What is Barista FIRE?
Barista FIRE (or written as BaristaFIRE) is a semi-retirement lifestyle that falls between traditional FIRE (Financial Independence, Retire Early) and full-time work. Its core idea is to cover daily living expenses through part-time or lower-stress work, while relying on passive income from earlier savings or investments (such as dividends, rental income, etc.) to maintain a state of financial independence.
How to use
You need
- At the beginning, you need to enter your current age, current annual income, and annual expenses.
- You should also input your current total assets, along with the allocation of these assets across different investment types (the total should add up to 100%). Different investment types will have different rates of return.
- You may enter decimal values if you believe they provide a more accurate estimate.
- The investment return rate is an estimate of how your invested money grows annually. This calculator will provide a default value for your convenience, but you can update it for a more precise estimate. Based on the past 10 years of S&P 500 returns, this rate is typically above 7%.
- The inflation rate reflects how your cash loses value over time. This is usually around 3%, though the number can vary depending on the country.
- The Safe Withdrawal Rate (SWR) estimates the percentage of your assets you can withdraw each year for daily expenses. This is typically set at 4%. The lower this rate, the harder it is to achieve FIRE (Financial Independence, Retire Early), as it means you need a higher total amount of assets.
Math
The formula to calculate your FIRE number using the Safe Withdrawal Rate (SWR) is:
\[ \text{FIRE Number} = \frac{\text{Annual Spending}}{\text{SWR}} \]
For example, if your annual spending is $40,000 and the SWR is 4% (i.e., 0.04), then:
\[ \text{FIRE Number} = \frac{40,000}{0.04} = 1,000,000 \]
This is how to calculate your net worth for next year:
The formula to calculate your end-of-year savings is:
\[ \text{End of Year Savings} = \text{Previous Savings} \times (1 + \text{Growth Rate}) + \text{Annual Savings} \]
This equation assumes your previous savings grow at a certain rate, and you add new savings at the end of the year.
Compound interest calculation is one of the core components of the entire calculator.
The standard compound interest formula is:
\[ A = P \times (1 + r)^t \]
Where:
- A = the future value of the investment or loan, including interest
- P = the principal amount (initial investment)
- r = the annual interest rate (as a decimal)
- t = the number of years the money is invested or borrowed for
Inflation consideration
Inflation is a crucial factor to consider when planning for retirement. Unlike stocks and mutual funds, cash gradually loses value over time due to inflation. The inflation rate typically ranges from 2% to 3%. This calculator already takes inflation into account—you just need to adjust the specific parameter. If you have a more pessimistic outlook, you can set a higher inflation rate.
Coast FIRE vs Barista FIRE
Coast FIRE and Barista FIRE share many similarities. For example, both require working now and for some time, then transitioning to a lower-paying job for several years before achieving FIRE status and early retirement. People sometimes confused about these two type of FIRE, the Coast FIRE and Barista FIRE. Based on my understanding, they have these differ parts:
- Barista FIRE require you continue your work but lower income which is lower pressure.
- Coast FIRE means you have saved enough money but still keen to work, you enjoy working so you can choose the job you do like, not for money only.
- Coast FIRE allows you to stop contributing to your FIRE account and simply rely on the income generated from your accumulated assets to naturally glide toward FIRE. All you need to do is earn enough to cover daily expenses without saving extra.
- Barista FIRE is a middle ground where, after achieving financial independence, you choose part-time or non-full-time work to cover living expenses while still enjoying a retirement lifestyle. This means you can stop adding to your FIRE account and even withdraw some funds for daily use, supplementing any shortfall with a part-time job (like being a barista), which is where the name comes from.
I have created an online Coast FIRE calculator as well.
FAQ
You can export the CSV file or save as image.
Yes, there are several “Advanced Settings” sections at the bottom of the calculator that you can expand to customize the default values.
All amounts are in today’s dollars.
Privacy and Data Usage Statement: Please note that all data you enter into this FIRE calculator is not transmitted to our servers or anywhere else. All of your data is anonymous and exists only within your browser.
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Disclaimers
This calculator is a model, not a prediction. The results are based on the limited information you’ve provided and certain assumptions about the future. All figures are estimates only and are not guaranteed.
It cannot accurately predict your final superannuation balance or retirement income, as these depend on many personal and external factors—such as your individual circumstances, unexpected life events, government Age Pension entitlements, investment returns, tax, and inflation.
The model assumes consistent contributions and stable conditions over time. These assumptions allow you to explore the potential impact of decisions within your control, such as changing your investment strategy.
We recommend reviewing and updating the projections regularly, especially if your situation changes. You can adjust some of the assumptions to better reflect your personal circumstances.
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