Barista FIRE refers to when we have enough investments that can cover a portion of our current expenses today and supplement the difference by working a lower stress, part-time job.
Despite the fancy name, it does not require you to become a barista. Instead, Barista FIRE originally got it’s name from the idea of working part-time at Starbucks to qualify for their corporate healthcare plan.
With that being said, this type of financial independence was developed to solve two large problems associated with achieving financial independence:
- How can I afford good healthcare at a reasonable price?
- How can I decrease the amount of money needed to become financially independent?
As this result, this post will be examining:
- How do you calculate your Barista FIRE number?
- How does Barista FIRE solve the healthcare and money required for FI issues?
- What are the best jobs for Barista FIRE?
- What are the pros and cons of Barista FIRE?
Let’s dive in.
How do you calculate your Barista FIRE Number?
Before we go over the steps in order to calculate our Barista FIRE number, we first need to understand that Barista FIRE is unique in the sense that it leverages a ‘math hack’.
More specifically, assuming a 4% withdrawal rate, every $1 in income that we receive today is equivalent to not having to save $25 for retirement. As a result, our portfolio needed for retirement substantially decreases with minimal increases in income.
Let’s look at an example.
Here is how $100 incremental increases in our income today impact the size of a portfolio needed to become financially independent:
This means that working a lower stress, part-time job has the ability to substantially slash the amount of money needed to become financially independent.
Now that we have a better understanding of the ‘math hack’ that enables Barista FIRE, let’s now calculate an example Barista FIRE number.
Step 1 – Calculate our Traditional FIRE Number
The first step in order to calculate our Barista FIRE number is calculating how much we need to be financially independent.
We can do this with the following formula:
Note: In this case, I am using 4% as the withdrawal rate. This is a common safe withdrawal rate to use based on research from the Trinity Study. You can adjust the withdrawal rate based on your own individual risk preferences.
With that being said, let’s assume that our monthly expenses work out to be $3333.33 a month.
Using the above formula, we can then calculate the portfolio needed in order for us to become financially independent:
As a result, our Traditional FIRE number is equal to $1,000,0000.
Step 2 – Calculate our Barista FIRE Number
Now that we know what our Traditional FIRE number is, we can now calculate our Barista FIRE number.
We will be doing this by paying homage to the original Barista FIRE.
At Starbucks:
- Employees must work 20 hours / week in order to enroll in a Starbucks health insurance plan
- Employees make a minimum hourly wage of $15 / hour
Assuming we work 20 hours / week for 50 weeks out of the year, this translates to us earning approximately $15,000 / year. Therefore, in order to cover the rest of our $40,000 / year lifestyle, we now only need to withdraw $25,000 / year from our portfolio:
This translates to our investment portfolio required to become financially independent decreasing by 37.5% ($375,000) from $1,000,000 to $625,000!
The Best Jobs for Barista FIRE
The best job for Barista FIRE is a job where you can earn an income AND be happy.
For me personally, once I leave the corporate world, I will try and get a job at a local tree nursery in my area. Not only do they offer health insurance, but it’s also is an opportunity for me to stay active.
With that being said, here are seven interesting/funny Barista FIRE job suggestions I found on Reddit 🙂
Job 1 – Home Depot
Job 2 – Government IT
Job 3 – Library Information Desk
Job 4 – Golf Course Maintenance
Job 5 – Video Game Developer
Job 6 – Aquariums
Job 7 – Home Maintenance
For more job options, check out 6 Jobs With A Lot of Downtime, According to Reddit
The Pros and Cons of Barista FIRE
The Pros of Barista FIRE
You solve the healthcare issue of FIRE
The truth is that healthcare in the United States can be very expensive, with medical costs increasing 668.8% from 1979 to 2020 (HRSA).
As a result, one medical mishap or emergency has the opportunity to make a large dent in your portfolio. I have friends who can FIRE but choose not to because of this.
However, by taking on a lower stress, part-time job, we are able to mitigate these risks by having access to more affordable healthcare prior to being eligible for Medicare.
You are decreasing the overall amount of money required to FIRE
The Barista FIRE ‘math hack’ we examined earlier enables us to FIRE with an overall smaller portfolio.
This table honestly amazes me:
In our example from earlier, we found that working 20 hours a week had the ability to decrease our portfolio required to FIRE by $325,000!
And due to the rise of the antiwork movement, the odds are in our favor of being able to make more than $15 / hour. This can potentially result in the ability to decrease our Barista FIRE number even more!
You get more time back today
Much like Coast FIRE, a major benefit of Barista FIRE is having more free time today.
Given the honest truth that we don’t really know how long we have to live, this is a major bonus.
Whether your goals are to travel more or spend more time with family, being a time millionaire is a huge selling point to potentially consider Barista FIRE.
The Cons of Barista FIRE
You still have to work
A drawback of Barista FIRE is that your portfolio alone can not support you.
As a result, you would still need to find a way to bring in a certain amount of income in order to fully support your lifestyle.
However, if you really hate the idea of work, there are ways to minimize the need to work:
- Increase your portfolio size
- Increase passive income
- Decrease your big 3 expenses
- Consider a Lean FIRE lifestyle
You are not taking advantage of your peak earning years
Depending on your age, you may be in your peak earning years and earning 6 figures.
And once you leave your career, it can be a lot harder to get back into.
Therefore, if you already have a sizeable portfolio built up, it may make more sense to grind out a few more years in order to achieve Traditional FIRE.
You still have to build a portfolio
Barista FIRE operates on the assumption that someone has already built a sizeable portfolio.
Therefore, if you are unable or unwilling to make the upfront investment to build up a large portfolio, then Barista FIRE may not be for you. And that’s okay.
However, don’t be intimated and not save at all.
Because no matter how you invest, compound interest is on your side:
Final Thoughts
Despite there being many types of financial independence, you are allowed to mix and match for whatever best fits your life goals 😛
As an example, Mrs. TVM & I plan on pursuing a mixture of Coast FIRE & Barista FIRE.
We plan to do this via the following:
- Continue investing in order to build up our investment portfolio
- Build passive income streams to cover our everyday expenses
- Allow our investments to coast while we enjoy our lives today
Is Barista FIRE something that you would pursue? Would you mix and match it with another type of financial independence as well?
Thank you for reading! 🙂
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