August 2023 Portfolio Update
Sunday 3rd September 2023
The 10 Year FIRE Journey
2023 is my sixth year into my FIRE journey, and it is shaping up to be a very good one. After a less than impressive 2022, the portfolio is performing well, returning a solid 12% return in the year to date - due largely to an improving sharemarket and an increase in valuation of our investment properties.
As it stands, if things continue the way they are now, our family is on track to hit our FI number by December 2027 - ensuring that we hit our FI goal within 10 years of starting it (we started in January 2018).
There is always temptation to rush things a bit faster than the current progress, but overall we are in a good place. Work is sustainable, life is balanced and our progress is solid.
FI Number Update
It has been a few months since I provided an update on our FI number. My most recent FI number was €800k. This number tends to change depending on inflation, our personal cost of living and when we plan to retire. I do still plan to work a little in retirement, likely still freelancing as a web developer for a couple of my existing clients, so I don’t always get too strict on my FI number, knowing I will have a small bit of income in retirement anyhow. Interestingly, we gave up on the 4% rule, as we found the ‘Die with Zero’ calculator to be a far better tool to calculate our FI number, especially when accounting for a mortgage being paid off one day and the state pension.
Attached below are screenshots from my own ‘Die with Zero’ calculator. You can download the calculator at the Money Flamingo website (thanks again Tina).
You will see, I use a 4% real return (a return adjusting for inflation), which I think is really conservative. Remember the calculator itself will always be adjustable in real time, which is one of the great things about how it works. This differs from say the 4% rule, which says you are 95% likely to be OK - and which assumes one's annual withdrawal amount stays the same (albeit adjusted for inflation), which just doesn’t really make sense. As it is, in our case, our withdrawals will reduce overtime as our mortgage is paid off and the state pension kicks in.
You can see our full calculation below:
And from the reading, you can see our FI number stands at €834k.
Here is the thing though. With the ‘Die With Zero’ Calculator, time is more important than the final FI number. For example, if I tried to retire today on €834k, it wouldn’t be enough. The extra 4 years of withdrawals wouldn’t provide enough coverage for me. So my final number will not be €834k - it will change depending on actual returns and any inflation adjustments. It could go up - or down from here. The one constant I can control however, is WHEN I retire. Therefore, as much as it is fun for me to quote an FI number, it isn’t that figure that is in my head. The figure that is in my head is December 2027 - the month I can hit my FI date. One’s FI date is a far better metric to follow than an FI number.
I know that I can control my FI date, because I can control how much I can pay off our 3 mortgages each month. Recall my latest investment plan is to simply start paying down 3 of our 4 mortgages on our investment properties to allow us to live on the rental income long term. I have a good idea on the interest rate, I have a good idea how much I can pay down each month - so it is pretty simple to build a plan around that to have all 3 mortgages paid off by December 2027.
August 2023 Portfolio Report
August was a solid month for the portfolio, albeit my stock portfolio did drop a little during the month. It broke a few solid months on the sharemarket side - but this is all part of the fun.
We have been doing some maintenance on our investment properties. I had great fun with my six year old in August, painting a fence on one of our properties. It was great seeing just how hard he was willing to work - he painted the fence for three straight hours with me. It is a great way for us to spend quality time together - and him learning about sweat equity first hand. I paid him €5 euro an hour for helping me, but the real lesson I am trying to pass on is that looking after an asset is important. He kept asking me what I was getting from painting the fence, and I answered it by saying “you will learn in time, son, that some things are worth a lot more than €5 an hour”. He doesn’t understand yet, but he will one day.
Manual labor is also a great way to appreciate a desk job. My day job of sitting at home at my desk and writing code is a walk in the park compared to the toll that painting a fence has on the body. When I returned to work on Monday, I had a new spring in my step - plus had the satisfaction of a job well done with the fence painting.
Finally, we started moving cash into our forth investment property in August. We will have a low cash balance over the next few months while we look to cover the deposit for this purchase.
| Portfolio Summary (as at 31th August 2023) | |
|---|---|
| Opening Balance | €454,236.25 |
| New Contributions | €5,000.00 |
| Portfolio Growth | €680.55 |
| Closing Balance | €459,916.80 |
Monthly Portfolio Growth Report
| Monthly Portfolio Growth Report | |
|---|---|
| Capital Gain + Dividend Income from Equities | €-1,480.88 |
| Real Estate Income | €2,161.43 |
| Total Growth | €680.55 |
| % Return | 0.15% |
Portfolio Breakdown
The table below shows the breakdown of my portfolio into the various asset classes:
| Portfolio Asset Breakdown (as at 31st August 2023) | ||
|---|---|---|
| Equities (Stocks) | €146,346.73 | 31.82% |
| Real Estate | €312,880.38 | 68.03% |
| Cash | €689.69 | 0.15% |
| Total | €459,916.80 | 100.00% |
2023 Year to Date Returns
Here is a summary of my year to date returns for 2023.
| 2023 Year to Date Growth Report | |
|---|---|
| Opening Balance | €342,734.85 |
| New Contributions | €65,400.00 |
| Equities Capital Gains + Dividends | €19,288.89 |
| Real Estate Capital Gains + Rental Income | €32,493.06 |
| Closing Balance | €459,916.80 |
| Portfolio Return | €51,781.95 |
| % Return | 12.69% |
Lifetime Portfolio Returns
Here are my returns since I started in 2018.
| 2018-2023 Growth Report | |
|---|---|
| Opening Balance | €0 |
| Contributions (Money Added) | €321,845.78 |
| Equity Release* | €41,220.21 |
| Real Estate Capital Gains + Rental Income | €78,932.46 |
| Equities Capital Gains + Dividends | €21,783.08 |
| Other** | -€3,864.73 |
| Closing Balance | €459,916.80 |
| Portfolio Return | €96,850.81 |
* In 2020, some of the new contributions came in the form of an equity release, as we turned our primary residence into a buy to let and purchased a new home to live.
** In 2018 & 2019 I made several bad investments in peer to peer lending, forex trading and unregulated investments, which resulted in losses overall.
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