Monday 3rd May 2021
I turned 37 in April. As I blew out my birthday candles, I released I had nothing to wish for - I had everything I needed and was content with my life.
Contentment is an important aspect of the FIRE movement, and one which is often not mentioned. Often when blogging and podcasting, it is easy to focus on the exciting things about trying to become financially independent... in truth, 90% of the FIRE movement is simply good old fashioned hard work - jump out of bed, work hard, save hard and invest well. Rinse and repeat for 8-15 years and you should be somewhere close (assuming you can get your savings rate to over 50%)!
Contentment is important as well, because one is going to need that as a minimum to actually become financially independent. Resisting the urge to upgrade a phone, car or bigger house takes discipline, especially when you see friends and peers with the latest gadgets.
Contentment also extends to other aspects of the FIRE movement. In April, we were able to add €4,500 into our investment portfolio. This was done via a €4,000 pension contribution and €500 added to our emergency fund, which lives in my web development company. While we continue to build wealth in our pension and company, our personal financial situation is challenging at best.
We deliberately pay ourselves at the lower tax rate to avoid paying 50% tax - something which we have identified as a key component of our ability to become financially independent. It should be noted that we do have some income that we pay 50% tax on - such as income from our rental property and from affiliate commission, however this income isn't tied directly to our time. As we see it, working one hour and giving half of that income to the Revenue Department is simply an unfair deal.
Having three children and recently moving house has put some financial pressure on us over the last few months. We have had to make renovations and repairs in the new house, which has made keeping our budget difficult at best. However, as a family we know that we need to continue pushing ourselves to add to our portfolio and that our personal finances - while in a mess at the moment - will correct themselves with some good old fashioned discipline.
The numbers tell the full story. In the first four months of the year, the portfolio has grown from ~€149,500 to ~€173,500 (up €24k in 4 months). Obviously this has been helped by the sharemarket hitting all time highs, but even without that, our ability to continue to add regularly to our portfolio is the reason for majority of the growth.
April marks three years since we made our first major investment and assuming we continue to put in €4,500 a month, we are on track to be financially independent within 5 and a half years (and assuming a 7.1% annual return).
Obviously we are aware that we don’t know what is in store for the markets over the next 5 years, and anything could happen. In truth, a good sharemarket crash at this stage would be welcomed, allowing us to purchase more units now for a cheaper price - but all we can do is ignore the noise and keep cost averaging into index funds at this stage via our pension.
Our plan for the next number of years is to continue to boost the pension. The hope is to build it up to around €400k - €500k over the next 5 or so years. We have adopted the “BaristaFIRE” approach - we are looking to save as much as we can now into our pension (which is very tax efficient), to then be able to stop working full time. I would ultimately like to go back to working part time / casual hours as a software developer (as I did in 2019), knowing that I have my future secured financially for when I turn 55 and can access my pension.
The alternative is that I continue to work full time after boosting the pension to €400k - €500k, and start saving extra income to bridge the gap between the time I can access my pension (likely at 55). In truth, the part time approach is likely going to be more appealing, but it is something which I can decide when I get there!
This plan likely sounds easy on paper. Honestly, trying to balance family life, working full time from home and other personal projects is hard work. I wrote last month that I finally was enjoying work again after a number of years of struggling with it - and I still am. However, trying to keep things “low stress” in the IT industry can be a challenge. This month alone, I had several late night phone calls with website issues, some deadline issues with several projects and a lot of headaches and stress. It’s tough - trying to please clients, spending enough time with the family, getting in exercise and time for fulfillment - all while trying to maintain a savings rate of around 70% - this FIRE stuff isn’t for the light hearted!
The good news of course, is that we have a clear plan and a path forward to reach FI in the next 5 years or so. The rest is just implementing it!
Let’s jump over to the numbers:
|Portfolio Summary (as at 30th April 2021)|
|Portfolio Capital Gain + Income||€2,704.95|
I use the 4% rule to calculate how much I could withdraw from my portfolio. This rule basically says, that if one were to withdraw 4% of their portfolio per year, that it is very likely that they would out live their portfolio. There are some critic's that dispute this and say the number should be lower, but I am happy to work off the 4% rule at this stage.
Based on the 4% rule, my investment portfolio now produces a monthly income of €578.54 (173,561.89 ÷ 25 ÷ 12). My target goal to become FI is €2,000 per month (meaning I need an overall portfolio of €600,000). Based on my current portfolio value, this means I am 29% on the way to FI!
This is a strange report, because I group capital gains and income together. Because we are ultimately withdrawing 4% (either via income or selling assets), it doesn't really matter how the portfolio grows. Therefore, this report records the changes based on asset types within the portfolio for the month:
|Monthly Portfolio Capital Gain + Income Report|
|Capital Gain + Dividend Income from Equities||€2,103.51|
|Peer to Peer Lending Income||€5.14|
|Cryptocurrency Capital Gain||-€94.67|
The table below shows the breakdown of my portfolio into the various asset classes:
|Portfolio Asset Breakdown (as at 30th April 2021)|
|Index Funds (Equities)||€75,447.10||43.47%|
|Business Venture Equity (Start Up Investments)||€10,416.61||6.00%|
|Peer to Peer Lending||€1,641.37||0.95%|
Foolish investments are bad investments I made early on, where I find myself not in a position to cash the investments out. I have no evidence yet to suggest that I won't see a return from these investments, so for now, they remain as part of my portfolio, until such a time that I am able to cash out, or the investment gets written off. These investments are a mix of bad peer to peer lending loans and investments in private companies. These foolish investments are all unregulated investments.
|Good vs Foolish Investments (as at 30th April 2021)|
I thought I would highlight what percentage of my portfolio is within my pension (which I won't be able to access until I am 55). We do have a rental property and the plan would be to withdraw that monthly income once I cut down to part time work. At the moment, we simply invest that money back into the portfolio.
If I am able to get my pension balance to a little over €400k by the time I am 42 (5 years away), then assuming an average return of 7.1% over the next 13 years, the overall pension value would have grown to over €1 million by the time I need to withdraw from it.
|Pension VS Non Pension Investments (as at 30th April 2021)|
|Non Pension Investments||€97,794.90||56.35%|
I thought it would also good to show a quick year to date summary, so you can see how the numbers look at a bigger scale:
|Portfolio Summary (from 1st January - 30th April 2021)|
|Portfolio Capital Gain + Income||€7,014.16|
This one is a little tongue and cheek - but based on my FI calculator results, and given that I work ~230 days a year, I have approximately 1,265 full time work days left to FI, or 253 Monday's!
Finally, it isn't all just about money! I also work on projects because I want to make positive changes to the world! Here are some projects I am part of:
I launched The Irish FIRE Podcast in June 2019. While I did run ads back on the podcast when it first launched, these days I run the podcast as a passion project. The podcast shares my story on my journey towards financial independence.
An Dúlra Co-Op is an Irish initiative hoping to make a positive difference, by establishing Irish native woodlands. Irish residents can become shareholders of the co-op and become part owners of newly established Irish forests. I co-founded the co-op in September 2020. We are still looking for new investors, so definitely check it out!
Portfolio Tracker is designed for those who are pursuing financial independence and are looking for a software that will add accountability to your FI journey. Portfolio Tracker is a simple, flexible investment software that will allow you to see the growth of your portfolio over time, without being complicated to maintain. Click here to track your own portfolio.
I helped co-found four new hockey clubs in North Munster, introducing over 300 children to the game of hockey. Interested in your children playing hockey? Feel free to bring them along to any of the following hockey clubs - Castletroy Hockey Club, Ennis Hockey Club, Nenagh Hockey Club and Thurles Hockey Club.