Coast FI is one of a growing number of alternative paths to Financial Independence. The FIRE movement changed the mindset of followers and reached even larger audiences through the pandemic years.
We learned that all work and no play result in stressful lives. Financial Independence opens the door to life after work, much sooner than the traditional retirement age.
However, only some are in a situation that supports an all-out push to FI, commonly found in Lean FI and Traditional FI approaches. Many who achieved FI through these techniques have reflected that the sacrifices were more significant than needed.
Coast FI still embraces the foundational elements of Traditional FI; simple living, anti-consumerism, self-care, and personal wellness, and eliminating the dependence on money in the decision-making process.
Unlike Traditional FI, Coast FI introduces flexibility into the plan. No longer is the journey a race to FI. Instead, the approach embraces the choice to live here and now and still reach complete Financial Independence in the long run.
This article will define Coast FI, discuss how the concept enables flexibility, and discover challenges that can impact your dream of Coasting to Financial Independence.
What is Coast FI?
Coast FI provides a twist on the Financial Independence Retire Early (FIRE) approach. Instead of accumulating all of the money needed to reach FI as rapidly as possible, this approach focuses on saving for the future and enjoying life today. A Coast FI lifestyle enables flexibility and freedoms that you might think only come with complete Financial Independence.
The Coast FI goal is to save enough many years before retirement to be free to stop contributing savings and let the nest egg grow and eventually reach Financial Independence.
Those who start saving early can achieve Coast FI with a much smaller savings balance than their total Financial Independence number. The level of savings is your Coast FI Number.
For example, consider a person who is currently 25, spends $40,000/year, and would like to retire at age 55 fully. After adjusting annual spending for inflation, the FI Number is almost $2.1M. However, this person can reach Coast FI after saving ~ $276K.
We’ve created a Google Sheets Coast FI Calculator that you can download and determine your Coast FI Number.
Once the individual reaches their Coast FI Number, further contributions to retirement savings are no longer necessary. The savings will grow over time, thanks to compounding interest.
Of course, finances are never a set-and-forget scenario. You still need to evaluate as conditions change, and your market portfolio plays a huge role in how consistent your returns will be.
Once additional contributions to retirement savings are no longer necessary, significant lifestyle flexibility is available.
The Link Between Flexibility and Quality of Life
In personal finance, flexibility can be the difference between grinding away in a job that is literally killing you and finding work that provides more meaning in your life. You have flexibility when you can reduce your expenses, including retirement savings, enough to reduce the stress to produce significant income.
Those who have the freedom to choose their work situation can build their life and fit work into the scenario. Lifestyles that include part-time work, digital nomad, or even seasonal work become available.
Financial flexibility doesn’t follow the traditional path to retirement. It doesn’t aim for having enough money to quit work and never work again. Instead, financial flexibility uses doable means to justify not an end, but a more realistic series of starts, stops, and restarts. It considers the lives most of us lead, if we’re relatively young, look nothing like the lives our parents led.
– Rocco Pendola (Financial Flexibility, Not Freedom)
Too many of us sacrifice too much today in hopes of a future. There is little quality of life when you do so.
Many prominent members of the FIRE community have discussed regret related to sacrifices made during the push to FI. Even Grant Sabatier expressed some regrets in his rapid path the Financial Independence.
Quality of life matters and financial flexibility is a great tool to help you keep this priority.
How Coast FI Enables Flexibility
Those who choose Coast FI realize that work is in their long-term future. Even people who reach FI early in life often continue to work, although on their terms.
There will be no sipping on cocktails on a beach for eternity. However, since their spending is lower, they can create a life that includes more sipping of cocktails than you might assume.
Achieving the magic level of savings to coast to retirement isn’t the only defining aspect of Coast FI. It’s still essential to reduce consumerism and keep expenses low. Achieving this is critical to most forms of Financial Independence. It realizes that things do not bring happiness, and instead, experiences are what bring absolute joy.
Examples of Flexibility in Action
Anders Skagerberg uses Coast FI to fuel his lifestyle as a husband and father of young children. He chose seasonal work as a tax preparer and freelance writing over potentially higher-paying work. His decision gives him the freedom to be present in the lives of his children and the ability to travel with his family.
One of my favorite parts about seasonal tax prep is I know it starts in January and ends in April.
This has a couple of unique benefits. First, it helps me keep going when the going gets tough. There’s no way around it: tax season can be challenging. But knowing that the end is in sight makes it more bearable as I work through the challenge.
It’s like seeing the light at the end of the tunnel, knowing that the end is just up ahead.
– Anders Skagerberg (5 Reasons Why You Should Work Seasonally While Coasting to Financial Independence.)
Skagerberg’s work creates flexibility and lets him live a seasonal lifestyle. He’s on track to retire, thanks to Coast FI, and he can spend valuable time on the things that matter most now instead of delaying gratification later.
Diania Merriam, the creator of the EconoMe Conference, changed her financial situation by moving to a lower location and a slower-paced lifestyle. She left traditional work, started hosting a podcast, and then launched the EconoMe conference. She lives a Coast FI lifestyle, doing work she loves.
Overcoming Challenges to Flexibility
The flexibility created by a Coast FI lifestyle still takes work. It’s vital to control lifestyle inflation, ditch the scarcity mindset, and be prepared for financial setbacks.
If you’ve read about Financial Independence at any level, there is a common theme of controlling lifestyle spending. Members of this community work hard to stop the urge to keep up with the Jones’s. Coast FI is no different. The key to creating flexibility is to control spending, so you need less income to feed the positive aspects of life.
Many people have fear about the future and their money. This often is bread from a scarcity mindset, that fear that what I have can quickly disappear. This causes you to fixate on issues today instead of working on long-term solutions. When you invest in a Coast FI strategy, you have to have faith that your investments will grow and reach your total FI number by your desired retirement age.
When markets dive, as in 2022, one can quickly feel that their strategy will fail. The good news is you have many years to recover with Coast FI. This concept is for a slower pace of wealth creation, and short-term swings are less significant over an accumulation phase that spans many years.
Emergencies happen to everyone, and an emergency fund and a plan to address the more significant crisis are substantial in Coast FI, like any other wealth-building strategy. The great news with Coast FI is that you’ve already created a lifestyle without inflated expenses, and adjusting work to cover emergencies is always an option.
Conclusion
Coast FI is a form of Financial Independence that creates flexibility in your lifestyle. While you will commit to working for many years, you earn the ability to mold your work to fit your life. This benefit is possible because you save a smaller amount for retirement early and let it grow over many years. After you reach the savings goal, further contributions to retirement savings are no longer required.
Reduced savings requirements and focus on controlling unnecessary spending create the freedom to choose a different lifestyle that creates more joy and less stress. These may include part-time or seasonal work, nomadic work, or even a full-time job with less stress.
Successful Coast FI’ers have been able to work seasonally and spend more time with family or even start a new business driven by passion instead of the pure need to earn more money.
Coast FI is an excellent alternative to Traditional FI for anyone with plenty of time to allow savings to compound and grow. You will need work covering your living expenses until retirement, but further retirement contributions are no longer necessary once you reach your Coast FI Number.
Personal finance flexibility can ease stress, create opportunities for more joy, and feed your life purpose.
