Online Business for Every FIRE Strategy: Fat FIRE, Lean FIRE, Coast FIRE, and Barista FIRE
On your way to financial independence, you’ve lived the frugal life and penny pinched to build your bank account. You’ve invested in lucrative markets. Maybe you’ve even acquired rental properties for passive income—but you still aren’t where you want to be.
How can you get to the next step of financial independence retire early (FIRE)? Often overlooked in the FIRE community, an online business can give you the boost you need to reach the next level of FIRE and achieve complete financial independence.
There’s no one way to achieve early retirement. Most FIRE advocates fall into similar categories with well carved-out strategies for becoming retirees on their own terms. No matter the type of FIRE you’re looking to follow, an online business fits well into every strategy. We’ll explore how online assets support the spectrum of the FIRE movement and how anyone can use an online business in their retirement planning.
What are the Different Types of FIRE?
Before you start an online business, you should know what kind of financially independent life you want to live. Some types of FIRE mean you keep working, just not full time, while others mean you never have to work again.
It might help you to know where you stand on the FIRE ladder so you can plan how to build your nest egg, as well as to know how an online business can fit into your unique goals.
Fat FIRE: Fat FIRE is what you probably think of when you hear about the FIRE lifestyle. Those who live the Fat FIRE life may not live in excess or penny pinch, but they still save more than the average person, giving them a rapidly growing retirement fund.
Lean FIRE: Lean FIRE is considered Fat FIRE’s opposite. Most people who adhere to this lifestyle don’t waste any money. They live a minimalist lifestyle and adhere to strict budgeting, so their retirement fund grows. Lean FIRE enthusiasts may trade an apartment in New York for a house in the Midwest or spring for a used car instead of a Tesla to ensure their savings rate stays high. It takes tremendous sacrifice, as these savers aim to amass 25x their annual expenses in a retirement fund so that they reach early retirement.
Coast FIRE: Coast FIRE applies to those who have their retirement savings covered but still have a part-time job. Whether they work because they enjoy it or to continue building their savings even further depends on the person. Coast FIRE retirees likely worked and saved hard in their youth. They saved and invested the amount of money necessary to compound enough interest by retirement age, ensuring a healthy withdrawal rate on their savings and the ability to live off the money throughout their retirement years. The part-time job is then used to cover their living expenses until retirement or until they feel enough money has been saved.
Barista FIRE: Barista FIRE is when someone has likely enough savings for retirement, but not for their current living expenses. These people no longer work a regular full-time job, but they keep a part-time job to keep their retirement savings intact and maintain the ability to cover their current expenses. In some cases, their spouse works and they use their spouse’s income to help them retire early or to take advantage of the working spouse’s healthcare plan.
How Can Online Business Fit into FIRE Strategies?
No matter which type of FIRE philosophy you follow, an online business can help you grow your savings even further. If you’re a Barista FIRE or Coast FIRE follower, an online business may allow you to quit that part-time job and become fully financially independent.
An online business can benefit you differently depending on what kind of financially independent life you’re currently living. It can be a lucrative way to do something you love while increasing your retirement funds.
Let’s look at how creating an online business can improve your FIRE strategy.
With Fat FIRE, you’re already living a comfortable life, and you likely have higher living expenses than other FIRE followers. Because cutting costs isn’t usually a part of the Fat FIRE ethos, an online business can help provide extra money to keep the lifestyle intact.
Cash flow is an important goal of every FIRE strategy, but Fat FIRE enthusiasts in particular rely on cash flow so they can spend how they please. In terms of investment vehicles, online businesses make the best cash flow investments compared to investments that are more traditional.
The beauty of online assets is that they provide immediate cash flow when they are bought from a marketplace. Other means of passive income for cash flow take years to build, but buying an established business cuts this time out completely. What’s more, managing this kind of cash flow asset is much more hands off and has a better return on investment than real estate, for example.
If you’re not at the Fat FIRE level but aspire to be in your financial freedom journey, an online business can help get you there by providing extra income to reach your FIRE number.
If you’ve been living a minimalist life and tracking every cent you spend, an online business can give you more stability as you build your retirement fund. While the whole concept of Lean FIRE revolves around saving money for the sake of retiring early, an online business can give you a little extra cash and make being frugal less constricting.
An established online business means you have more options, and it’s completely possible to bootstrap your business venture without hefty upfront capital.
It’s well established that you can start an online business for a couple hundred dollars, so if you don’t mind the time commitment of building your own business, you can work your way toward creating passive income streams and saving money on your journey to get there.
When you want to move into Lean FIRE, an online business can grow your retirement fund faster. While other FIRE followers might use the money from their online business to upgrade their daily life, you’ll have more money to retire with if you keep up with the Lean FIRE principles.
If you don’t want to retire yet, you could consider starting an online business to get to Coast FIRE. With Coast FIRE, you may not need a side hustle, but you can have one anyway.
An online business can be a great tool for Coast FIRE retirees because of its flexibility and adaptability to your exact Coast strategy. An online business doesn’t have to conflict with your part-time job. However, if you’re looking for a change or if you want to add another income without the job search or sacrificing more time to a second job, an online business can alleviate this burden for you.
Because the success of Coast FIRE relies on protecting your net worth you’ve invested in the stock market and ensuring it will accrue enough interest by the time you retire, a profitable online business is an added protection—an account from which you won’t need to withdraw any earlier than need be. You can also use this money to add to your IRA or index funds, further growing your nest egg.
Don’t forget that online business can further gain your money in a sale. You can earn 2.5–4 years of profit upfront by selling your business, and this windfall alone can be what you need to reach your FIRE number and retire fully.
An online business may affect Barista FIRE followers more than any other type of FIRE. Because you do need to work with Barista FIRE, an online business can change the way you work—and maybe even bump you up to the next level of FIRE.
A full-time job is a considerable time commitment, and while you want to increase your income, you may not have the energy for a second job outside your home. Online business works for people who want to work but still want to spend time with their families or for those who would like to replace their full-time job with online income.
Online businesses allow you to work from home—or anywhere else—while managing clients, customers, and products. If you choose a particularly lucrative business niche, your online business can move you into Coast FIRE or even Fat FIRE, where you can quit your full-time job and work on your terms.
If you’ve retired, but your spouse still works, an online business can mean either you both work on the same business to build income together or your spouse works outside the home and keeps their health insurance benefits while you work from home part time so you both can retire earlier. Any way you build it, as a pair, you have more options to make enough money to cover your regular living expenses, giving you more freedom in Barista FIRE.
Why Online Business Works for FIRE Strategies
An online business benefits your FIRE strategy no matter what type of financial independence you want. It’s not only about building more money in your retirement account or spending more on your current lifestyle.
Online businesses can be the perfect way to ease into retirement and adjust your work to work for you. What is it about online businesses that make them work for FIRE?
FIRE is all about flexibility. That’s why you do it—to make your life one you can enjoy and to retire younger so you can do the things you love. With an online business, you can work from anywhere and run the business on your terms.
Many online entrepreneurs work from home (or wherever else they want). You don’t have to sacrifice travel, time with friends and family, or caring for your home with an online business. Even if you’re not at the point of financial independence, your online business can still give you most, if not all, of these benefits right away.
Your online business niche can determine everything about your online business, including how it works for your FIRE future. Choosing a profitable niche means you’re more likely to earn more money or be more connected to your individual passions, helping you to engage with something you love in a business capacity.
If you’ve always envied high-income bloggers making money by writing about things they enjoy, your online venture could be your chance to work on becoming a successful blogger yourself. Most people who go this route don’t become overnight successes, which is why taking a short cut and buying a profitable online business is an almost surefire way of reaching blogging success.
You may choose to focus on a niche for its profitability and its evergreen nature. Success in a niche that is trending or has room for growth can extend the life and profitability of your investment, ultimately affecting how you access your own financial planning or annual spending. The right business, in the right niche, can give you the freedom to change your FIRE strategy entirely.
No one says you have to work a dull, soul-sucking job until you reach financial independence. If you want to do work that you enjoy, even before you retire, an online business can make this a reality for you.
The American Psychological Association says that people who work remotely are often happier and more productive. With the flexibility of an online business, you don’t have to wait until retirement to feel fulfilled.
Whether you’re satisfied with your work also determines the type of FIRE for which you want to strive. Many people who reach Coast FIRE, or even Barista FIRE, can get the fulfillment they need in their work after they reach financial independence.
The idea of passive income from an online business can be especially attractive to Fat FIRE followers. With an online business, you may not have to give up the business after you technically retire. Affiliate programs, Amazon Associates, or Amazon FBA are often the most chosen monetization options that generate passive income and require minimal maintenance.
In this way, an online business can become an investment similar to a rental property. While you still maintain the premises, your business generates most of the income without your input. The beauty of this though is that an online entity is usually far less hands on than real estate and can even give much better returns.
For millennials surviving off credit cards and struggling to get their personal finances in order, additional passive income is often the key to moving from survival mode to financial stability. Finally building a passive income stream means they can actually pursue FIRE instead of letting it remain a distant dream. Online business is one of the most accessible forms of passive income, and it can easily be within your reach.
We mentioned earlier that starting an online business is a relatively small investment. Many startup and brick and mortar businesses incur incredible initial costs, which are a barrier to entry for the average person.
With an online business, you don’t have as many expenses as you would if you were maintaining a building, staff, and supplies, which come with building a physical business. By starting an online business, you can maintain the FIRE principles of limiting spending (ideal for Lean FIRE followers) while realizing entrepreneurship at a fraction of the cost.
As a FIRE follower, you probably want to keep your options open in as many areas as possible. This doesn’t necessarily mean diversifying your investments, though that is one path to follow. The power to decide what you want for your online business provides another path.
When you start an online business, you decide how you want to run it. Your business can align with your interests, hobbies, skills, and more. Many entrepreneurs with online businesses choose such monetization options as:
- Service-based businesses
- Amazon FBA
- Content-based affiliate businesses
Within each of these types of online businesses are endless niche choices, including lucrative ones that have evergreen staying power. Tailor your business to you, and you can build upon it with your existing expertise and aim for a profitable exit in a few years’ time.
Having so many options works well for FIRE followers because it means you can decide what to do with your business as you reach financial independence. Whether you keep it or sell depends entirely on what you want out of your retirement investments.
Regardless of what type of FIRE you’re working toward, an online business can adapt to your strategy. Once you understand your FIRE goals, a wealth of opportunity for online business growth will be opened.