FIRE Glossary
Every term you'll meet on FireVerdict, in plain English. Each definition comes with a small worked example using round numbers — no jargon, no fine print.
Coast FIRE
The point where your existing savings will grow into a full retirement fund on their own — no more contributions needed. You still cover today's bills with work income, but retirement is already locked in.
Example: Retire at 60 spending $40k/yr at a 4% SWR → FIRE number $1M. At age 30 with a 5% real return, your coast number is $1M ÷ 1.05^30 ≈ $231k.
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Barista FIRE
A part-time or lower-stress job covers some of your living costs, so your portfolio only has to fund the rest. The name comes from covering benefits and coffee money with an easy job.
Example: You spend $3,000/mo ($36k/yr). A part-time job covers $1,500/mo, so your portfolio funds $18k/yr → at a 4% SWR that's $450k instead of $900k.
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Lean FIRE
Financial independence on a minimal budget — covering essentials with little room for extras. It's the cheapest possible exit from required work.
Example: Spend $25k/yr at a 4% withdrawal rate → Lean FIRE number $25,000 ÷ 0.04 = $625k.
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Fat FIRE
Financial independence with a luxurious budget — travel, hobbies, and comfort without counting dollars. The highest-cost flavor of FI.
Example: Spend $100k/yr at a 4% SWR → Fat FIRE number $100,000 × 25 = $2.5M.
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Chubby FIRE
Financial independence with real comforts — above lean, below fat. A generous-but-not-opulent retirement budget.
Example: Spend $75k/yr at a 4% SWR → Chubby FIRE number $75,000 × 25 = $1,875,000.
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FIRE number
The portfolio size that makes work optional: your annual spending divided by your safe withdrawal rate. Cross it and investments can fund your life indefinitely.
Example: Spend $40k/yr at a 4% SWR → FIRE number $40,000 × 25 = $1M.
Try it: FIRE number on FireVerdict →
Safe withdrawal rate (SWR)
The percentage of your portfolio you can withdraw each year with low risk of running out. 4% is the classic starting assumption, adjusted up or down for early retirement and risk tolerance.
Example: At a 4% SWR, a $1M portfolio supports $1,000,000 × 0.04 = $40k/yr of spending.
4% rule
A rule of thumb from historical market data: withdrawing 4% of your portfolio in year one (then adjusting for inflation) made money last 30 years in most US market histories. It's a starting point, not a guarantee.
Example: The rule implies saving 25× annual spending: spend $50k/yr → $50,000 × 25 = $1.25M.
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Real return
Your investment return after inflation — what your actual buying power does. The exact conversion is (1 + nominal) ÷ (1 + inflation) − 1, not simple subtraction.
Example: 7% nominal return with 3% inflation: (1.07 ÷ 1.03) − 1 = 3.88% real, not 4%.
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Inflation adjustment
Restating money from different years in the same buying power so comparisons are honest. Dividing by (1 + inflation)^years converts future dollars into today's dollars.
Example: At 3% inflation, $100 in 10 years buys what $100 ÷ 1.03^10 = $74.41 buys today.
Compound growth
Growth on growth: returns earn returns, so a portfolio accelerates over time. This is why early dollars do most of the work in long horizons.
Example: $10,000 growing at 5%/yr becomes $10,000 × 1.05^10 = $16,289 after 10 years — with no extra deposits.
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Savings rate
The share of your income you keep instead of spend. It's the single biggest lever on how many years until financial independence.
Example: Save $500 out of $2,500/mo take-home → savings rate $500 ÷ $2,500 = 20%.
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Dollar-cost averaging (DCA)
Investing a fixed amount on a schedule instead of all at once. You buy more shares when prices are low and fewer when high, smoothing your entry price.
Example: Investing $12,000 as 12 monthly purchases of $1,000 instead of one $12,000 lump sum.
Capitalization rate (cap rate)
A rental property's unlevered yield: annual net operating income divided by purchase price. Higher cap rate means more income per dollar of property.
Example: NOI $24,000/yr ÷ price $400,000 = a 6% cap rate.
Net operating income (NOI)
A property's annual income after operating expenses (taxes, insurance, maintenance, management) but before any mortgage payments. It's the numerator of the cap rate.
Example: Rent $2,000/mo minus $800/mo expenses → NOI $1,200/mo × 12 = $14,400/yr.
Debt snowball
Pay debts smallest balance first while paying minimums on the rest. Costs slightly more interest than avalanche, but quick wins keep people motivated to finish.
Example: Debts of $500, $2,000, and $8,000: kill the $500 first, roll its payment into the $2,000, then the $8,000.
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Debt avalanche
Pay debts highest interest rate first while paying minimums on the rest. Mathematically the cheapest payoff order — it minimizes total interest.
Example: A 22% APR card before a 6% student loan: every extra dollar kills 22 cents of yearly interest instead of 6.
Try it: Debt avalanche on FireVerdict →
Coast number
How much you need invested *today* so that compound growth alone reaches your FIRE number by your target retirement age. Below it you're still saving toward coasting.
Example: FIRE number $1M, retiring at 60, now 30, 5% real return → $1M ÷ 1.05^30 ≈ $231k invested today.
Try it: Coast number on FireVerdict →
Financial independence (FI)
The state where your assets generate enough income to cover your living costs indefinitely — work becomes optional. Measured as net worth versus annual spending.
Example: Spending $40k/yr, you're FI when net worth reaches 25 × $40,000 = $1M (at a 4% withdrawal rate).