In Just 7 Easy Steps, You Can Retire Early & Travel

So many people dream of quitting work forever to live out their dream of traveling but have no idea how to get started. Well, we’re going to break it down for you and we’re going to do it in just seven simple steps. 

Just a few short years ago, we were a typical couple burning ourselves out trying to climb the corporate ladder. Our lives were almost entirely devoted to work with the exception of a tiny sliver of time on the weekend when we would catch up on chores and binge watch Netflix. 

Travel was our passion and the only thing that got us through the work week was counting down the days until our next trip. But when our vacation days got closer, we’d have to work even more frantically so we could step away from the office for a week or two. Sometimes it didn’t even seem worth it to take a vacation because it just added to the stress. 

Let’s compare that to our life today. We no longer need to work because we’re financially independent. That means no more bosses, no more meetings, no more Sunday blues. Even better, instead of going to the office, we get to spend our days traveling the world. We’re based in a new city every month and every day there’s something new and exciting to discover.

The best part is that everything we did to get to where we are today, you can do too. We followed seven basic steps to come up with our big dream and our plan for retiring early. 

Step 1: Your Big Dream

How will you spend your time once you no longer need to work for a living? For many of us, the big dream is to finally do all the traveling we never had a chance to do. When I was younger, I always wanted to backpack Europe or spend a few months in Southeast Asia. Of course, I thought I had all the time in the world to do those things. But suddenly I was “grown up.” I was married with a mortgage and choices felt more limited. I was locked into the standard corporate path and almost forgot that there might be other options in life.

That’s why it’s so important to take the time to reflect on what you want to do with your life and how you would  spend your time if earning money was no longer an issue. Coming up with your big dream for life after work is what will keep you motivated on the path to early retirement. It will also help you budget for your future life, which we’ll get to in just a moment. 

Step 2: Track Your Spending

There’s just no way around it; if you want to come up with how much money you’ll need for the future, you’ll need to know how much you’re spending today. Sure, you probably know how much you spend on your rent or mortgage and likely have a sense of recurring bills. However, many of us spend money in ways we don’t even notice, whether it’s that extra item in your online shopping cart or buying a cappuccino everyday. 

It may be surprising to learn that, until just a few years ago, we had never tracked our spending. Once we decided on the goal of financial independence, we knew it was time to finally start tracking every dollar and penny. Honestly, it was a shock. We couldn’t believe all the excess spending we were doing every single month. Over the years, we had fallen into pricey habits like joining a boutique crossfit gym, going to a fancy hair salon or dining out a few times a week.

We discovered that there was a lot of fat we could and should cut if we were serious about retiring early. And all it took was logging our spending for a few months to spot the opportunities to save big.  

Step 3: Budgeting for the Future

Next is estimating a realistic budget for your dream lifestyle that we talked about earlier. Is your goal to travel continuously over the next few years? Or are you planning to keep a home base and take a few long trips each year? Do you want to spend all your time in the high cost countries of Europe? Or do you want a backpack lifestyle in Central America? 

Using your existing budget from Step 2 as a base, you can estimate an annual budget for the lifestyle you want to have in early retirement.

We knew that once we retired, we wanted to travel the world full time. We didn’t want a home base or any possessions to worry about. Instead, we would be in a new city and a new Airbnb each month. 

Of course, we needed to figure out how much this new lifestyle would cost. So we researched the cost of living in different countries using Numbeo…we searched Airbnb to estimate the cost of accommodations…and we used Google Flights to figure out our travel costs. All of this helped us come up with the annual budget for our new lifestyle.

Step 4: What’s Your Risk Tolerance?

Now we’re starting to get serious: What’s your risk tolerance? If you want to say goodbye to working for a living and take up full time travel or anything else your heart desires, you need to have enough money— ideally to last you the rest of your life. 

One rule of thumb that many people within the financial independence community follow is to save 25 times their annual expenses. Remember, you just calculated your annual expenses in Step 3. Of course, this money can’t just sit in your savings account. It needs to be invested in a diversified portfolio so that it generates a return you can live on. 

This next part is really important. Many people feel that 25X your annual expenses is a bit risky. A lot can happen over the course of your early retirement like inflation, market downturns and rising health care costs. For that reason, many people — including us — choose to save up 30X their annual expenses or even more. So depending on your own risk tolerance, what’s the right multiplier for you?

Step 5: Your Financial Independence Number

Now comes the fun part: it’s time to calculate your financial independence target number. The math is simple. Just take your expected annual expenses from step 3, multiply it by Step 4 and there you have it. This is the amount of money you need to save and invest if you want to say goodbye to the office forever. 

Why is this number so important? This is the amount that represents your freedom and provides a clear goal for you to work towards. Once we calculated our financial independence number, it was really exciting because our plans for the future suddenly felt within reach. 

Still, once you’ve landed on your number, you’re only at the beginning of the journey. 

Step 6: Your Action Plan

The next step is to figure out how to achieve that number. And that becomes your action plan. Are you comfortable just saving the same amount as usual every month? Or do you want to accelerate your journey to financial independence and early retirement?

If you want to get there even faster, you’ve got lots of options. You can spend less each month and therefore save more money. You can try to earn more, whether it’s going after a promotion or starting a side hustle. Or you can invest smarter; take a look at your portfolio and see how you can improve it. For a few thought starters, check out our blog post and video on how we invest and learn from all our mistakes.

Whether you start a side hustle, trim your monthly budget, or change up your investment portfolio, there are many strategies that could help you achieve your financial goals. 

When we were focused on growing our savings, we tried all kinds of strategies. We worked as expats in Singapore to save on taxes, we cut our living expenses, we switched to low cost index funds and lots more. 

Step 7: Track Your Progress and Stay Motivated

It can be a long journey to early retirement — it could be years, it could be decades. Some people already have a nest egg, while others are starting from scratch and lots of people are still paying off debt. No matter where you’re starting from, the important thing is stay motivated and celebrate your wins. You can use tools to track your savings and watch your net worth grow, whether it’s pen and paper or a fancy app. You can create accountability by sharing your wins with family or on social media. 

And don’t forget to enjoy the journey. When we were cutting costs, we tried to make frugality fun. Instead of blowing our budget on fancy dinners out, we invited friends over for theme nights.

There it is…the huge and complex goal of retiring early and traveling in just seven steps. But what’s the best way to get started on your journey right now? We recommend choosing one small thing…one small action…and doing it today. Choose the thing that makes sense for where you are in your journey. 

If you haven’t come up with your big travel dream, don’t wait…pick your first destination today. If you’re ready to track your spending, download an app today and log your very next purchase. If you need to budget for your future lifestyle, look up your bucket list countries in Numbeo and see how much they cost. Start small but start today.