FIRE Glossary
Plain-English definitions for every term you'll encounter on your path to financial independence.
FIRE Types
Coast FIRE
Coast FIRE is the point where you've saved enough that your investments will grow to your full retirement number on their own, even if you never save another dollar.
Barista FIRE
Barista FIRE is the point where you have enough saved to retire eventually, as long as you keep working part-time to cover your current living expenses.
Lean FIRE
Lean FIRE means achieving financial independence on a modest budget, typically under $40,000/year in spending, implying a portfolio under $1 million.
Fat FIRE
Fat FIRE means pursuing financial independence with a portfolio large enough to support a comfortable or even luxurious lifestyle, not just bare necessities.
Chubby FIRE
Chubby FIRE is the middle ground between regular FIRE and Fat FIRE, retiring early with enough to live comfortably but not lavishly, typically $100,000 to $150,000 per year in spending.
Key Numbers
FI Number
Your FI number is the total amount you need invested so that your portfolio can sustain your annual spending indefinitely. It's the finish line for financial independence.
Expense Multiple
An expense multiple is your portfolio value divided by your annual spending. If you have $700,000 saved and spend $50,000/year, you're at 14x. Financial independence using the 4% rule requires 25x.
The 4% Rule
The 4% rule is a retirement guideline that says you can withdraw 4% of your portfolio in your first year of retirement, then adjust for inflation each year, and your money should last at least 30 years.
Safe Withdrawal Rate
Your safe withdrawal rate is the maximum percentage of your portfolio you can withdraw each year in retirement without running out of money over your planned time horizon.
Dividend Concepts
DRIP (Dividend Reinvestment Plan)
DRIP means automatically reinvesting your dividend payments to purchase additional shares of the same investment, instead of receiving the cash.
Dividend Growth Rate
Dividend growth rate is the annualized percentage increase in an ETF's or stock's dividend payments over a specific period, typically measured over 3, 5, or 10 years.
Yield on Cost
Yield on cost is your annual dividend income divided by your original purchase price, not the current market price. It shows the yield on the money you actually invested.
Return of Capital (ROC)
Return of capital is a distribution from an ETF or fund that isn't earnings or income. It's your own invested money being paid back to you. It reduces your cost basis rather than representing a real return.
All Terms A-Z
This tool is for educational and informational purposes only. It does not constitute financial advice. Past performance does not guarantee future results. Consult a qualified financial advisor for personalized advice.