December 2023 Portfolio Update
Friday 5th January 2024
Life without Work – The Mini Retirement Update
I spent most of December off taking a long 3 week break from work. We didn’t go away, we didn’t even technically staycation – we just lived our lives for a 3 week period without the need to go to work – a very small mini retirement.
And life was good. The lack of stress from work was highly enjoyable – though somewhat ironically, life was still super busy. It likely didn’t help that I had taken time off during the “mad season”. Getting ready for Christmas is busy work or no work – but at the same time, a lot of my reasons for being busy was simply just life with children.
Get up, get the kids ready for school, drive them to school, come home, do a few house chores, spend time with the wife relaxing and watching some TV – and before you know it, it's time to collect the kids from school again. The days went fast and I enjoyed each and every day. There was always something going on in a busy family life, with something to look forward to each day.
It got to a stage, where I wondered how I ever had time to do all of this and work full time. I got to get all the jobs sorted around the house that I had put on the long finger. I was able to read books and reflect a lot more. I enjoyed taking my time at the supermarket rather than rushing to get everything sorted. It was nice – and honestly, it only makes me want to crave more of the same, for longer periods.
The “Race” to Retirement
I mentioned last month that I would look to provide an update on my overall plan. I have mentioned recently that I am looking to pay down the mortgages on three of our investment properties and live off the cashflow then from the rental income.
While this plan isn’t exactly full proof long term (rental properties aren't always cashflow positive when things break – or a tenant can stop paying rent), the plan would be for me to transition into a semi-retired state – still work a little as I wish too – while living off the rental income.
In the long term, we would bring in more rental income from our fourth rental property, as well as a pension which I could start withdrawing from at some stage. Alternatively, we may even sell the rental properties at some point to embrace “full retirement”, without the need to manage rental properties and simply move our assets into 100% stocks (and maybe some bonds). This is something I will likely do when turning 60 - still over 20 years away!
There is an ironic twist to all of this. I was able to calculate that even if I decided to stop contributing to our portfolio from today, then the three rental properties would pay the mortgages off themselves from the rental income in around 13 years. So there technically is no need for me to continue contributing if I didn’t want to.
I have this small dream of being semi-retired, partly living off our rental income and working here and there in the evening as I need to. This is largely how I discovered web development back when I was 16 – staying up late into the night, coding and learning and discovering. Burning the midnight oil and having that great sense of adventure that comes from learning something new.
When something turns from a hobby to a profession, often the fun is lost, and in many ways I have felt this about programming over the last 20 years. It became something I had to do, not something I wanted to do. This was validated when I hit my Flamingo FI number earlier this year – all of a sudden, my enjoyment for programming started to come back, an ironic twist now that full time work was optional.
Could I embrace this lifestyle from today – working the evenings only and enjoying my days off? The answer is nearly. My numbers don’t work enough yet to allow me to do this without the need to continue to work more than I would like - I would need to cover our full expenses from work only as I don’t yet have any of the mortgages paid off which would allow me to live off the rental income. So as much as I would love to start cutting back - I am not there just yet.
The Reality is that 99% of Early Retires will work in Retirement
Tina from Money Flamingo wrote a great blog article in 2022 to highlight the fact that nearly all early retirees still being in an additional income after hitting FI and the reality is, I will fall under the same umbrella.
My 24 day mini retirement taught me one thing - work is an important part of life. One of the great benefits of programming is that it keeps the brain active. It allows me to think, to focus and to problem solve. This is as important as other aspects of my life - exercising, eating well, being a good husband and father and being a good friend.
For the majority of us, the problem with work is that we don’t get to do it on our own terms and we have to do it for too long. Spending a third of our weekdays working for most of us likely just feels too much. Add in work we don’t like, or work we don’t get to choose, then our desire to work becomes less and less. Add in the opportunity cost that comes from not doing other things - the family time we miss, the rounds of golf we don’t get to play - it is no wonder the majority of us resent having to work.
Time away from work helps us to reset our priorities. I have realised that work isn’t the enemy, but like everything in life, needs to be balanced and needs to be managed. Working 40 hours per week is too much for a truly balanced and meaningful life - but working say 10 hours per week on an optional basis - that sounds pretty good. Add in to that work that you get to choose and decide how and when you do it - now we are talking.
I recently calculated that for me to be truly FI, I would need to pay down three mortgages on our investment properties - which will take me four years to do at my current savings rate. While it would be neat to say I was FI within 10 years of starting out, the reality is, I don’t need to keep working full-time for this long.
By paying off say a mortgage and a half, this would give us enough cashflow from our rental income to offset some of our annual expenses, while I freelance 10 hours per week to cover our full expenses.
In the meantime, the pension will continue to grow and the other mortgages will be paid down from the rental income and our property valuations will likely increase over time.
For me to adopt this lifestyle would take me around 2 years to do - cutting my time in half to allow me to move to a complete semi-retired lifestyle.
In time, the remaining mortgages would be paid off from the rental income, I could access my pension and look to retire fully in around 12 years from today.
Effectively by adopting this approach I am getting back 2 years of full time work, in exchange for 10 years of casual freelance work - but knowing that chances are I would have worked that 10 hours a week of casual freelance work anyway!
Here is a quick look at the ‘Die with Zero’ calculator if I were to adopt this strategy:
And here is how that compares if I were to try to adopt full FI within the next four years:
I don’t know what the next two to four years will bring - none of us do - and as always, plans are subject to change. I don’t need to make any decisions on this for at least another 24 months anyhow and for now, the status quo will remain and I will continue working full time, saving €5,000 per month.
December 2023 Portfolio Report
I mentioned last month that it had been 12 months since we did a valuation on our first investment property. Typically, this is largely an estimate – I typically look at what other properties sold for in the area and what other listings there are, to get an idea on what our property would sell for today – accounting for any solicitor and auctioneer fees.
Surprisingly, I found no evidence that prices had increased in the estate. While prices were up in Limerick over the last 12 months, there have been some issues from new houses being built in the estate, and I wondered if this had an impact on selling prices overall. Prices were roughly the same as they were 12 months ago. As a result, the valuation of €260,000 remains the same as a year ago - so there hasn’t been an increase in the overall valuation of the property.
As mentioned last month, one of our rental properties needed some plumbing work done, so our rental income was down a little compared to normal due to this. In early 2024, I need to organise some maintenance work on all our rental properties, including gutter cleaning, roof cleaning and outside painting, so I expect the rental profit to be lower over the next month or two as this work gets completed.
Aside from that, stocks soared again in December - meaning that I got very close to hitting the €500k mark. It looks odds on to cross that in January all going well
| Portfolio Summary (as at 31st December 2023) | |
|---|---|
| Opening Balance | €485,215.07 |
| New Contributions | €5,000.00 |
| Portfolio Growth | €8,685.32 |
| Closing Balance | €498,900.39 |
Monthly Portfolio Growth Report
| Monthly Portfolio Growth Report | |
|---|---|
| Capital Gain + Dividend Income from Equities | €5,863.72 |
| Real Estate Income | €2,821.60 |
| Total Growth | €8,685.32 |
| % Return | 1.77% |
Portfolio Breakdown
The table below shows the breakdown of my portfolio into the various asset classes:
| Portfolio Asset Breakdown (as at 31st December 2023) | ||
|---|---|---|
| Equities (Stocks) | €153,280.36 | 30.72% |
| Real Estate | €343,380.49 | 68.83% |
| Cash | €2,239.54 | 0.45% |
| Total | €498,900.39 | 100.00% |
2023: A Review of my 6th FIRE Year
2023 has been my best FIRE year to date. I saw my FI portfolio increase from €342,734.85 to €498,900.39. This increase was made up of €85,422 in contributions and an overall gain in the portfolio of €70,743.54 (a 16.52% annual return).
I contributed more in 2022 - yet my overall increase was far greater in 2023 due to higher investment returns.
I am now likely only a month away from my FI portfolio hitting €500,000.
In truth, the reality of my portfolio hasn’t fully kicked in. I likely wouldn’t have believed it if I was told in six years I would build a portfolio up to €500,000. In those six years, I have had two mixed years - 2020 and 2022, but in both cases, I rode the storm and saw the increase as a result the year after.
I don’t know what 2024 will bring - all I can do is keep working to my plan and riding out any storms.
| 2023 Year to Date Growth Report | |
|---|---|
| Opening Balance | €342,734.85 |
| New Contributions | €85,422.00 |
| Equities Capital Gains + Dividends | €26,042.81 |
| Real Estate Capital Gains + Rental Income | €44,700.72 |
| Closing Balance | €498,900.39 |
| Portfolio Return | €70,743.54 |
| % Return | 16.52% |
Lifetime Portfolio Returns
Here are my returns since I started in 2018.
| 2018-2023 Growth Report | |
|---|---|
| Opening Balance | €0 |
| Contributions (Money Added) | €341,867.78 |
| Equity Release* | €41,220.21 |
| Real Estate Capital Gains + Rental Income | €91,140.13 |
| Equities Capital Gains + Dividends | €28,537.00 |
| Other** | -€3,864.73 |
| Closing Balance | €498,900.39 |
| Portfolio Return | €115,812.40 |
* 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.
FIRE in 10 Years Update
I started to record this figure this time last year, so I thought it might be nice to keep it updated for our sixth FIRE year. This would assume I keep trying to achieve FI within 10 years - which as mentioned above, there is a good chance I won’t see this through anyway but it is fun to show my progress anyhow - just to show what is possible to achieve in 10 years.
Trying to forecast is obviously littered with variables - many which are outside of my control, but I always think that forecasting can at least be a bit of fun. The following is what I call my 10 year path to FIRE, based on a 5% annual return and with me aiming to hit an €800k FI number.
The following table shows the results of if I were to take 10 years at a 5% annual return, investing a little over €5,000 per month on average. The forecast shows the portfolio growth based on a constant 5% return at €5,000 per month. My actual results are listed on the right hand column.
| Year | Forecast (5% Return) | Actual Results |
|---|---|---|
| 2018 | €63,236 | €41,252.14 |
| 2019 | €129,707 | €62,544.93 |
| 2020 | €199,580 | €125,549.27 |
| 2021 | €273,027 | €221,789.02 |
| 2022 | €350,231 | €342,734.85 |
| 2023 | €431,386 | €498,900.39 |
| 2024 | €516,693 | |
| 2025 | €606,364 | |
| 2026 | €700,622 | |
| 2027 | €800,000 |
As you can see, in what is an ironic twist, even though I cut back my contributions in 2023, I am actually nearly 12 months ahead of my 10 year target now. Obviously this chart doesn’t take into account inflation, which when adjusted for would make a difference, especially given the impact on inflation over the last 3 years - but it still shows the power of building that FI snowball!