August 2024 Portfolio Update
Monday 2nd September 2024
What will Happen once we hit FI?
I have talked a lot recently about our FI Number, which we have defined as being €750,000 (for now, read more below). I want to clear one thing up in relation to what will happen once we hit our FI number.
The first thing I am going to do is leave full time work. This will either be cutting down to working 3 days per week, or ideally moving to adhoc freelancing work, working 5-10 hours per week. The option I choose will largely depend on how much cashflow our rental properties generate at the time we hit FI. Ideally, I would like to be able to withdraw at least €24,000 per year from our portfolio and offset the rest through causal based freelance work, however in the event the portfolio doesn’t generate that by the time we hit our FI Number, then I will continue to work 3 days a week full time just to cover our expenses until such a time that the portfolio does generate at least €24,000 per year.
We are due to pay off one of our mortgages in January 2025, which is going to free up around €18,000 per year in cashflow - so if we can clear a good chunk of a second mortgage, we are well on our way to generating the cashflow we need!
When looking at the bigger picture, the plan is for us to only draw down from our rental income initially once we hit FI. This means the assets themselves (the actual properties and our stock portfolio), will remain untouched, and thus will naturally increase in value overtime. So yes, there is a good chance that our FI portfolio will grow to a substantial size within 5-10 years of us hitting our FI number - the key thing that we are looking to do at the moment by paying off our mortgages, is to create cashflow for ourselves once we hit FI, without needing to sell our underlying assets.
I (like most that hit their FI Number) will make significant life changes once we hit FI, however I won’t consider myself fully retired - just semi-retired - as I will still be working a little in retirement on projects I enjoy.
The Spanner in the Works
I don’t want this to sound like I am looking to push the goal posts out, however there are some significant cost factors coming up in the next 12-18 months that may require us to adjust our FI Number.
We are due to hit our FI Number sometime in 2025, however the closer we get, the more I am looking at our overall spending to make sure everything is in line with our expectations.
Interestingly, some of these costs we can control. For example, we recently ended a 3 year contract with our security system monitoring company. They increased our monitoring costs from €29.95 per month to €33.45. However, when I called them up to ask about our options, I ended up renegotiating a new lower monthly cost of €24.95. A pretty decent discount when you factor in inflation over the last 5 years.
However, there are some costs that are going to be unavoidable. Firstly, our health insurance costs jumped €360 per year in our recent renewal. I am going to try to negotiate this cost down, but I have a feeling this will be tough, as health insurance costs have risen overall. This pushes our monthly costs out by €30 per month. We also faced a similar cost increase recently in our home insurance, which I wasn’t able to negotiate down - again costs have risen across the board.
But the real big concern I have is that in November 2025, we will come off our 5 year fixed mortgage. Our current interest rate is 2.4%, far lower than the current mortgage rates. Thankfully, we do have a B3 rated house, so we will be eligible for the ‘Green Mortgage’ rates, but this could push our monthly mortgage costs out by another €200 - €300 per month - a pretty significant cost factor.
Don’t get me wrong, I could easily pretend none of these cost increases are a factor and declare ourselves FI when the portfolio hits €750,000, however, I would prefer to be honest with myself (and to you reading this) and say that this is all part of the FIRE process. Inflation and cost increases are natural, but the FI Number should be adjusted annually to reflect this, and so please do expect me to account for this as we move closer to hitting our FI Number.
But I guess the fun part is, I will show how this gets accounted for in our ‘Die with Zero’ calculator, so you can see first hand the impact that increased spending has on our FI Number - buckle up, it is going to be a bumpy ride!
August 2024 Portfolio Update
August was a solid month overall. Our rental properties performed well, with no major hiccups. Stocks were up overall in August, which came as a small surprise, as there was initial fear at the start of the month that stocks were about to go into a big decline. This simply shows the power of ignoring the news and carrying on as normal.
The biggest change moving forward from next month is that our monthly contributions are decreasing from €7,500 per month back to €5,000 per month. This is because one of my project’s recently finished up and I am not looking to replace this - instead enjoying working less, earning less, but getting to enjoy life more! Our portfolio has returned over €70,000 year to date, yet our contributions have only been €58,200, highlighting the fact that we are at the stage of our FI journey where our portfolio returns are a bigger factor than our contributions. Therefore, me pushing on and working additional hours to grow the portfolio is definitely no longer necessary. We are going to hit FI sometime in late 2025 or early 2026, and how much we contribute from here is really only going to move the needle by a matter of months, not by years.
As an aside, a neat little milestone was achieved during August - we have officially made contributions of €400,000 to the portfolio since we started in 2018!
Here are the overall portfolio numbers:
| Portfolio Summary (as at 31st August 2024) | |
|---|---|
| Opening Balance | €618,121.93 |
| New Contributions | €7,500.00 |
| Portfolio Growth | €4,427.01 |
| Closing Balance | €630,048.94 |
Monthly Portfolio Growth Report
| Monthly Portfolio Growth Report | |
|---|---|
| Capital Gain + Dividend Income from Equities | €1,057.64 |
| Real Estate Income + Capital Gain | €3,354.12 |
| Interest on Cash Savings | €15.25 |
| Total Growth | €4,427.01 |
| % Return | 0.71% |
Portfolio Breakdown
The table below shows the breakdown of my portfolio into the various asset classes:
| Portfolio Asset Breakdown (as at 31st August 2024) | ||
|---|---|---|
| Equities (Stocks) | €177,493.96 | 28.17% |
| Real Estate | €449,091.43 | 71.28% |
| Cash | €3,463.55 | 0.55% |
| Total | €630,048.94 | 100.00% |
2024 Year to Date Returns
Here is a summary of my year to date returns for 2024.
| 2024 Year to Date Growth Report | |
|---|---|
| Opening Balance | €498,900.39 |
| New Contributions | €58,200.00 |
| Equities Capital Gains + Dividends | €23,933.08 |
| Real Estate Capital Gains + Rental Income | €48,936.71 |
| Interest on Cash Savings | €78.76 |
| Closing Balance | €630,048.94 |
| Portfolio Return | €72,948.55 |
| % Return | 13.09% |
Lifetime Portfolio Returns
Here are my returns since I started in 2018.
| 2018-2024 Growth Report | |
|---|---|
| Opening Balance | €0 |
| Contributions (Money Added) | €400,067.78 |
| Equity Release* | €41,220.21 |
| Real Estate Capital Gains + Rental Income | €140,076.84 |
| Equities Capital Gains + Dividends | €52,470.08 |
| Interest on Cash Savings | €78.76 |
| Other** | -€3,864.73 |
| Closing Balance | €630,048.94 |
| Lifetime Portfolio Return | €188,760.95 |
* 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.