Irish Financial Independence & Personal Finance Podcast

Tuesday 4th February 2025

Are we FI yet?

I have talked in the past that being FI is as much a theory driven thing than anything else. Infact, the closer we get to FI, the more I am starting to understand that as one starts to wind down from conventional 9-5 work, the more opportunities that open up in other areas.

Last month our portfolio hit €700,000. We have paid off a mortgage on one of our investment properties and we have stopped making contributions to our portfolio. We are now coasting to FI - but are we actually there already?

I always expected it would be easy to know, but the reality is a little different. Given that early retirement is a bit of a myth, and no one is really ever going to not work again (at least in some capacity), it can actually be hard to know when we are there! But let's have some fun, and assume for a second that I never planned to work again. Would our family be OK?

Interest rates have dropped further on our investment properties recently, so the cashflow that we can now produce from the three rental properties which we own in my company is up to €28,000 per year. This is good news, but this still isn’t quite enough alone to cover our annual expenses. In saying that, is there a way we could restructure our investments to ensure we would have the cashflow we need?

I explored several different options, but there was one way that this is possible. It involves selling our first investment property. Our first investment property is owned in our own name and is pretty much cashflow neutral. I don’t include any of this income as part of the €28,000 per year rental income because it has been in the rent pressure zone for a while now, and the rent is too low to produce any cashflow for us! If we were never going to work again, our idea would be to sell this property. There is a good bit of equity in the property, and even after paying capital gains tax on the profits from the sale, we would come away with at least €120,000. This would be enough to clear the €9,000 balance on our personal loan from our solar panel and car upgrade, as well as give us cash of around €110,000.

With this money, we could invest it into stocks, likely a mix of ETFs and Investment Trusts. Combining this capital with our pension portfolio, would give us an overall stock portfolio of a little over €300,000. From there, I simply adopt an idea I first mentioned back in October 2022. We look to draw down 4% of the combined stock portfolio per year, withdrawing initially from the non pension pot until I turn 50 (less than 10 years time) and then from the pension pot once I hit 50 years old. This will give us the additional €12,000 we need per year.

So all up, €28,000 from our 3 rental properties and €12,000 per year from our stock portfolio, giving us the required €40,000 per year that we would need to retire and never work again. There we have it - we are officially financially independent and never have to work again if we didn’t want to! It took us seven years in the end - 2018 to 2024 - we were technically FI at the end of 2024, I just hadn’t realised it.

Let’s show how this €40,000 would be allocated to show what our monthly budget would look like:

This budget covers everything from:

• Basic living costs - food, accommodation, transport, bills, clothing
• Our healthcare costs
• Our kids education costs
• Basic Kids entertainment costs
• Christmas and birthdays costs
• A pretty decent annual holiday (€2,400 per year)
• Some personal spending for golf for me, and hair, nails, make up etc for my wife and the odd night out etc.

It doesn’t cover things such as:

• Major household renovation projects
• Major car upgrades
• Big holidays (like our trip to New Zealand)
• Significant College Costs for our kids

A big reason why we aren’t looking to adopt full retirement at our age, is because we still have these potential big expenses hanging over us long term. I say potential because these are really optional. If I wanted to, we could drive our current car for another 10 years, never take a big holiday, never make any household renovations or our children can pay their own college costs. I could also simply not write about these sorts of things and pretend they don’t exist - but I want to try to explain the difference between being FI in theory and what it is like in practice.

This is why being semi-retired instead of fully retired is far more desirable. It allows us to cover our cost of living and have extra money for these extra optional expenses we might have. They are a mix of YOLO (You Only Live Once) expenses and capital purchases.

As a result, I see our breakdown of yearly costs (pre tax) as something like this:

Living Costs - €40,000
YOLO Costs / Capital Purchases - €13,000

This income will be paid out in semi-retirement as:

Portfolio Income - €30,000
Causal Working Income - €23,000

You likely noted that the total income is €53,000, which happens to be exactly on the tax cut off rate in Ireland (the amount before 50% tax rates kick in). In other words, I plan to continue to pay myself at the tax cut off rate even in semi-retirement as this is the most efficient route to take from both a tax point of view and an amount that allows us to live not just a life that covers our living costs, but an income point that allows us a few extras as well!

As for earning €23,000 - this can be done easily in a semi-retired state working 10 hours a week for around 40 weeks a year as a freelance software developer.

Hopefully this gives you a good idea of what FI and early retirement really looks like in practice.

Irish Independent Update - Bringing FIRE to the Mainstream

Three of my articles were published in the Online Money section of The Irish Independent in January. This has been an exciting opportunity and I have been keen to explore where it might go. So far the feedback from the articles has been really positive, however there is a small sense that the content might be too niche, which is a pity. One of the aspects I love about the podcast and articles I have written over the last five years, is there is a sense of a story along the way. You can literally follow our families FI journey from start to finish. This makes the podcast and blog interesting I think (I actually enjoy listening back to old episodes myself to get a sense of going back in time). My story is a little bit lost on the articles for The Independent, but I am still really keen to see if I can give the FIRE movement some mainstream coverage.

The comments on social media have been interesting. I updated my own Linked In profile, to actually finally let everyone know what we have done over the last seven years. I had kept it pretty low key to friends, extended family and work colleagues, so I think it came as a bit of a surprise to some. But my LinkedIn has been updated to let people know I host The Irish FIRE Podcast and am a columnist for The Irish Independent. If you haven’t already, definitely add me on LinkedIn so you can get more real time updates.

Anyway, the comments from those who are on my network have been very positive, and I am highly thankful for those. The comments on The Irish Independent page, not so much! I even tried to address some of these comments in my third article - people saying things like “these numbers don’t make sense, it wasn’t possible” and “It isn’t possible to retire on so little at age 40”. I get it - and my skin is thick enough to take it. I also knew I would get such comments, I am more about helping out those that are interested in learning more - and that is my big driver for doing this.

The last thing I would like to say on The Irish Independent opportunity is that they are paying me. I figured some of you might have been wondering, so I am happy to be upfront about this. They did offer me money on a per article basis. To be honest, I accepted the opportunity before we even discussed the money aspect, and I pushed back on it, saying I didn’t need to be paid. However their policy is to pay people for their work. I accepted what they offered me, I didn’t negotiate on it, and I can confirm it is a tiny fraction of what I was getting as a software developer. I don’t really know what I will do with the money, as it is all additional money I hadn’t planned for. I guess the definition of accidental income. My wife joked that it will cover a trip or two to Penney’s - honestly, it isn’t a huge amount in the scheme of things and the opportunity was far more about being able to share our story on a national scale to a mainstream audience. It is just neat to be able to say I am a columnist for a national newspaper - not bad for a boy who was in Additional English classes as a kid and who likely has undiagnosed dyslexia!

January 2025 Portfolio Update

Stocks were up in January, a decent start to the year for the portfolio. January was the first time in seven years that we hadn’t added any money to the portfolio, instead letting it coast from here. Everything at this stage is about the amount of cash we have, and we are currently building cash within the portfolio with a plan to hopefully start making withdrawals in the second half of 2025.

We had some minor expenses for our properties, but nothing major. January was a solid month overall.

Here are the overall portfolio numbers:

Monthly Portfolio Growth Report

Portfolio Breakdown

The table below shows the breakdown of my portfolio into the various asset classes:

Lifetime Portfolio Returns

Here are my returns since I started in 2018.

* 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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