Wouldn’t it be nice to retire when you’re young enough to enjoy it, and have the energy to travel the world or spend time with your family? That’s what the Financial Independence, Retire Early (or FIRE) movement is all about.

I hit my retirement number in 2018, still in my early 40s. If I wanted, I could retire and never work another day in my life. However, I like making the world a better place through business, so I’m choosing semi-retirement instead. Now I work on what I want, when I want, and where I want — and travel the world the rest of the time (hi from Los Angeles at the moment!).

There are three basic steps to Financial Independence, Retire Early:

  1. Develop good financial habits.
  2. Know your retirement number.
  3. Prepare for retirement.

Develop Good Financial Habits

While you might think the easiest way to get rich is to win the lottery, many lottery winners don’t have good financial habits and go broke again! The best way to get rich is slowly, through good financial habits. If you don’t have these, I recommend reading some books on personal finance, such as The Millionaire Next Door or Rich Dad, Poor Dad.

Here are some of my favorite financial habits that I have honed over the last decade:

  • Spend less than you earn. This seems obvious, but most Americans don’t get it.
  • Get out of bad debt. Credit card debt is for suckers. Pay it off first and never borrow from a credit card again (I haven’t in 20 years). Then pay off auto loans and other personal debt, then student loans. Loans that let you leverage appreciating assets, like a home mortgage or a business, may be worthwhile (I have several mortgages, but chose not to go into debt for any of my businesses).
  • Develop multiple streams of income. I have rental properties, an Airbnb room, stock investments, and three businesses right now. Even if I didn’t work, I’d still have income coming in. And if any of my nest eggs breaks, I still have others.
  • Invest wisely. Take advantage of compound interest and have your money make money! Don’t try to time the market, but don’t be afraid to go opposite of what everyone else is doing.

Know Your Numbers

Now that you’re saving money, you need to know two numbers:

  1. Your net worth. This is the total value of all of your assets, including cash, money in the bank, home value, credit card debt, . I use mint.com for this to track it daily.
  2. Your retirement number. This is the amount of money that you can live on for the rest of your life. There are a number of ways to calculate this, but I like using the 4% rule. Figure out how much money that you can live on for the rest of your life, and then multiply it by 25. For example, if you need $50,000 per year, then you need $1.25 million saved. You can put this in a fairly safe account that earns 4% a year, and never have to work again! It’s even safer if you have passive or semi-passive income, such as rental properties or a business.

Plan For Retirement

Once you are getting near your retirement number, you should start planning for your retirement. Here are a few things to keep in mind:

  • Lifestyle – What is the lifestyle that you want when you retire? Do you want to buy an RV, live abroad, or play computer games 24/7? Do you have a spouse and are they onboard? What about children?
  • Healthcare – The Affordable Care Act may not have made healthcare as affordable as we’d like, but it does put a limit on health insurance costs so that you won’t go bankrupt, especially if you have a pre-existing condition.
  • Borrowing money – It’s much harder to borrow money, especially large amounts like mortgages, when you don’t have a steady stream of income. If you have a mortgage, you should consider refinancing before you quit your job or sell your business.

Of course, when you reach your number you may be having so much fun that you don’t want to retire! That’s what I’ve done, and it’s one of the best parts of being an Easy Entrepreneur.