Are you looking for a less intense way to achieve F.I.R.E. (Financial Independence/Retire Early)? Look no further than Coast FIRE!
Coast FIRE is arguably the simplest and most effective way to join the FIRE movement. It provides a clear and concise path to FIRE without all the overwhelming financial jargon.
Here is my YouTube video going over this content (if you prefer to watch it instead).
This post may contain affiliate links; please see our disclaimer for details.
What is Coast FIRE?
Coast FIRE Benefits
Coast FIRE is a popular retirement strategy involving saving enough money so your nest egg can grow without additional contributions. Once you reach Coast FIRE, you no longer need to work to save for retirement; instead, you only work to pay for current living expenses. This allows you to enjoy a more relaxed lifestyle and focus on activities you enjoy rather than working simply to earn a paycheck.
To achieve Coast FIRE, it is essential to start saving early and invest in a diversified mix of assets. Coast FIRE provides individuals with financial security in retirement and is an excellent option for those looking to retire at the typical retirement age.
How Much Should You Save to Reach Coast FIRE?
Coast FIRE calculation considers variables like age, income, and expenses to determine how much you need to save each month to reach your goal.
While no fixed sum will satisfy everyone’s retirement needs, a rough estimate is often considered 25 times your annual expenses, which is your FI or FIRE number.
Let’s say your monthly expenses at retirement will be $1,300 a month; you will need $15,600 (1,300 x 12) a year and $390,000 (15,600 x 25) to cover expenses for 25 years.
This is based on the 4% principle, which states that you can withdraw 4% of your savings each year without running out of money.
You will want to ensure you have enough in your investment accounts to grow passively without contributions so that it can grow and reach your FIRE number by the time you retire.
Once you hit that number, you will have reached Coast FIRE!
Coast FIRE can be a helpful tool for anyone who wants to retire early or achieve financial independence.
The Coast FIRE approach is simple: you save a certain percentage of your income and invest it in a way that will generate a passive income stream. However, there are a few key components that you need to be aware of before beginning.
First: you must calculate how much you need to save to reach your retirement goals.
Second: you need to choose the right investment vehicle for your needs.
Third, estimate how long you’ll need to keep your money invested.
Coast FIRE example
The formula for determining a Coast FIRE number begins with a regular FIRE number, estimated to be 25 times annual spending.
So, for example, if someone spends $50,000 annually, their regular FIRE number would be $1,250,000.
The Coast FIRE number is then determined by dividing the regular FIRE number by (1+annual growth rate) to the power of “years to grow.”
In the example above, if it is assumed that it will take 30 years to reach the regular FIRE number, and the average annual growth rate over those 30 years is 7%, the calculation would be $1,250,000 / (1 + 0.07)^30 years = $164,209.
Therefore, the Coast FIRE number in this example would be $164,209. It should be noted that this number is only an estimate and may vary depending on individual circumstances.
Nevertheless, it provides a helpful starting point for anyone looking to save for a comfortable retirement.
To sum things up, here are two ways to calculate your Coast FIRE number
Use the formula from the example above. You can adjust your annual return rate and use this exponent calculator. Then divide that number by your FIRE number.
Use a reliable investment calculator to see how much your investments will grow without added contributions.
What Are the Benefits of Coast FIRE?
1. You can achieve financial independence and retire early.
The real reason you want to achieve FIRE is to retire early and live life on your terms. And Coast FIRE makes this possible!
Once you reach your Coast FIRE number, you can quit your job and enjoy a life of leisure. All you need is to work or have passive income streams to cover daily expenses.
2. You don’t have to worry about outliving your savings.
How many people do you know who are worried about running out of money in retirement? With Coast FIRE, you don’t have to worry about this.
As long as you have your Coast FIRE number saved up, you can live off of your passive income for the rest of your life, no matter how long you live.
3. You can still retire even if your investment portfolio takes a hit.
We all know that the stock market is volatile, and it’s impossible to predict what will happen in the future.
However, with Coast FIRE, you don’t have to worry about this. Even if your investments take a hit, you can still retire if you have your Coast FIRE number saved up and have other fail-safes in place (diversified investments, emergency savings, passive income streams).
What Are the Risks of Coast FIRE?
1. Not saving enough consistently
The biggest risk of Coast FIRE is that you might not reach your Coast FIRE number if you don’t save enough.
This is why it’s so important to ensure you’re saving as much as you can each month. I wrote another article with 12 saving money tips and How We Save 56% of Our Income as a family.
If you don’t think you can save enough, think of ways you can decrease spending and increase income.
One way you can increase your savings and investments is by mico-investing.
ACORNS is a popular platform that can round up money from purchases and automatically allocate those funds to diversified investments.
Another risk of Coast FIRE is that you might not be able to retire as early as you want. This is because it can take a long time to reach your Coast FIRE number.
If you’re not patient, you might get frustrated and give up on the whole idea, but the truth is that anyone can reach financial freedom through hard work and perseverance.
3. Lack of discipline and focus
When life gets comfortable, we tend to get lazy with finances. Once you hit Coast FIRE, life may seem easier, but it’s important to monitor all money decisions and transactions constantly. You cannot all of suddenly increase spending and get into debt.
This is especially true if you hit Coast FIRE and have passive income streams covering all expenses.
Just make sure not to miss anything with your finances and ensure all expenses are accounted for. If you own your own business, make sure you have the proper legal protection.
Flamingo FIRE And Coast FIRE Differences
For those who don’t know, Flamingo FIRE is where you work until you have saved up half or 50% of your FIRE number. Then you can semi-retire and let investments grow passively to retire within 10-15 years fully. Depending on your age, this could be less time coasting and more quickly hitting FIRE.
Flamingo FIRE is a great option for those who are okay with sacrificing longer to build up investments that reach 50% of their nest egg number.
Barista FIRE And Coast FIRE Differences
Barista FIRE is where you work part-time to collect health insurance benefits. It’s called Barista FIRE because Starbucks gives health insurance to those working part-time.
Many people in the FIRE movement work at Starbucks as baristas simply for health insurance benefits.
Healthcare costs can get out of hand, especially as you age. And if a good health insurance plan does not cover you, you could end up bankrupt.
So, Barista FIRE is an excellent option for those who want to ensure they’re covered by health insurance.
The difference between Barista FIRE and Coast FIRE is that you have a job. You’re still working, but the sole purpose behind your employment is health insurance and not much more.
In Conclusion
As with any FIRE strategy, there are risks and rewards. It’s essential to understand both before you decide if Coast FIRE is right for you. But if you’re looking for a FIRE strategy that doesn’t require much work and that you can do from anywhere in the world, Coast FIRE might be the perfect option.
As you look at the different forms of FIRE, you’ll find that each has its unique set of pros and cons. It’s important to understand these before you decide which form of FIRE is right for you.
Coast FIRE is a great way to semi-retire early and enjoy life without worrying about money. That’s what FIRE is all about. So, if you’re looking for an easy and stress-free way to join the FIRE movement, Coast FIRE might be right for you.
Disclaimer:
We hope the information in this article provides valuable insights to every reader but we, the Biesingers, are not financial advisors. When making your personal finance decisions, research multiple sources and/or receive advice from a licensed professional. As always, we wish you the best in your pursuit of financial independence!
If you’re looking for ways to save money for your house down payment, you’ve come to the right place! In this article, I will discuss seven money-saving methods we used to increase our savings rate to save up a total of $20,000 for our first house down payment!
Welcome to our Biesinger FIRE Journey! We are a family of four and are PUMPED to share our financial insights while pursuing financial independence with you. 🙂
This post may contain affiliate links; please see our disclaimer for details.
Our First Homebuying Experience
So my wife and I were in our early 20s and attending college when we started looking for our first home.
The first lesson from our story is you can start investing at any age, even in real estate!
We worked extremely hard to cut down on expenses and save up/make more money, but we’ll get more into that a little later…
Purchasing your first home or real estate property is such an exciting time! You are not only creating a safe and secure location for you and your loved ones, but you are also buying a property that appreciates in value!
How cool is that?
Going back to the year 2016
Shortly after my wife and I were engaged in December 2016, we discussed whether we should rent or buy a home after getting married.
My in-laws are landlords in China, so my wife has always possessed an amazing investing mentality. Even though people would tell us to rent since we were still in college, she felt we should buy a home.
My grandpa was a builder who owned investment properties, so I was very intrigued with the idea of buying a property that could be turned into an asset/rental property in the future.
My main concern was that it would be too expensive, but Shan reminded me that we don’t need the fanciest property on the block and could make it work.
Not to mention we would have the option to rent it out in the future instead of paying rent to a landlord.
I quickly jumped on the same page that our first property would not be a forever home but would be an excellent investment opportunity!
So we started comparing locations and properties to find the best deal and place for our future rental.
Shan found a townhome in a stellar location – the unit was close to two prominent colleges. We both felt it would be a fantastic investment property since it would be easy to rent out in the future.
That’s when we started seriously discussing how to cut back on spending and save up enough money to purchase it!
A lesson I learned back then was to think, “how can I make it happen” instead of going to the default of thinking, “I can’t do that,” or “that’s too difficult at my age.”
It wasn’t in my plans originally to become a landlord at such a young age, but I realized that anything is possible if you work hard at it – and have a partner who is on the same page financially.
Success is inevitable if you don’t give up and are willing to learn and improve.
So remember, the sky is the limit! Never put boundaries or limits on yourself when it comes to achieving your goals and building long-lasting wealth.
Now let’s jump into the seven money-saving methods we used to save our $20,000 down payment!
1. Move Into My Parents’ House to Save on Rent
After my wife graciously accepted my wedding proposal, we moved to my parent’s home. We were fortunate to have this option where we could save more money.
Everyone’s situation is different; we are so grateful my parents allowed us to live with them rent-free until we saved enough down payment for our first house.
Because they made our life easier, we want to make their life easier.
We would try to help with housework like doing dishes, mowing the lawn, etc.
2. Switching Phone Plans to Mint Mobile
We love Mint Mobile, and so do our wallets! haha
Mint Mobile has helped us save tons of money, especially during college! We all know how phone plans can get pricy with long, frustrating contracts.
Our friends told us about Mint Mobile many years ago. For many reasons, we are still using them today!
Mint Mobile offers amazing plans at incredible prices, with plans as low as only $15 a month! My wife and I pay only $15 monthly for our phone plans. Check out how you can save money with them today!
3. Having a Simple yet Elegant Wedding
Shan and I’s Wedding photo taken in SLC, Utah
We are also fortunate to help help with most of our wedding reception expenses from my parents, and my in-laws helped with my wife’s dress, honeymoon trip, and some other expenses.
My parents and in-laws had a certain amount they were willing to spend to help with wedding expenses. We kept things simple, so we did not go over budget and did not need to spend our own money.
The only thing we spent money on for our wedding were our rings, but we only spent $150. I was surprised but touched when Shan said she would rather put that money towards a downpayment.
My ring is $25 from Walmart, lol. My wife’s ring is a little over $100.
According to The Knot 2021 Jewelry and Engagement Study, the average cost of an engagement ring is currently $6,000. This study found that roughly one-third of all respondents spend between $1,000 to $4,000 on their engagement ring. Only 8% of ring shoppers are spending under $1,000.
So we saved a lot on our engagement/wedding rings!
We both aimed to put most of our money into saving a down payment for our first property.
We knew our wedding would be one moment, but our marriage would last forever. 🙂
4. Set Financial Goals as a Team
One of the best ways to help us save a $20,000 down payment for our first real estate property is to sit down together and make the same financial goals.
We both want to save up a down payment and purchase our first home, and in the future, we can buy another and rent our first one.
Because we have this mutual goal, we have been working so hard for this goal to make it happen.
Setting the same financial goals together will give both of you a direction of where you hope to end up in the future.
Once you and your spouse have the same financial goals, you will be on the same page and working as a team!
Goals also motivate us and give us a positive vision for the future. 🙂
When married couples have the same goals, it will also strengthen their marriage.
Determine what expenses are essential and what can be cut back or eliminated.
Creating a budget and living frugally are essential steps that helped us save our 20K down payment.
Having a written budget and detailed plan will make you more likely to stick to your goals to save up your house down payment.
We would not eat out a lot but instead decided to cook at home. We would frequently make a lot of food, divvy it up into lunch boxes, then put it in the freezer.
Doing this was so convenient, especially when constantly on the go. You can warm it up in the microwave when needed. No matter at home, at school, or the workplace.
We also decided to buy a lot of things second-hand, don’t buy brand new!
6. Find Ways You Can Make More Money
To save our $20,000 down payment, I switched from working a part-time job to a full-time job while also attending school full-time.
This was a great boost to our combined income. Not long after, I was promoted to bilingual supervisor with an additional bump in pay.
Shan was an international student and was only allowed to work on the school campus as a part-time employee, but there were other perks.
We both enjoyed discounts whenever we ate or shopped on campus. Doing so helped us cut down on eating costs.
In May 2017, Shan and I were happily married and had just finished our semester finals!
During that summer, I worked an additional job to save money for our down payment (one full-time + one part-time job).
7. Take Up Side Hustles
Another way to help us save our first house down payment is having side hustles.
I heard about donating plasma from my brother and started donating it.
You can probably make around $400 a month, sometimes even more, when a promotion is going on! Depending on the place, each donation will take around one hour in total, and you can donate up to twice in one week.
It was so easy; I just had to lie down there and could read a book or play on the phone.
I sometimes donate plasma when they have a good promotion, but now the money I get is my “freedom/fun money,” lol.
All in All
An accumulation of many small decisions saved us tons of money for our down payment!
EVERY DOLLAR COUNTS!
By September 2017, we had saved enough down payment and closed on our first real estate property!
My wife was 21 years old, and I was 23. The underwriting process and everything took approximately one month to be completed.
Waiting for the underwriting and everything felt like forever since it was our first time going through the process. We were worried we might be denied the loan amount, but everything went smoothly, and we were approved.
Not only did we take a big investment step, but we also kickstarted our FIRE journey!
We have become very passionate about taking control of our finances, living below our means, and making our money work HARD for us.
I hope our experiences can give you some ideas to help you save on your house down payment!
Check out other articles in our blog, where we share our financial freedom stories with tips on personal finance & investing!
Disclaimer:
We hope the information in this article provides valuable insights to every reader but we, the Biesingers, are not financial advisors. When making your personal finance decisions, research multiple sources and/or receive advice from a licensed professional. As always, we wish you the best in your pursuit of financial independence!
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