What is Barista FI?

BaristaFI is a phrase used to describe someone who isn’t fully financially independent (i.e. no longer needs to work) but has enough income from passive investments that they only need a modest job to make up the difference between their passive income and their financial needs. 

That job doesn’t necessarily need involve making coffee, it’s more about the concept of a low-stress, part time or lower income job.

You might alternatively, for example, choose to work in a bookshop (which appeals to me) or a library, to teach or tutor part time or suchlike.

In many ways BaristaFI can be thought of as a halfway house between the high-stress corporate world and complete retirement. It allows you to reset your working life to align more with your core values.

It is therefore particularly suited to people who earn a decent income right now but find that their career is sucking the pleasure out of everyday life.

It’s a way to escape early from your high-stress job sooner, rather than sticking with it for a few more years with the aim of reaching full financial independence.   

BaristaFI Example

Collette works as a District Manager in the retail sector. She works unsociable hours including regular evenings and weekends, meaning she regularly misses out on family events, birthdays and so on. Her varying shift patterns mean that she’s often too tired to do anything productive when she really is off. 

Despite disliking her job, it turns out she’s surprisingly good at it. She’s risen up the ranks and now earns enough to save and invest a little each month.

Ultimately, however, she wants out of that high-stress job as soon as possible, but feels that reaching financial independence is just too much of a stretch.

Having just hit her 50th birthday, Collette has managed to pay off her mortgage. Her monthly expenses are now a modest $1,500, and she has carefully saved the excess to accrue $200,000 which is invested in index funds. 

Using the well-known 4% rule, Collette could potentially draw $8,000 of interest per year from her investments, while leaving her principal to continue growing.

With expenses of just $18,000 per year, she only needs to make $10,000 per year – less than $900 per month – to make ends meet.

She could, in this example, consider quitting her high-stress, long-hours management position, and instead work part-time at her local plant nursery while enjoying a much better quality of life. 

Pros of BaristaFI

Allows You to Improve Lifestyle Sooner than Full FIRE

The concept of financial independence is a great one if you’re starting out nice and early and/or you are a high earner. For others, however, reaching full financial independence might not be realistic – or even possible.

I know the FIRE community love to tell us that anyone can do this but in reality I believe that’s some way off the truth. 

For people who want to improve their lifestyle by working less, having less stress, or doing something they’re passionate about, baristaFI can represent a more reasonable solution to your problems. 

Personally, I love animals. I did a degree in biology. Given the choice, I’d rather be studying reptiles in the forests of Borneo. Sadly, there’s not much call for that sort of thing, and the salaries are understandably not great.

However baristaFI could give me the option to take one of these jobs – which wouldn’t really pay enough if it was my only income source – so long as I could supplement this with income from passive investments.

Lower Stress Environment

I’ve written before about how I spent an entire summer living in France. There were many amazing things about this experience, but possibly the most noticeable (and unexpected) was the release of stress.

I didn’t even realize beforehand how stressed I was about work. Even on evenings and weekends I was thinking about it, worrying about it, talking about it. 

When I gave up my job and moved to a little villa in rural France, all this pressure started to ease. I felt like a completely different person after a few weeks. 

Whether you’re feeling stressed or not, it’s almost certainly impacting you to a point. Going from a high powered job with lots of responsibilities to one where you have very little to worry about can make a massive difference to your life.

More Time to Follow Your Passions

I find that work constantly gets in the way of enjoying myself. Unlike people who say they get bored when they’re not at work, my problem is very much the reverse. I have the time of my life when I’m off, and get bored stiff at work. 

BaristaFI has the potential to give you your time back. That way you can take up painting, learn a new language, prepare nutritious meals for your family and more. And time, after all, can be a lot more valuable than money.

Health Insurance

Living in the UK, we don’t have to worry about health insurance. I’m aware, however, that it’s a major concern to many US readers.

Keeping some kind of job, no matter how meagre, can help to ensure employer-funded insurance, which can save you a ton of money each year.

Cons of BaristaFI

While I think the concept of BaristaFI is an interesting one, I do also worry about the downsides. Indeed, based on how I feel now, I don’t think BaristaFI is right for me. Here’s why…

Starts Drawing on Your Investments Sooner

We all know about the power of compound interest. The longer you leave your money alone, the more it will be worth eventually.

The risk with baristaFI is that you start drawing from your investments much sooner than you otherwise would have done, and this severely limits the growth you’ll experience. 

One “hedge” against this is to stay put in your high salary job for another year or two, building an additional “buffer” into your investments. In that way, rather than drawing the full 4% that studies suggest should be safe, you could instead draw 3% or 2%, allowing your investments to keep growing even during baristaFI.

May Be Harder to Retire Early

Whether you opt for part-time work, or a lower paid but less stressful job (or even both!) it’s likely that your retirement contributions will drop.

This, in turn, can slow down your progress towards full financial independence.

For some people, that’s a price worth paying. Others, however, choose to stick to their current career for a little longer.

Only you can decide where that “comfort” zone is where you’re ready to tender your resignation.

New Job May Not Meet Expectations

Ask many baristas about their job and they’ll likely tell you how busy they are, how rude some customers can be, and about the never-ending cleaning rota.

Just because a job is lower paid doesn’t mean that it will necessarily be more enjoyable or lower stress.

You may quit your “big money” job only to have a very nasty surprise when you swap to something more modest. 

You’ll Need to Keep Secrets

Financial independence is really something you should keep to yourself. There are numerous reasons for this. Firstly, employers don’t tend to like free thinkers; it can be intimidating to find out that one of your junior staff has a big investment portfolio that pays you a handsome sum each month automatically. 

The second issue is you don’t want to estrange your coworkers. While they’re working their fingers to the bone in a low wage job, they don’t want to be told that you don’t really need the cash and you’re here for “pocket money”. 

Lastly, of course, when people find out you’ve got lots of savings and investments there’s a risk they’ll start asking for loans or other forms of financial assistance.

Adjusting to Lower Pay Might be Tough

Low stress is great. But more modest pay can be tough.

If you’re used to your time being worth $X and suddenly it becomes worth a fraction of that then this could be quite demoralizing.

In fact, it could make your efforts seem almost worthless, and may make you wish you’d never left your comfortable old job. 

Is BaristaFI Right for You?

Make no bones about it; baristaFI is not for everyone. While there are lots of great things about the concept, I feel that it also has a lot of potential downsides too.

As with coastFI, there are no “right” and “wrong” answers here; it’s more what suits you personally, based on your long-term goals and your unique personality.

If full financial independence isn’t an option then this may be a worthy consideration.

For others, doing a lower paid and potentially less challenging job may prove boring and unmotivating.