It is a way of saying that someone is living bravely and doing what they truly want to, sometimes indulgently.

For Example:

The phrase is usually used in the following manner: “He (or she) is living life in the fast lane.” This usually has little to do with driving, as it may sound. It is true though, that people who choose to live life in the fast lane may also drive in the fastest lane on a highway.

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Dialect Zone International