You may have heard of FIRE and FI. It’s an acronym that means Financial Independent / Retire Early.
The key difference between FIRE and FI?
FIRE means throwing in the towel and quitting work. With FI, quitting work is optional. FI is exactly what I recommend you to work towards, too, due to the risks of physician burnout.
It’s hard to define FI because it’s not a concrete point. The bank does not issue a letter that says:
“Congratulations, you have reached FI!”
Instead, FI is an art that each person determines for him or herself. But there are some numbers behind it.
Here’s how most people in personal finance circles have defined FI:
Different stages of FI
FU money – (In my house with small kids, we call it Freedom Money!) This is 1-2 years of yearly expenses saved. It allows you to quit the job you hate without living on the streets. Is your job killing you and you need time off to find a better job? Have you used up all your maternity/paternity leave and need more time with your growing family? You can, and you can still afford to live while doing so!
LeanFI – You have just enough money to stop working forever if you cut discretionary items out of your budget. Typically this is for somebody who wants to go in and out of the workforce and take several sabbaticals throughout life. Want to spend a year in New Zealand? Why not.
FatFI – You reach this if your net worth is at least 30 times your annual spending, if not more. This is for people who are anxious whether “enough is enough” or are not very frugal. There is a FatFIRE group devoted to people in this category by Physician On FIRE that both you and your DrSpouse can join.
FI – This is a general term that includes FU Money, LeanFI, or FatFI. FI’s most agreed-upon rule of thumb definitions is net worth that is 25 times your annual spending.
What if your DrSpouse is still in training?
If you’re hearing about FIRE for the first time or your DrSpouse is still in training, it can feel overwhelming. You don’t have a crystal ball telling you where you’ll live, how much you’ll make, or how happy he will be at his job.
Good news is you don’t need to figure out the exact math behind this FI stuff right away. One of the beauties of FI is that you can reassess your situation along the way.
For example, if your goal is to reach FIRE by 55 but you find out that you don’t feel comfortable to do so until you’re 57, then you can put in two more years. Or the opposite, you can find out that you really overshot your goals and you can semi-retire or fully retire earlier.
While your DrSpouse is still in training, don’t worry about the math. Your job is to continue to develop financial literacy skills so your family can eventually reach FI.
Your DrSpouse better believe he’s lucky to have you!