5 Levels of Financial Freedom, According to Married Money Coaches Who Say They’ve Achieved Level 3

It’s not hard to see why people find the concept of FIRE—short for Financial Independence, Early Retirement—appealing.

Followers of the movement aim to hide as much of their income as possible in investment accounts. The more aggressively they save, the sooner they reach their so-called FIRE number, i.e. the amount of money in their account from which they can withdraw indefinitely and thus replace income from a 9-to-5 job.

It’s an attractive idea — who doesn’t dream of quitting their job for good? But that comes with some financial realities. The traditional FIRE model prescribed by the movement’s early torchbearers like Mr. Money Mustache relies on earning a high salary while living minimally to keep costs low.

“That message doesn’t really work for most people,” says Jessica Fick, who runs The Fioneers with her husband, Corey, where they create content and offer courses, coaching and retreats focused on financial independence.

“Most people don’t make software engineer salaries and can’t live on $30,000 a year,” he adds.

In other words, if you’re a normal person living on a normal salary, trying to save enough to achieve FIRE will either require a lot of deprivation or take a decent amount of time. If it’s the latter, Jessica and Corey think you should enjoy life.

“We look at how people can make the life they want to live a reality on their journey to FIRE, not just after it,” says Jessica.

The Ficks, both 36, have identified five stages of financial independence and say they are currently at level three, known as “Coast FI”. They’ve saved enough money to retire — they estimate they’ll be able to stop working in their 50s at the current rate — and they can use the money they make now to pay for their lifestyle.

For the couple, that means having a home base in Boston and spending six months in 2023 traveling the country in a van, spending time outside with their golden doodle, Madison.

Here’s a closer look at the five levels of financial freedom.

The first step to financial independence: getting out of debt. The Ficks are not anti-debt purists. A mortgage, for example, could be part of a perfectly sound financial plan, they say.

But for those burdened with high-interest debt, such as credit card balances, paying off debt means making room in your budget to save more aggressively for retirement.

“The key thing about being debt free is that it lowers your expenses,” says Corey. “Once you get rid of that debt, you can either save more or work less.”

Building enough wealth to say, um, “forget about you,” isn’t just about achieving a specific monetary value, the Ficks say.

“It’s also a feeling,” says Jessica. “It’s the amount of money you need to get out of a bad situation or to take advantage of an opportunity like leaving a toxic job or starting a new business.”

This number will vary depending on lifestyle factors such as whether you have children and how easily you could transition to a new job in your field if your current one isn’t working out. It doesn’t have to be cash – for example, you could count investment accounts if you’d be willing to use them under the right circumstances.

But that willingness is key: “It’s not ‘F you’ money if you don’t feel like you can use it,” says Jessica.

Determining if you’ve come across Coast FI will require a bit of math. First you need to remember the FIRE number. Generally, you find this number by determining the annual income you’d like to live on in retirement and multiplying it by 25. You’re actually dividing by 4%—the amount you think you can safely withdraw from each year to retire without running out of money.

Let’s say you thought you could live comfortably in retirement on $40,000 a year. According to the traditional FIRE number calculation, you would need an investment of $1 million to do this.

If you’ve reached what Fioners call Coast FI, the money already in your investment accounts will hit your FIRE number, subject to certain market assumptions, without you ever having to invest another dime.

You can play around with the compound interest calculator to see if you’re on the right track. Going back to the previous example, let’s say you’re 25 and trying to reach your FIRE number by 50. If you had $175,000 in a Roth IRA and expected a 7% annual return on your portfolio, you would be well on your way to becoming a millionaire by age 50 without having to increase your investments.

Meanwhile, every dollar you earn goes towards funding your current lifestyle. In other words, you are on the coast.

For the Ficks, that means putting money into a business that has grown profitable enough to allow them to quit their day jobs and hit the road in an RV.

“The dream is location independence and being able to achieve that before we reach financial independence,” says Corey. “To buy and build a campervan and be able to travel three or six months out of the year is part of the dream.”

One could theoretically “commute” until retirement, but if you continue to contribute to retirement accounts and live below your means, you may find yourself living in semi-retirement—a state that some FIRE adherents have dubbed “Barman FI.”

At this stage, you can work less or take a lower-paying job that you find enjoyable—say, making cappuccinos at your favorite local coffee shop—while supplementing your living expenses with withdrawals from your investment accounts.

“You can withdraw 1% or 2%, but you’re still covering the rest with active income,” says Jessica. “And even with withdrawals, your investments will still grow to give you the traditional retirement number you’ll need later.”

At the bottom line, withdrawals from your savings completely replace the income you would otherwise earn from work. At the current rate, the Fioneers expect to reach full financial independence in their 50s, but that number is not set in stone. If their income exceeded their current lifestyle needs, they could invest the excess money in medium-term goals.

They could also continue to invest toward retirement, which could increase their FIRE number or bring their retirement date closer.

“Achieving Coast FI doesn’t mean we can’t save another dollar,” says Corey. “It gives us the ability to live a more intentional life.”

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