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Barista FIRE Calculator: Your Secret to Early Financial Freedom
Dec
Afraid of being alone in retirement and having to rely on your assets? The Barista FIRE, a variant movement on the original FIRE (Financial Independence, Retire Early) philosophy will be a great way to go ahead with your financial independence goal.
Key takeaways
- Investment returns can offset some of the cost of living, but not all of it.
- For those who are ready to retire early but aren’t quite ready to quit their jobs completely.
- It is possible to retire with much less money and in a shorter amount of time with Barista FIRE.
What is Barista FIRE?
The term Barista FIRE refers to a variant of the FIRE (Financial Independence, Retire Early) philosophy in which early retirees hit their FIRE number and then keep a low-stress or part-time employment for reasons such as paying off debt or covering medical expenses.
The goal of Barista FIRE is the same as that of other forms of FIRE: to retire early while still having sufficient savings and investment income to meet all of one’s living expenditures indefinitely. Now you need health insurance or extra money, so you take a part-time job or start a side business.
In light of Starbucks and other businesses providing healthcare to their part-time workers, the term Barista FIRE was born to describe this trend. According to a business document, hourly employees at Starbucks are eligible for health insurance if they work at least 240 hours every quarter, or just under 20 hours per week.
This method has found widespread acceptance in the United States because of the high cost of private medical care. KFF, an independent non-profit group focused on national health issues, estimates that in 2022, the average monthly premium for an American enrolled in an Affordable Care Act (ACA) plan will be $438. People who love the FIRE method regard Barista FIRE as a means to reduce the cost of health insurance and preserve their nest egg.
How does Barista FIRE work?
The key to achieving Barista FIRE is setting aside funds equal to some but not all of your annual living expenses. If you want to retire traditionally and spend $40,000 each year, you’ll need $1 million in savings. Then your traditional FIRE number is as follows: FIRE number = 25 x (yearly expenses).
Contrarily, you wouldn’t have to wait till you made $1,000,000 to qualify for Barista FIRE. Using the 4% rule, you can put away $250,000 and earn $10,000 a year. Get a part-time job paying $30,000 per year that also provides health insurance to cover the rest of your costs. This part-time job should be something you look forward to doing, as it will make you happier overall. One in which you do less work and have more time for fun and relaxation. That’s why people enjoy using Barista FIRE.
How to calculate your Barista FIRE number?
Here what you need to do to calculate your Barista FIRE number:
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Calculate your Barista FIRE number with formula
The traditional FIRE number is calculated by multiplying your annual living expenses by 25 following the 4% rule. And the formula is (annual expenses) x 25. For example, you spend $50,000 per year, then your traditional FIRE number would be $50,000 x 25 = $1,250,000.
The Barista FIRE number is calculated nearly the same, but your annual expenses can be lowered by deducting the money you earn from your part time job. This means your Barista FIRE formula would be (annual expenses – annual Barista FI job income) x 25. For example, you spend $50,000 each year and you earn $25,000 per year from your job, then your Barista number is ($50,000 – $25,000) x 25 = $625,000.
Calculate your Barista FIRE number with calculator
Nowadays, you can quickly determine your Barista FIRE number depending on your individual cost of living and income with the help of one of the many available programs. This will allow you to experiment with different income levels and observe how the minimum portfolio size needed to achieve Financial Independence (FI) as a Barista changes. The age at which you will achieve Barista FI is also displayed.
Pros and cons of Barista FIRE
What are the benefits of Barista FIRE?
If you’re thinking that achieving Barista FIRE is too much of a problem or too much of a long trip, consider that there are advantages to doing so. Some reason for chasing your Barista FIRE are as follows:
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Enjoy a less stressful life
Barista FIRE is attainable with the correct combination of side gigs and full-time work. By redirecting the money you would have spent on healthcare to a rainy-day fund, mutual funds, or other forms of passive income, you can work toward your goal of financial independence more quickly and spend more time doing the things you enjoy.
No worries about healthcare expenses
In addition to its other merits, Barista FIRE is attractive because it can, in theory at least, provide for the costliest aspect of retirement—medical care. Since most people rely on their employers’ health insurance, quitting a full-time job is a challenging decision for most workers.
Seriously, who could possibly be wrong? Even with Medicare coverage beginning at age 65, healthcare costs in the United States have become one of the most significant expenses for retirees. Many people would refuse medical help if they had to pay the large costs associated with health care.
Taking first step into early retirement
With Barista FIRE, you can reach financial independence and early retirement far sooner than you would without it. You no longer need to put up with the demanding schedule and hostile work environment. Working 40 hours per week down to 20.
Since you have so much leisure time, you can finally accomplish the things that have always brought you delight. You won’t have to stress about working long hours for free anymore. The odds are in your favor, so feel free to be as accommodating as possible with your work schedule.
And you can do all of this with Barista FIRE!
Does Barista FIRE have disadvantages and risks?
Can the potential advantages of Barista FIRE be weighed against the potential drawbacks? Barista FIRE, like any other investment, carries the potential for profit or loss. Here are some downsides of Barista FIRE you should put into consideration.
Puts a hold on your financial freedom
If you are not working a full-time job, barista FIRE could delay your financial freedom by a few years. Because of this, getting there financially may take some time. Although initially it may not seem like it, in the long run it will help you out by bringing in more money. Gaining a high-paying skill and investing more of your money will increase your wealth. And ultimately, this will help you achieve your financial objectives.
Problems with healthcare benefits
Health insurance is not always provided by businesses that only hire part-time workers. If you are ill and can’t work, it can have a devastating effect on your money. What’s more, you’ll have to dip into your regular savings to pay for medical care or medication if you fall unwell. Unless you make the appropriate preparations and account for this cost, it has the potential to significantly alter your budget and associated expenditures.
The urgent need to increase both work and investment
If you want to reach Barista FIRE, you’ll have to put in more hours and work for more years than someone who isn’t trying to get there. Making more money through other activities can and will increase your financial cushion. As a result, making a budget that works for you can be really useful, as it will allow you to keep tabs on your spending and encourage you to abandon your bad financial habits. Choosing a frugal lifestyle can pay out in the long run.
There are a number of moving parts that must fall into place before you can achieve your end aim. Keep in mind that you’ll need to put in some serious time in the office to bring in enough cash to make your strategy work. That’s why being economical with your time and money is so important. These drawbacks are inevitable on the path to success.
Compare Barista FIRE with different types of FIRE
1. Barista vs. Traditional FIRE
To attain your FIRE number with traditional FIRE, you may need more time if you want to pay for everything, including healthcare, out of your assets. Early retirement from a full time job (and switch to a part time job) might be possible for Barista FIRE.
2. Barista FIRE vs. Coast FIRE
Coast FIRE includes three stages: accumulation, semi-retirement, and full retirement, while Barista FIRE has only two steps: accumulation and semi-retirement.
With the help of Coast FIRE, you will be able to call yourself financially free. The only way to ensure this happens is to wait to spend your retirement savings. On the other hand, using Barista FIRE, you can start using your passive income from your savings much before you reach FIRE.
3. Barista FIRE vs. Lean FIRE
When you hit your FIRE number, you may start working part-time as a barista to help cover medical costs and other obligations. In contrast, the goal of Lean FIRE is to obtain financial independence, retire early, and live off your savings alone.
4. Barista FIRE vs. Fat FIRE
If Lean FIRE is all about living frugally, then Fat FIRE is the other end of the spectrum. Those aiming for Fat FIRE will strive for a passive income far greater than their monthly spending to allow them to live ‘the good life’. The goal of those pursuing Fat FIRE is to amass a passive annual income of $100,000 to $200,000.
5. Barista FIRE vs. Slow FIRE
Since the hustle-centric values of the FIRE culture might be detrimental for some, Slow FIRE arose as a countermovement. For those who practice slow FIRE, this implies being cautious about how much they spend now in relation to their future needs. Rather than sacrificing the now for the future, you can work for financial independence, retire early while still having fun.
6. Barista FIRE vs. Spouse FIRE
This variant of FIRE may be familiar to you. One of the goals of personal finance is to reach a point where one spouse can stay at home or work part-time without the household falling into financial ruin. Parents of young children tend to like the Spouse FIRE.
The most advanced combined FIRE: Barista-Coast FIRE strategy
You totally can design your own FIRE strategy to fit your needs and preferences by drawing on the tenets of various FIRE methodologies, such as the Barista FI and the Coast FI.
As part of Coast FI, you pay for day-to-day costs with income from a job while your savings grow. Of course, the fact that you won’t have access to your savings for a long time is a drawback.
Using Barista FIRE, your investment portfolio will provide you with a steady annual income, but you probably won’t reach financial independence that quickly.
By combining the two approaches, you can gain the most benefits while avoiding the drawbacks of each. You can achieve financial independence and enjoy a semi-retirement income from your investments with the combined strategy Barista-Coast FIRE.
What are the best jobs to make money while doing your Barista FIRE?
When doing Barista FIRE, you need to find a job that provides both financial security and personal fulfillment. Although Starbucks’ environment has inspired the concept of Barista FIRE, working in a coffee shop is not the only choice that offers health benefits to part-time employees. Here are some of the best jobs you can look for while doing your Barista FIRE.
- Starbucks
- Package of Whole Foods, United States (UPS)
- Costco
- Lowe’s\Staples
Wrap it up
Barista FIRE is the answer to early retirement and financial independence. While it can appear simple at first glance, getting started will take a lot of time and resources. Ignoring the work involved in getting there and the math involved in figuring it out, understanding your current situation in relation to your desired future state is crucial for taking the necessary next steps.
With Barista FIRE, you may realize your ambitions. Obtain a comfortable living wage, not be required to work overtime without extra compensation, have some degree of scheduling freedom, and have enough spare time to pursue personal interests. This is the finest of times since it allows you to acquire what you want out of life without having to sacrifice too much right now. You only need to put in the time and effort necessary.
What are you waiting for now? Join the Barista FIRE movement to take closer steps to early retirement lifestyle. So you can do what makes you happy, make your own way in the world, and confidently face the future that you’ve always imagined.