Irish Financial Independence & Personal Finance Podcast

December 2022 Portfolio Update

Tuesday 3rd January 2023

The Good and Bad of 2022

2022 was my fifth year pursuing FIRE and in terms of financials, was my best FI year to date. We added €120k to our portfolio and saw our portfolio rise from around €220k at the start of the year to €343k by the end of the year.

While the numbers look great, I have been reflecting in December over my work-life balance in general.

Back in mid 2020, I covered a podcast episode on the four pillars. This was a really powerful episode that explained the four pillars of success:

1. Health
2. Weath
3. Relationships
4. Fulfillment

It has become obvious to me that while I have been pushing myself as hard as possible on the weath side, this has come at the expense of the other three pillars.

Working Towards a Better Life in 2023

Everyone’s FIRE journey is unique, however on every journey some key decisions will need to be made along the way.

For the better part of two years, I have been working as hard as I could, especially in the last 12 months. Along the way, I have forgotten one important aspect - that reaching FI wasn’t why I started down the FIRE journey in the first place. I started my FIRE journey as I wanted to create a better life.

Somewhere along the way, my FI obsession has gotten in the way of my better life. I have sacrificed too much - and now feel that I am missing out on too much. For example:

  • I have struggled to keep my weight down and stay at the same level of fitness that I was. I simply don’t have enough time for exercise.
  • I feel guilty about not being able to spend time with my kids after school.
  • I constantly feel I am missing time with my family and wife because I am working late or caught in a meeting.
  • I didn’t get to play as much golf as I would have liked.
  • I have little to no job satisfaction - I have been working for the money and have been factoring in little else.

When I start to look at the opportunity cost of working primarily for the money, it is clear to see that what I have done, while OK in the short term, was never going to be a long term solution.

I certainly don’t regret those last two years. The last 12 months in particular has been the hardest part, but in terms of our portfolio, buying two investment properties in 2022 and adding €120k to our portfolio has been a game changer for our FIRE journey.

However, it is time I look to turn my journey from a sprint to a mathathon - it was fine for me to do what I did for a short term, but it is the right time for an adjustment. The reality is, there comes a stage where one’s portfolio gets large enough to let compounding to the heavy lifting, and I feel I have built a portfolio large enough to be able to push the foot off the accelerator a little.

I’m not against earning good income - and actually, the income side isn’t so much the issue - it is more about how I am earning it.

When earning money comes with a huge opportunity cost, then this is where other options need to be considered.

Putting job satisfaction ahead of money needs to be the first change that I make. Rather than taking the highest paid job, I need to start to factor in other things into the equation. Things like:

  • How stressful is the job?
  • How much flexibility is given?
  • What is the organisation culture like?
  • Am I well suited for the work, or is there a high degree of learning?
  • Do I get on well with the manager and other team members?
  • Would I actually be interested in this job if I didn’t need the money?

Moving from a money first approach to a lifestyle first approach is going to be the first thing I look to change in 2023 I figure that finding a job that I would actually want to do even if I was retired, is a far better attitude to have, than slaving away at a job I don’t enjoy just for the money.

The ironic thing is, I started my FIRE journey in the first place because I wasn’t satisfied with working, but the real answer was never to work harder doing work I didn’t like to save and retire early - the real answer was to find a way to actually enjoy the work I was doing.

If I can find a way to enjoy working and save on top of that, then I actually am in a position where I can work towards FI in a much more sustainable way than trying to rush because I am trying to escape something I don’t like.

To conclude, you can expect me in 2023 to start working towards putting my lifestyle ahead of racing to FI. I feel I have built up a portfolio to a stage where I can start to pivot and slow down a little.

The truth is, I would rather find work that I enjoy and feel that I wasn’t in a rush to retire because I enjoyed my work-life balance, than feeling that work is something I need to escape from.

I look forward to covering more about this in the next few updates.

Property Strategy Update

I mentioned on a recent podcast episode about my property strategy that I am looking to buy another two investment properties in 2023. I just wanted to mention that I am going to be flexible on this and not put myself under too much pressure. Property prices in Limerick increased by another 2% in the last quarter of 2022, so I am finding that deals that were available a few months ago are not coming up as easily at the moment. So I will go in with an open mind and be patient to find the right deal. If one doesn’t come along, so be it, I can either keep cash in case a deal presents itself or pay down an existing mortgage on one of our existing investment properties.

Does your FI Number Really Matter?

I discussed in the last update the concept of a Shadow Budget for us, which is a clever approach for retiring in our early 50’s when our children are older. I had a lot of feedback that I am forgetting to factor in other things such as The State Pension and an Inheritance and that as a result, I should be more aggressive with my withdrawal rate.

The more I reflect on everything, the more I like the idea of building a portfolio of €800k, this would give me enough of a number to be able to withdraw 5% in the early years while I am still raising my children, and then cutting down to a 4% withdrawal rate in my 50’s once my children are no longer dependent on us financially. It simplifies so many of the complications I have when it comes to working out my FI number with children.

As it is, withdrawing likely won’t be such an issue anyway. Most people who actually achieve FI don’t end up withdrawing initially from their portfolio and simply find work they love which happens to bring in enough income to cover their expenses (I will be covering more about this in a future podcast episode due out in soon).

For example, in one particular post on the Money Flamingo Blog, Tina talks about the fact that early retirement is largely a lie, or a myth. She mentioned that most people who “retire” in their 30’s or 40’s don’t really retire and end up working in some capacity and don’t withdraw from their portfolios anyway.

She has a really funny post which describes the typical early retiree working life, which I will share here:

“Hmm… Turns out, I don’t want to lie on the beach for the rest of my life after all. And the fun projects I’ve started working on actually earn me some money. Looks like I won’t need to tap into this massive nest egg I accumulated any time soon. Who would have thought?” (credit Money Flamingo)

It certainly gives food for thought and I will credit the Money Flamingo Blog as being a massive influence on my decision to look to build a more sustainable life around the FIRE movement. I suspect that as my portfolio grows, I will continue to cut back on work and look to cruise to a semi-retired lifestyle in the long run.

Where am I on the FIRE Spectrum?

In one particular article on the Money Flamingo Blog, Tina talks about The FIRE Spectrum. I thought this was very clever. I thought it might be nice to show my own progress based on an FI Number of €800k and a current portfolio value of €343k.

FIRE Milestone € Amount Percentage Completed
FU Money * €100,000 100%
Coast FI ** €194,357 100%
Flamingo FI €400,000 86%
Barista FI *** €600,000 57%
FIRE €800,000 43%

* I figure anyone with €100k with a good chunk of cash is going to feel in a good place from an FU Money point of view. Even with my own cash being low right now due to buying an investment property recently, I will build it up again and having three rental properties is a great way to feel like you have options and could take a few months off work if I really needed to.

** My Coast FI number is based on my current age of 38, retiring at 67 and a 5% inflation-adjusted annual return.

*** I figure I could adopt Barista FIRE at this point. Work a little bit (10 hours per week), withdraw our rental income and let our stock portfolio and properties increase in value in the meantime.

Solar Panels - Monthly Return

December is the darkest month of the year, so I didn’t have high hopes for our solar panels in December, but actually they still held up OK. I expect the performance of the panels to start to improve each month from here and I will look to report on the panel performance to July 2023 to cover a full year’s usage of the panels.

We consumed 281 KWh of electricity during the month, buying 214 KWh's (same as November ironically). Our solar panels covered 24% of our electricity usage, saving us €24.79 before depreciation (based on 37c per kWh). We received a credit back of €1.89 from supplying 9 KWh's to the grid. Our total savings accounting for depreciation was €3.58, giving an annual return after depreciation of 0.45%. Our panels did better than break (accounting for inflation) even during the darkest month of the year.

Here is a breakdown of our solar panel usage since they were installed in July:

Solar Panel Return - Year to Date
Month Percentage Covered by Solar Electricity Saving (after depreciation) Credit from Supplying the Grid Annual Return
August 83% €29.42 €34.86 7.95%
September 62% €28.90 €7.98 4.57%
October 45% €22.98 €4.20 3.38%
November 31% €12.05 €2.10 1.76%
December 24% €1.69 €1.89 0.45%
Monthly Average 48.9% €19.01 €10.21 3.62%

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