Financial Independence Terminology


If you're new to the financial independence movement, you're likely to hear a lot of terminology thrown around. In this post I give a quick explanation of some of the commonly used jargon you're likely to come across.

Financial Independence

You can consider yourself financially independent when you have enough passive income to cover your living expenses without the need to rely on a salary.

If you quit your job tomorrow, will your investments provide you with enough income to cover your expenses indefinitely? If so, then you've achieved financial independence.

For a more detailed look at this topic, check out what is financial independence.

FIRE - Financial Independence, Retire Early

Retirement age is often thought of as being 65. However with FIRE, the goal is to achieve financial independence earlier than that age allowing you to retire sooner.

Depending on your personal situation (income, expenses, investments), It's usually possible to reach FIRE within 10 to 15 years.

It's not uncommon for people to start implementing FIRE strategies in their 20's allowing them to retire in their 30's. However, the same strategies are applicable at any point in your life.

FIRE tends to focus on these key aspects:

  • Eliminate debt.
  • Lower expenses (time to get thrifty).
  • Invest a large percentage of your income (often at least 50%).

Under the umbrella of FIRE, we have a few different strategies which i'll go into next.


Lean FIRE focuses on cutting expenses dramatically by living frugally and taking advantage of any life hacks that allow for a lower cost of living.

By lowering your expenses, you're able to invest the extra money to achieve financial freedom.

With Lean FIRE, it's not about how much you earn, it's about eliminating unnecessary spending from your life. It's about identifying what's important to you, figuring out what really matters and getting rid of the rest. It's about looking for life hacks and opportunities to live a more thrifty life in the pursuit of FIRE.


Fat FIRE focuses more on increasing income rather than reducing expenses.

Additional income could come from any number of strategies including salary increases, rental properties or side hustles.

With Fat FIRE you may well look for opportunities to spend less and be thrifty in certain areas of your life, however the real focus is on increasing income which can then be invested.

Barista FIRE

Barista FIRE is an optional strategy you can take once you've accumulated enough wealth and / or passive income to where you only need minimal salaried income each month to cover your expenses.

Generally this is a point before you've reached complete financial independence where you choose to get a low paying, low stress job, safe in the knowledge that you don't need anything more in terms of income. Since you're not focused on salary, you're free to look into options like part time work or jobs that really make you happy.

Barista FIRE allows you to quit the rat race before reaching financial independence while still remaining on track with your investments and income.

Coast FIRE

Coast FIRE becomes an option if you invest enough before you retire such that you haven't yet reached financial independence but the power of compounding, interest and returns ensure you will reach that point without needing to invest any more.

Put another way, you're in your 30's (or 40's or whatever) and you've invested a significant amount but you're still a way off from being financially independent. At this point using reasonable assumptions for the returns on your portfolio, if you calculate that they will grow enough by themselves without any additional capital to allow you to retire at 65 (or whatever age you're targeting), then you can just coast the rest of the way.

At this point your salary income simply needs to pay for your expenses since you don't need to invest any more to ensure you have enough for retirement. Just sit back and coast (if that floats your boat).

DINKS - Dual Income, No Kids

Having kids is a major factor influencing financial independence and retirement planning. Therefore you'll often come across the term DINKS referring to a couple who both pull in an income and don't have kids.

Geographic Arbitrage

Geographic Arbitrage (or simply geoarbitrage) can be a potentially powerful FIRE strategy. It involves living in a relatively cheap location while earning an income provided by a relatively expensive location.

An example of geoabitrage would be living in Thailand which has a reasonably low cost of living while working remotely for a silicon valley tech company in the US. The idea being that you'll be earning a high salary (in a strong currency) while only needing a small amount of that income to live somewhere with a weaker currency and cheaper living expenses.

Geoabitrage can be incredibly powerful across countries and currencies, however it's also possible within one country. By relocating to a different State within your country and working remotely for a company, geoabitrage can again be taken advantage of.

Stealth Wealth

It's not uncommon for people to brag about their wealth and seize any opportunity to show others how much they have. People love to show off their fancy car, big house or any number of things that ensure they keep up with (or ahead of) the Joneses.

Stealth Wealth on the other hand is about keeping your wealth under wraps. It's about not letting others know about your situation with respect to money.

The journey towards financial independence often means amassing large and impressive investment balances in short amounts of time. However this results in following a different path in life than what's most common in our consumer culture.

The life path of being thrifty, not spending money on frivolous items and finding value in prudent personal financial decisions is not the norm in today's culture. Stealth Wealth means not trying to impress others with your money but to rather be comfortable with yourself and others without any reference to money.

Side Hustle

Many people on the path to financial independence supplement their salary with income from side hustles. This could be anything from online business and freelancing to dog walking and house painting.

The sooner we become financially independent, the sooner we own our time and have the freedom to choose what we do with it. Therefore having a side hustle that generates income in addition to your salary is a great way of getting there faster.

Digital Nomad

We live in an incredible time in history that allows us to work remotely from anywhere on the planet. The internet has connected the world in a way that has never been done before. The online world continues to expand our opportunities in terms of location independence, business opportunities and freedom of expression.

Being a digital nomad means working from anywhere on the globe and not necessarily calling any single place home. It means taking advantage of the internet to experience the world while working from wherever you happen to be at the time.

Lifestyle creep

As our salaries and income increases, we tend to inflate our living costs. We become accustomed to and comfortable with our current living situation but when a salary increase comes along, we quickly find ways of spending it. That new level of spending then becomes the new normal.

Lifestyle creep is incredibly detrimental to achieving financial independence. Avoiding lifestyle creep and investing the extra money from salary increases can fast track the journey to financial freedom.

Article by Brendon @ Money FI

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