For those who want to reach financial independence early but don’t want to build up a huge nest egg, Barista FIRE can be a great option to consider.
FIRE stands for Financial Independence / Retire Early and is used to describe people who accumulate a large enough nest egg that they can live off their portfolio entirely and don’t need to work anymore. Barista FIRE is a modification of FIRE, and defined as when someone has enough money to retire early with the support from a part-time job for additional income.
This post will dive into exactly what Barista FIRE is, how it works, and whether it’s something worth pursuing.
What is Barista FIRE?
Most people in the FIRE movement aim to save enough money to be able to cover all of their yearly expenses with the returns on their investment portfolio.
How large their portfolio needs to be is determined by the 4% rule. Essentially, you can safely withdraw 4% of your portfolio every year without worrying about it running out. If you have $40,000 a year in expenses, that means you’ll need a portfolio of $1,000,000 to safely be “financially independent” and retire early.
Of course, for a lot of people, saving up 25x their yearly expenses is a tough ask and can potentially take a long time. It can be tough to reach traditional FIRE early if you’re not extremely frugal or sacrificing some of your lifestyle. This is where Barista FIRE comes in.
Barista FIRE is when you retire early with a portion of your expenses being covered by the 4% withdrawal but another portion being covered by your part-time work. For a lot of people, this means that they don’t need to accumulate as large of a nest egg to comfortably retire and can push their “retirement” up many years.
How Does Barista FIRE work?
Barista FIRE works by essentially replacing a portion of your “cash flow” from investments with active income.
For example, if you wanted to generate $50,000 a year for your retirement, traditionally you would need to save $1.25 million. $50,000 / 4% = $1,250,000.
However, if you can find a part time job that pays $30,000 a year, you only need to save up enough money to cover you for $20,000 a year. Therefore, your target saving number would be $500,000. This is a much more achievable target than $1.25 million for a lot of people and can seriously move up your retirement age.
By doing Barista FIRE, you are also allowing yourself the flexibility of finding a job that you’re truly passionate about, even if you’re not earning a lot from it. The true appeal of Barista FIRE is to have more time for friends, family, and life adventures.
How to Calculate Your Barista FIRE Number
Your Barista FIRE number is the amount of money you need to save up before taking the leap into financial independence (AKA “retiring”.) The steps for figuring out your Barista FIRE number are:
- Calculate your yearly expenses
- Subtract your projected “barista income” to get your needed cashflow
- Multiply your needed cashflow by 25 (or divide by 4%) to get to your Barista FIRE number
The first step is to figure out how much money you’ll need every year in retirement. This can be done by tallying up all of your current expenses and adding in a little bit more money for adventurous things you want to do during retirement like travel or picking up new skills.
Then, you’ll need to project a “barista income” for yourself. This number is the amount of money you expect to make from part time work during your retirement years. You can arrive at your needed cashflow (or supplemental income needed) by subtracting your yearly expenses number by the barista income number.
Finally, you just need to take your needed cashflow and divide it by 4% (or multiply it by 25) to reach your Barista FIRE number. Again, this follows the 4% rule basically stating that you can withdraw 4% of your portfolio every year into perpetuity assuming the markets perform as they have historically.
In practice, calculating your Barista FIRE number might look something like this:
- Yearly expenses (or total cash needed per year in retirement) = $60,000
- Part-time job salary = $35,000
- Needed cashflow (supplemental income needed) = $60,000 – $35,000 = $25,000
- Barista FIRE number = $25,000 x 25 = $625,000
In this example, your yearly expenses are $60,000 and you are projecting that you’ll make $35,000 a year working part-time. In this case, you’ll need to save up $625,000 to safely retire from your current job and make the switch to this new lifestyle.
Pros and Cons of Barista FIRE
Like any decision in life, there are many things to consider before pursuing Barista FIRE. Here are some of the main pros and cons of Barista FIRE.
- Freedom – If you currently don’t enjoy your job, Barista FIRE can provide a way for you to escape and start doing something you really care about (even if it pays less money.) Just like many other methods of FIRE, Barista FIRE is a great way to take control of your time and start living life on your own terms.
- Insurance – One of the biggest benefits of continuing to work is that you’ll have insurance. Needless to say, insurance is costly and if you’re going out of pocket for it, it can throw a big wrench in your retirement plans. Working part-time during retirement gives you the benefit of having insurance to cover you and your family if times get rough.
- Engagement – Having something to do during retirement can actually be essential toward contributing to your purpose and giving you some meaning in life. Working part-time might now just be good for your wallet but also good for your health (more on this in a section below.)
- Still working – For many people, the Barista FIRE lifestyle may not feel like true retirement. Having to wake up on time, go to a scheduled place and time, and work for someone else can seem not much different from the grind of work you might have had at your old job.
- Stress – There is a certain level of stress that is associated with your work when you rely on it for income. Even though the part-time jobs you take on may not be roles in which you need to take on a lot of responsibility, there is still the consideration that you might not be able to afford your expenses if you get fired.
- Old habits – You might fall back into your old routine if you continue to work part-time during retirement and end up having a full-time job in no time. Of course, ending up working full-time is against the entire purpose of Barista FIRE in the first place.
My Personal Take on Barista FIRE
I personally feel like Barista FIRE is an awesome way to gain financial independence at an early age. Many studies have actually showed that there is a higher risk of early dementia, Alzheimer’s, and even death for those who retire early and don’t do any kind of productive work.
Working part-time during retirement may not just be something that is good for our finances but something that is necessary for our wellbeing.
Of course, there is the fact that no job is stable and if you rely on work while “retired” to support your lifestyle, there will be a certain level of anxiety associated with making sure you don’t lose your job. For that reason, I believe that Barista FIRE is perfect for someone who has already achieved their traditional FIRE number, but uses Barista FIRE to truly pursue something their interested in or expand their lifestyle.
This can provide you with an opportunity to do work you fully enjoy without having to worry about the financial repercussions if it doesn’t work out. I think that this level of financial independence is the perfect combination of both active work boosting your income during retirement and also being completely self-reliant.
Also, I think that having a large enough nest egg to fully support yourself will give you more freedom to truly pursue what you want. If you’ve always wanted to be a musician, you don’t need to worry about if you don’t make any money and can pursue your passion at full speed.
Is Barista FIRE For You?
At the end of the day, it’s very hard for the average worker to retire early on a large stash of money. Statistically speaking, the average retirement age is 62 and not many people manage to even retire before 50.
Barista FIRE can help to change that. If you manage to re-assess your goals and aspirations in retirement and get comfortable with the idea of working part-time, you can seriously lower your FIRE number and bump up your retirement age by many years.
Whether Barista FIRE is right for you will require a lot of soul-searching and asking yourself some tough questions. At the end of the day, Barista FIRE does provide you with a partial life of FIRE even if you never become a millionaire. If that sounds appealing, Barista FIRE may be the right move for you.
Jeff is a Harvard 2025 student passionate about making smart financial decisions both in school and in the workplace so that he can spend more time doing what he loves (like playing golf, spending time with family, and travelling). He has experience working in the financial industry and enjoys sharing all things personal finance, academic, and golf-related. Outside of blogging, he loves to cook, read, and golf in his spare time.