Smart Coasting in California: How Managing Fixed Overhead Unlocks True Financial Freedom

Here is the core philosophy of Coast FIRE: Reaching financial independence while enjoying the way to get there. Coasting FIRE is all about saving and investing lots of money in the early years of your career. 

Then your money grows quietly in the background while you’re working, until one day your savings are enough to cover your retirement. After that, the money your investments make can be enough to cover the current costs of living, so you won’t need to earn money anymore. 

You’ll have the chance to switch to a lower-paying job or to work part-time. You could also go for an extended trip or take your time to enjoy the things that are important to you.

It sounds so dreamy, but how do you keep up the momentum when real life happens? Coast FIRE sounds so easy on paper, but how do you really keep up the momentum when real life starts to happen?

Understanding your fixed expenses is also key to coasting. Practitioners, such as we call them on the West Coast, need to have a handle on their fixed overhead costs, or else they will be running in the red. 

These can include rent or mortgage, utilities, food, and transportation costs. Practitioners can track these costs through receipts or other tracking methods. Once they know where their money is going, they can make cuts as needed. This will help them save money to put towards their retirement goals.

The Reality of Living Costs in California

Of course, as many know, California offers incredible opportunities, coastlines, and communities. However, it’s generally acknowledged that California has a higher cost of living than other states. 

Therefore, high fixed costs will be a major impediment to your ability to coast in many locations throughout the state. To get around this, you will have to work long hours to try and save enough to cover your costs. 

This would not be very fun, as it would consume most of your time and energy, thus preventing you from enjoying your life and pursuing your passions.

And that’s the point.

By lowering the required fixed costs for Coast FIRE, one can create more financial freedom to choose between different options for their future. 

If someone wants more time for their family, to study, or to change careers in a different industry, reducing the required income for their current situation will make that possible.

One of the largest expenses for any household is transportation. Next to housing, transportation can be very expensive. In addition to the cost of fuel for your car, the expenses for maintenance and repair of your vehicle, registration fees, and required insurance coverage, there are additional costs such as parking fees, tolls, public transportation expenses, etc. 

While we have no control over gasoline prices, required registration fees, etc., we do have control over the cost of required protections such as insurance coverage, etc. 

We can often shop around for the cheapest required insurance coverage, etc. If we have a vehicle that requires coverage under our own policy for others, we can often save by obtaining coverage under a different policy for that vehicle. 

For example, a policyholder may have several vehicles in their household that require coverage under their policy for others. Rather than having all vehicles covered under the same policy, the policyholder can obtain a separate policy for one or more vehicles to save on the cost of required protections for those vehicles.

By minimizing your mandatory recurring bills, you can lower your required annual target income, freeing up money to cover your discretionary personal goals or your personal costs on an as-needed basis. 

For example, you could get the cheapest car insurance in California to reduce the annual cost of your required vehicle protection.

Small adjustments build massive freedom over time.

Reduced overhead can help you reach your desired financial milestone faster.

Auditing Your Recurring Overhead

This financial audit will be needed to keep a Coast FIRE strategy robust in the long run. Auditing fixed expenses from time to time can reveal annual sums of money that have been wasted unknowingly.

However, after writing down the expected monthly costs for housing, utilities, memberships, food, and protection, he realized that he was already spending a lot of money. He also thought about how he could reduce costs in several of the categories.

Compare your current rates for things like personal insurance, telephone service, and internet service to what others are currently paying in the market for similar services and consider purchasing to get a new, lower rate, even if you are a current customer and have been a loyal customer.

Eliminate Redundant Expenses: Look for services that provide substantially the same value, such as streaming services (e.g., Netflix, Amazon Prime), phone services, and membership clubs (e.g., Amazon, warehouse clubs). Eliminating redundant services can lead to substantial reductions in required income.

Downgrade coverage amounts. Mandatory overheads are often based on older models and prior lifestyle demands. Decrease the amounts of coverage needed as newer car models decrease in value.

In this way, you develop a very lean budget which supports your independence. It doesn’t have to mean a very stressful job or a high-income job.

Geographical Strategies for Coasting in the Golden State

A Geographic Approach to Coasting in California. While many Financial Planners and budgeting programs focus on the “big picture” of California (e.g., Sacramento vs. LA), the truth is that there are many geographic areas within each major metropolitan hub (or city) that can have very different costs of living.

Is location flexibility something you can leverage in your current situation?

If you are working in a job that allows for remote work or even a split of time between work locations, it’s possible that moving an hour outside of a major urban center could cut your housing costs in half, making way for the other cuts needed to reach your Coast FIRE number.

Reducing the need for personal driving within your California city can provide additional savings, and ways to save on the driving you do need, for example, in purchasing fuel.

Balancing Lifestyle Quality with Long Term Security

Coast FIRE is not about extreme frugality or about trying to live on the minimal. If you are going to have to spend money, then you might as well spend it on experiences, things that bring you joy, things that you can use to build up other people, community-type projects, and hobbies. 

Just make sure that you are keeping your mandatory fixed costs as low as reasonably possible.

When you manage the necessary overheads for your lifestyle, you cut the financial anxiety from your life. 

You are then able to choose whether you want to take a lower-paying job to do something that you are passionate about or take a few days off per week to do things that you enjoy.

Staying disciplined and keeping to the terms of fixed expenses helps safeguard the finances you have worked so hard to achieve and enables you to maintain financial independence for decades to come.

When you master the balance between fixed expenses and personal fulfillment, then coasting can become a whole lot more than just a way to calculate your Coast FIRE early retirement date. Instead, you’ll find that it can become a very fulfilling way to peacefully exist as you keep on keeping on, moving along on your own terms.