flavor.

Time for family and friends

The Lean FIRE lifestyle means making sacrifices in some areas, but it comes with the freedom to control your time. For many, the hustle and bustle of the rat race come at a real cost — not enough time to spend with our loved ones. So remember, time is the one thing you can never get back. And financial freedom means having more of that precious asset.

Live simply

Keeping up with the Joneses comes at an enormous cost, both financially and psychologically. In this pursuit, we often move away from doing things for ourselves, working with our hands, growing our own food, and making our own furniture. Yet, sometimes these simple things are the most satisfying and meaningful. If you’ve ever tasted a homegrown strawberry, you know the feeling!

Give back

Another benefit of financial freedom is having the time to give back through volunteering or charitable work. Many people find purpose in helping others. And studies have shown that retirees who volunteer frequently and have a sense of purpose tend to have healthier hearts and a lower risk of dementia.

Related reading: 13 Best FIRE Blogs For Financial Education And Inspiration

Final Thoughts

Traditionally, early retirement was reserved for only the highest earners. But now, Lean FIRE is a realistic option for anyone willing to put in the hard work and make the required lifestyle changes. With careful planning and smart investments, you can escape your 9-to-5 and reap the rewards of FIRE, well before retirement age. 

You will be able to enjoy your days however you please. You could get involved with hobbies you are passionate about, immerse yourself in new cultures, or take some time for yourself! 

And more importantly, by implementing frugal spending habits and finding creative ways to supplement your income, you won’t have to skimp on the quality of your life. 

So get started on the Lean FIRE journey today. And make sure that your dreams of an early retirement come true!

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