Visionary. Value focused.

How you do anything is how you do everything.

Lean FIRE – how to get there?

Financial Independence, Retire Early, or FIRE, has been a rising trend of our generations for quite a while. And it is an ocean of information out there for you to research and study. In this blog, we will talk only about lean FIRE and how can we get to that stage.

Tl; dr;

There are only a few repetitive steps required to achieve lean FIRE.

  • Pay yourself first.
  • Spend less than you earn.
  • Invest.

Most people will fail in the first 2 steps, one simple explanation is that, they lack conviction. The system works, you just need to keep going and do not derail from the plan.

Invest simply into a handful of ETFs and keep putting money in regularly, otherwise known as Dollar Cost Averaging strategy.

What is FIRE?

Basically it is a lifestyle where, your investments generate enough income to replace your daily jobs (hence the term Financial Independence). You can finally quit the 9-5 job that you may resent and do what you want to do, never to have another job again (hence the term Retirement Early).

There are multiple different types of FIRE, in which there are 2 main types that are often discussed:

  • Lean FIRE: your investments generate barely enough income to support your most basic needs. You can quit your job but you can only live in the simplest lifestyle. Clearly we don’t want that, but it is a good milestone to know that you are now working for more than just to meet your needs.
  • Fat FIRE: your investments generate a lot of income that it can sustain the wildest lifestyle of your dream. To know your dream spending, ask yourself this, if you had a million to spend in a year, and you couldn’t buy investment assets, what would you do with it?

Calculate lean FIRE goal

If you know your monthly spending, that is good. But if you don’t, it is a good idea to start recording your income and your expense per month. After about a year, you should have a good idea on how much you spend, and that can be the figure that you need to determine when to reach lean FIRE.

For example, living in Melbourne, Australia, my monthly expense falls around $2,000 – $2,500 per month. So my goal for lean FIRE is $2,500 x 12 = $30,000 income per annum. That means if my investment portfolio can generate $30,000 per annum, I have achieved lean FIRE. We will use this figure in future calculations.

Above is a super simplified method, there are obviously contingencies that we need to account for, but the goal of this exercise is to come up with a number that we can aim and shoot for. Achieving lean FIRE is an important milestone in the journey, since it signifies that we are no longer working because we have to, we are now working because we want to.

How to get there?

Going back to The Richest Man in Babylon; which is, as far as I know, is the first book on personal finance written. It lists 3 simple rules for financial independence:

  • Pay yourself first: when we receive your salary/wage, move at least 10% of that amount into a separate account. We will discuss on what do we need to do with that later.
  • Spend less than you earn: With the remaining amount, you can only spend at much that amount and do not borrow money to spend more.
  • Invest in what you know: this is where the 10% comes in. Over time we will build up a considerable amount of money and now we will attempt to invest for a good return.

Most people fail on the first 2 steps. Why? Because that’s how life is, there will always be another party, another emergency, another splurge item. And only someone who can say no to non-essential items when it is necessary can succeed to get past these 2 steps.

So, how do we generate the required income to cover our expenses? The most popular way is to invest in ETF shares. This has several benefits:

  • Less capital required, we can invest with as little as $100.
  • High liquidation, easy to convert back to cash if anything happens.
  • Proven track records, we can see performance dates back 30-40 years.
  • Income can be received through dividend.

Let’s say we invest in ETFs, and the portfolio generates around 4% income per annum (this is actually the main number that FIRE practitioner uses for calculation). So, to have $30,000 per annum income, we need to have a portfolio of $30,000 / 4% = $750,000.

That’s not even a million!!! You can achieve lean FIRE with just $750,000 net worth!!!

And the road to get there is even more magical. Let’s say you invest all your money in a simple ETF, for calculation sake.


Since inception (2009), VTS has been enjoying a phenomenal return of 15.62% per annum. Plugging that into moneysmart website, we have the following calculation result.

graph for compound interest

Clearly if we follow the system, it will take us 19 years to reach our target. But it is still doable. And we can fast track this by taking in more income in our early years and put more into the regular contributions. I have seen people only take 5 years to reach their goals, mainly by minimizing their expenses and maximizing their income, invest all they can spare into the ETFs.

What does it mean for me?

When I looked at the number, it is so obvious to me that anyone can reach lean FIRE and have a better mindset on why they work at the job that they don’t even see a future in.

Therefore, when I reach that figure, I left the company that I worked for and started working for myself. Let me tell you, there is no greater joy than working not for money but for a higher purpose. As a chess grandmaster once said, when you see a good move, look for a better one. I saw lean FIRE as a good move, and now I am looking for a great move.


Anyone can achieve lean FIRE, it is not even out of reach for an average income person in Australia. The main thing that stops us from that is only ourselves. We need to learn how and when to say no to things, and then apply the principles, trust the numbers and the system and it will work.

“When you see a good move, look for a better one” – Emanuel Lasker, World Chess Champion

By Tuan Nguyen

No Responses

    Leave a Reply

    Your email address will not be published. Required fields are marked *