Financial Independence & Retiring Early Guide For New Jersey Residents

For many New Jersey residents, achieving financial freedom may seem like a distant dream; especially in this high cost of living state! But the FI/RE movement—short for Financial Independence, Retire Early—offers a pathway to rethinking money, work, and life priorities. 

This movement has gained significant traction in recent years, as more people strive to take control of their financial futures and break free from the traditional 9-to-5 grind. Whether you dream of retiring early or simply attaining greater financial flexibility, understanding the core principles of FI/RE and how to implement them can unlock the life you want to lead. 

In this article, we’ll explore what FI/RE is, the different variations of it, the benefits of financial independence, and the steps to reach your own FI/RE goals, along with tips for avoiding common pitfalls along the way. 

What is FI/RE?

The average American graduates from college at around 22 and retires at 64. 

In those 42 years of working they get into credit card debt, buy expensive cars and homes that require them to continue working, and have no real control over their time as Monday through Friday from 9 to 5 they have to work to pay the bills.

It doesn’t have to be this way though, and that’s where FI/RE comes in. FIRE stands for Financial Independence/ Retire Early and people who follow the principles of FI/RE are retiring decades before the norm. I’m talking in their forties and in some cases even in their thirties. 

FI/RE isn’t just for people looking to retire early. Through the principals of FI/RE I was able to buy a rental, buy into a property management business, and start my own financial planning firm all before the age of thirty. And I have no intentions of retiring early!

Most people achieve FIRE by living on only 40 to 50% of their income, but read on because living on half your income isn’t as impossible as you may think!  

Benefits of Financial Independence

Who loves to sit in traffic everyday, work 8 or more hours at a job you hate, just to sit in traffic on the way home and be too tired to do anything else? I’m guessing not many. Below I outline the many benefits of achieving FIRE

1. Freedom of Time

One of the most powerful benefits of Financial Independence is the freedom it provides for your time. Imagine waking up in the morning without an alarm clock, free to decide how you spend your day. Whether you choose to focus on hobbies, invest in personal growth, spend time with loved ones, or just sit on the couch playing video games all day long, the freedom to control your time is a luxury that most people never experience while they’re tied to a job. Many people who achieve time also spend their time traveling and pursuing philanthropic activities. There is an infinite amount of possibilities waiting.

2. Life Satisfaction and Happiness

While I wasn’t able to find any studies on FIRE, many people I know who have achieved early financial independence report significant increases in overall life satisfaction and happiness. No longer stressed about bills, debt, or job insecurity. This shift allows for more mental well-being, as the constant worry about money is lifted.

Financial stress is a major factor in people’s lives, often affecting both mental and physical health. Growing up, many of us witnessed our parents struggle with constant money worries—working long hours, stressing about paying bills, and dealing with the anxiety of living paycheck to paycheck. Achieving FI/RE is a way to break free from this cycle.

3. Enjoy Your Best Years

Another compelling reason to pursue FIRE is to ensure that your best years are ahead of you, not behind you. Many people wait until they’re too old to enjoy life before retiring. By achieving financial independence early, you’re able to enjoy your youth while you still have the energy and health to travel, experience life, and pursue your dreams.

4. Focus on Your Health

One of the greatest benefits of FI/RE is the ability to focus on your health. When you’re not tied to a stressful job, you can dedicate more time to working out, eating well, and prioritizing sleep. Imagine having the time to consistently exercise, prepare nutritious meals, and get 8 hours of sleep every night.

Physical well-being is a key component of overall happiness, and financial independence removes the barriers that often prevent people from taking care of their health, which is usually lack of time, stress, and burnout. By investing in your health, you not only increase your chances of living longer, but you also improve the quality of your life.

5. Self-Sufficiency and Independence

When you’re financially independent, you no longer rely on anyone else to make a living—you’re in control of your financial destiny.

This sense of independence is liberating. You’re no longer at the mercy of an employer or external circumstances. Whether you choose to work part-time, start your own business, or completely retire, you’re in the driver’s seat, and that freedom gives you the power to create the life you truly want.

Variations of FIRE (Lean, Fat, Barista, Coast)

Lean FIRE  emphasizes extreme frugality and minimalism, aiming to retire early with a much smaller nest egg than traditional FIRE methods. The core idea is to drastically reduce living expenses by adopting a simpler, more minimalist lifestyle, often cutting out non-essential luxuries like dining out, travel, and expensive hobbies. 

People pursuing Lean FIRE typically save and invest a large portion of their income, sometimes 60% or more, and focus on living in lower-cost areas, reducing housing expenses; such as by househacking, and minimizing discretionary spending. This strategy allows for a faster path to financial independence, as the smaller financial needs mean less money is required to reach your financial independence number. 

However, it often involves significant sacrifices in comfort and lifestyle, which may not be sustainable for everyone. While Lean FIRE offers the freedom to retire early, it requires a high level of discipline and a willingness to live below the average standard of living.

Fat FIRE focuses on achieving financial independence with a more comfortable lifestyle in retirement. Unlike Lean FIRE, which emphasizes frugality and minimalism, Fat FIRE requires a larger nest egg to support a higher standard of living, allowing individuals to retire early without significantly cutting back on their desired lifestyle. 

Those pursuing Fat FIRE save and invest aggressively, typically targeting 25–30 times their expected annual expenses, but their retirement budgets often include more room for discretionary spending, such as dining out, travel, or upgrading to a more spacious home than what Lean FI/RE can offer. 

The goal is to reach financial independence with enough wealth to enjoy a stress-free, comfortable retirement without the need to compromise on quality of life. 

Barista FIRE is where individuals achieve partial financial independence, allowing them to leave full-time, high-stress jobs but continue working part-time or start a part-time small business. 

The term “Barista” comes from the idea of taking on a flexible, low-stress job—like working as a barista at a coffee shop—that provides basic income, often to cover things like health insurance or small day-to-day expenses. 

The goal of Barista FIRE is not to fully retire but to reduce reliance on a traditional career while still maintaining a comfortable lifestyle. This approach offers a balance of freedom and work, where people can pursue hobbies, side projects, or work on things they’re passionate about, without the financial pressures of a full-time job. 

Barista FIRE still requires a solid financial foundation to support part-time work and to allow for a more relaxed approach to income generation. In addition, it can be harder to make travel plans while still having to work as you’ll need to either show up in-person for your part-time job, or have access to wi-fi. 

Coast FIRE is an approach to financial independence where individuals save aggressively in the early years of their careers, reaching a point where their investments are expected to grow enough, through compounding, to cover their retirement needs without requiring further contributions. 

Once they hit this milestone, they “coast”,  meaning they can stop contributing to their retirement accounts and focus on other life goals. This approach to FIRE can be great for people who enjoy what they do for a living and don’t necessarily want to retire early, but want to achieve financial independence so that work becomes optional. 

This is the approach to FIRE I take. I spent most of my twenties setting myself up for early financial independence, but I love what I do and don’t intend to retire early; maybe just work a little less.

People pursuing Coast FIRE often choose to take on work they enjoy, pursue passions, or have more flexible careers. It’s a middle ground between the traditional FIRE path and a more gradual approach to financial independence.

However, it does require making disciplined savings decisions early on to take full advantage of compounding over time. There can also be a large up-front time commitment. For example, I’ve been working 50-60 hour weeks for the past two years. In fact, it’s Thanksgiving and I’m working on this article at home! But intend to keep this pace for the next few years before cutting back on my hours because I know putting in the time and effort now will provide me the ability to work less hours, if I so choose, much sooner.

Steps to Achieve FI/RE

Is FIRE something you are looking to achieve? If so, you should have a clear plan in place. These are the steps I take with my FIRE clients:

Step 1: Get a Clear Picture of Where You Stand

The first step in any FIRE journey is to get a solid understanding of your current financial situation. This is all about taking stock—where are you today?:

• Money In: What are your current sources of income, and how much are you earning?
• Money Out: What are your monthly expenses? Where is your money going?
• Assets: Where are your savings and investments? What is the state of your retirement accounts, real estate, and other assets?
• Liabilities: What kind of debt do you have? Student loans, credit cards, mortgages? What’s the interest rate?

At this stage, we’re not worrying about how to cut expenses or optimize your budget or portfolio—we’re just getting the lay of the land. Knowing where you are financially will help you make informed decisions about how to move forward.

Step 2: Define Your Goals and Timeline

The timeline for FIRE will vary depending on your income, expenses, and goals. Some people are aiming to retire in five years, while others may want a longer runway. Here’s where we break down the following:

• When do you want to retire? Setting a clear retirement date is crucial as it will dictate how aggressive your saving rate and investments will be. 
• What does your ideal retirement look like? Think about how you want to spend your days when you’re no longer working, or working less. Do you want to travel the world? Spend more time with family? Start a passion project? Sit on a beach drinking margheritas?  Understanding what makes you happy and what you want to do with your time will help craft a sustainable and realistic plan.

Step 3: Assess Feasibility of the Current Trajectory

At this point, we need to assess if your current trajectory will get you to your goal of early retirement. 

• Is it feasible on your current trajectory? Here is where you look at your existing financial habits and ask whether you’re on track to meet your FIRE goal. We use planning software to model what the current trajectory looks like and what the probability of FIRE success will be.
• What minor changes could make a difference? Maybe you can adjust your budget, invest more aggressively, or increase your income. Or maybe you can utilize certain tax strategies to save big on taxes. This is where we dive into the nitty-gritty. How can you optimize your spending and savings rate? Cutting out unnecessary expenses—like dining out frequently, expensive subscriptions, or luxury purchases—could free up funds for investing, allowing you to reach your goal faster.
  • Maybe you decide to take only one vacation a year instead of two or skip vacations entirely for a few years.
  • You could downsize your home or explore creative ways to reduce housing costs, like house hacking (renting out part of your home).

These sacrifices can feel hard in the short term, but they’re often necessary to reach the freedom you’re seeking. Being honest with yourself about what you’re willing to cut out of your life is an essential part of the FIRE process.

If everything looks achievable with these small tweaks, great! But if you find that early retirement is still out of reach despite these changes, it’s time to think bigger.

Step 4: Bring in the Big Guns (Advanced Strategies)

Most people who come to me looking to FIRE have investment accounts, but what if it’s not possible, or you just don’t want to cut out any more expenses? Then this is where more advanced strategies can be used to boost returns above the long-term stock market average of 8-10%.

• Real Estate: If you’re willing to put in more effort, real estate investing could offer higher returns—around 15-20%—but it also comes with added risk and time commitments. Managing rental properties, finding tenants, and handling maintenance can be time-consuming.
• Business Acquisition: For those who are entrepreneurial, buying and running a business can offer returns upwards of 30% or more. However, this strategy comes with higher risk and requires expertise in managing businesses. Also, you’re probably going to work an insane amount of hours when first starting out.

You don’t have to choose just one path; you can combine strategies. Many successful FIRE achievers use a mix of real estate, retirement accounts, and business ownership to create a diversified portfolio that aligns with their risk tolerance, desired returns, and lifestyle.

But remember, increasing your return potential usually means taking on more risk. The higher the potential reward, the more time and knowledge you’ll need to manage those investments effectively, which is where an advisor who is knowledgeable on real estate and business acquisition can come in.

Step 5: Address the “What-Ifs”

Life doesn’t always go according to plan, and when you’re aiming for early retirement, you need to have contingency plans in place. Here are some common scenarios to prepare for:

• Early Death or Disability: What if something happens to you, and you can’t work or provide for yourself and your family? Make sure you have appropriate insurance (life, disability, etc.) to protect your financial future.
• Lower-than-Expected Returns: What if your investments don’t grow as quickly as projected? Diversifying your investments and having an emergency fund can help weather market downturns in early retirement.
• Job Loss: If you lose your job, how will that affect your FIRE timeline? Having multiple income streams or a side hustle can help mitigate this risk.

Contingency plans help ensure that you won’t be derailed by unforeseen circumstances, so you can keep moving forward toward your goal. Having a plan B, C, D, & E can reduce stress when the unexpected happens (and the unexpected always happens)

Step 6: Implement and Monitor

Once you’ve created a clear, actionable plan for FIRE, it’s time to execute. But the work doesn’t stop there. Financial independence is a long-term goal, and things can change along the way.

• • Monitoring and Adjusting: As your life circumstances change, or as market conditions shift, it’s important to monitor your progress regularly. Are you hitting your savings and investment goals? Do you need to adjust your budget or investment strategy? Life doesn’t always go according to plan, and a flexible approach will help you stay on track.

• Constantly Look for Improvements: Mortgage rates are currently at around 7%, but in the coming years they will most likely drop. At that point it may make sense to re-finance into a new mortgage. This is just one example of how things can change to create more opportunities to save money.

With a solid plan in place and a willingness to monitor and adapt, you can stay on course toward early retirement. 

Common Pitfalls and How to Avoid Them

1. Not Budgeting or Tracking Expenses

One of the biggest mistakes people make when pursuing FIRE is failing to properly budget or track their spending. Without a clear understanding of where your money is going, it’s nearly impossible to know how much you need to save or what adjustments you need to make. 

To avoid this pitfall, start by tracking your income and expenses for a few months. Categorize your spending (housing, food, entertainment, etc.) and look for areas where you can cut back. I use RightCapital with my clients because it enables them to automatically tag and track their expenses and see what their average spend is in each category. A well-structured budget not only keeps your financial plan on track but also gives you clarity on how much you need to save to hit your FIRE target. Check out this article on “Smart Budgeting” for more info. 

2. Carrying Credit Card Debt

Credit card debt is one of the most destructive financial burdens you can carry, especially when aiming for FIRE. The high interest rates that credit cards charge can quickly erase any progress you make in saving and investing. Credit card interest can be upwards of 25%! The minimum payment may look small but over time your $10,000 balance can cost you $20,000 in interest alone!

To avoid this mistake, focus on paying off high-interest debt as soon as possible. Once you’ve eliminated credit card debt, always pay the balance in full each month to avoid accumulating interest charges. Reducing or eliminating credit card debt is one of the fastest ways to increase your savings rate and get closer to your FIRE goals.

3. Thinking Early Retirement Will Solve All Your Problems

While financial independence can certainly provide peace of mind and freedom, it’s not a magical solution to all of life’s challenges. In reality, without a clear sense of purpose, a plan for how to fill your time, or a healthy work-life balance in the years leading up to retirement, early retirement can feel isolating or even unfulfilling.

To avoid this pitfall, it’s important to build a life and mindset that aligns with your values long before you retire. Develop hobbies, engage in personal growth, and focus on what brings you joy. FIRE isn’t just about quitting your job—it’s about designing a life where your time is spent in a way that fulfills you. Without a sense of purpose, retirement can quickly become a letdown rather than a reward.

4. YOLO’ing It All on Risky Investments

No one likes to hear that they have to work another 10 or 20 years to retire. Cryptocurrency, meme stocks, and other high-risk, high-reward ventures—have tempted many people to take shortcuts to financial independence. While it’s fine to take some risks with a portion of your portfolio, putting all your money into speculative investments can derail your progress towards FIRE.

Instead of chasing the latest trends or betting on the next big thing, focus on building a diversified portfolio that balances risk and return. The stock market and real estate are tried-and-true strategies for growing wealth over time. 

5. Overlooking the Cost of Health Insurance

Healthcare is one of the most significant expenses for early retirees, yet it’s often overlooked until it’s too late. If you retire early you won’t be eligible for Medicare until age 65, and health insurance can be expensive. And I mean really expensive! A lot of early retirees find themselves facing exorbitant premiums and out-of-pocket costs for private insurance plans, which can drain their savings if not properly accounted for in their FIRE plan.

To avoid a healthcare nightmare, factor in the cost of health insurance from the outset. New Jersey residents have access to Get Covered NJ, the state’s health insurance exchange. Here you can qualify for subsidies based on your income to offset the cost of insurance. And because you’re retired it becomes much easier to control your income so you can qualify for more subsidies. Other ways to save include using a high-deductible health plan and using health savings accounts (HSAs) to cover medical expenses. 

6. Inadequate Cash Reserves for Emergencies

While FIRE advocates often emphasize investing for the future, some make the mistake of neglecting their emergency fund in favor of putting all their savings into long-term investments. Cash reserves, however, are critical to weathering unexpected events such as job loss, medical emergencies, or sudden financial setbacks. 

To avoid this issue, ensure that you maintain an adequate emergency fund, ideally 3-6 months’ worth of living expenses, and in retirement you may want even more than that. This money should be easily accessible in a high yield savings account or a liquid, low-risk investment like government money market funds or treasury bills.

7. Relying Too Heavily on Cash Savings

Having inadequate cash reserves is an issue and the opposite is true as well. Some people pursuing FIRE make the mistake of saving large amounts of cash in savings accounts, believing it’s a safe way to build wealth. While it’s important to have cash reserves, relying too much on cash can severely limit your investment returns over time. Inflation will erode the purchasing power of your savings, meaning that your cash will lose value if it’s sitting idle. Typically, cash will only make up a small portion of your overall strategy.

8. Underestimating Longevity

Many people underestimate how long they’ll live and, therefore, how much money they’ll need to sustain themselves in retirement. With advancements in healthcare, people are living longer than ever, which means you need to plan for a retirement that could last 30 years or more. 

To avoid this mistake, plan conservatively and estimate your retirement timeline based on a longer life expectancy. Factor in healthcare costs, inflation, and potential unexpected expenses. These are all things that we can project with planning software to see how little changes create a butterfly effect down the road. I run projections out to the age of 100 for clients to see if there are risks of running out of money before then.

9. Focusing on Cutting the Wrong Expenses

We always hear about how that $5 cup of coffee every workday adds up to $1200 a year. And sure, cutting down on expenses like this is beneficial, but that’s probably not what’s keeping you poor. Your $700 a month car payment and $3,000 rent is what’s keeping you poor. By focusing on cutting down on these big expenses you may be able to save 1200 a month; not just a year, like if you cut out the coffee.

Conclusion

Achieving financial independence and possibly retiring early isn’t a one-size-fits-all journey, and it certainly isn’t without its challenges. However, by understanding the variations of FI/RE, taking deliberate steps toward financial discipline, and steering clear of common mistakes, you can put yourself on the track towards a more secure and fulfilling financial future. With the right mindset and careful planning, you can break free from the constraints of traditional work life, building a more rewarding and flexible lifestyle for yourself and your family.