Dylin Redling and Allison Tom at Niagara Falls Source: Dylin Redling and Allison Tom

In a growing movement, people in their 20s and 30s are planning to retire early. Like, by age 35 or 40. Early financial independence isn't just for top earners. People in expensive cities who don't make huge salaries are also planning on retiring way before 65. They all have a few things in common. They live well below their means. They invest heavily in low-cost mutual funds. They are buy-and-hold investors. And they all make extremely personal spending decisions.



You don't need a budget

Many people think sticking to a dreaded budget is essential. Wrong, says Grant Sabatier. At the moment, Sabatier's main job title is blogger and author of "Financial Freedom," to be published in February. Now 33, Sabatier started pursuing financial independence at age 24. He was able to do it in five years and three months. Most people find budgets tedious and difficult, and there's a good reason, Sabatier said. They're overwhelming and have you trying to look at everything at once. Here's how to budget without budgeting. Take an expense category, such as housing or transportation. Ask if the total amount is giving you what you want in return. Can you buy a cheaper car or move closer to work? Can you trade down in housing and save money on that monthly cost? Looking at the big expenses can be a powerful strategy. Minimize those expenses that may not bring as much happiness as a movie ticket or latte. "Those are the things where the per-dollar amount and joy ratio is very high," he said.

Spend on what's important

Not everyone is pursuing financial independence for an early retirement. H.N. (she asked that her initials be used so her employers do not know about her finances) said it's expensive to be sick. The 29-year-old has multiple disabilities and was diagnosed with an autoimmune disease last summer. "I don't want to retire," she said, "but I want to make sure my finances are in as order as much as possible. The permanent disability rate of my condition is very high." H.N. lives in New York City, where the cost of living is high but her salary is not. To cope, she manages her money carefully to make room for the things that are important to her. "People assume I'm living this horrible, deprived life, but I really don't think I'm deprived," she said. To manage life on a $62,500 salary, she has a roommate, bringing her share of the total $1,690 rent to $810 a month. Her initial goal was to save as near as possible to $100,000 by age 30, which she hit this year. Rents are high in her area but food is good and quite cheap. Her monthly grocery bill runs between $300 and $500 a month, and she eats out infrequently, keeping it to $20, including tax and tips. That generally means going without appetizers and desserts. While many FIRE people love to leverage credit card points to save on travel, H.N. and her partner don't spend enough money to accumulate points and miles. For a recent trip to Europe, she sprang for $3,000 business class seats. The extra rest and comfort made the cost worth it so she wouldn't arrive exhausted and possibly ill.

Try geographic arbitrage

Don't be afraid of bears

Redling says they're fortunate to have experienced two big bear markets – because while it hurt their bottom line in the short run, they learned they could come out the other side intact. "Our strategy since Day 1 has been the Warren Buffett strategy of buy and hold for the long term," Redling said. "Our nest egg is here to work for us for the next 30 years."

Treat money with respect

Redling had an epiphany when he and Tom were first dating. Both were working a restaurant in Times Square. "I shoved all my cash in my pocket one day," he said. When Tom saw this, she said, "What are you doing? You worked very hard for that money – put it in your wallet, and put it in order." Her comments changed Redling's way of thinking about money, from disregarding it to paying much more attention to the value of money and its relationship to work. "Think how hard you worked for that money," he said. "Hopefully everything else will come from that initial respect for the value of money."

Reduce temptation