November 2024 Portfolio Update
Tuesday 3rd December 2024
The Transition to Semi-Retirement!
If you have been reading my monthly updates for long enough, you know that every now and again I write about semi-retirement - this idea of slowing down and letting the portfolio grow in the background while working just enough to cover our expenses.
Last month I declared that it turns out that we are closer to hitting FIRE than we thought. With €27,000 of yearly income from our investment properties, withdrawing from a cash pot each year and a little bit of casual work, we could declare ourselves FIRE and live our best life.
We made another over payment on one of our investment properties in November and the mortgage balance has dropped to around €12,000. On top of this, our tax bill in my company came in at less than expected, which means in December we will have an additional €5,000 we can add to the portfolio (on top of our standard €5,000 contribution) - meaning we can look to pay off this mortgage in December! Once the mortgage is paid off, this will give us our cashflow of around €27,000 per year.
My plan had been to then continue to work full time for a few more months until hitting around €30,000 cash, and then allowing ourselves to start withdrawing from the portfolio.
However, I realised in November that I am missing one step that is going to make the transition so much easier - the semi-retirement phase, or consolation phase as I referred to on this podcast episode.
Why not just reduce my workload once the mortgage is paid off. Reduce our work load significantly, cover our families expenses and let our cashflow build up from our rental income while I wait for the portfolio to grow and hit that magic €750,000 number.
How long will this take for us to hit €750,000 and have a cash cushion of €30,000? Likely 9-12 months, so only a few months longer than if I continued to grind working full time, but the bigger impact saves me 4 months of working full time.
This new plan allows me to take baby steps on my way to FIRE, without the need of the sudden jump. I will be in a position to start cutting back from work from January and plan to start having conversations with some of my clients about reducing my workload from 2025. I am looking forward to providing updates over the next couple of months as I transition to this new stage of our FIRE journey.
€750,000 is too low!
I have talked about this already in the last couple of updates, and without wanting to sound like a stuck record, I feel I need to take more time to put our €750,000 FI portfolio in context. I was at the local Limerick FI meetup group recently, and a good friend pointed out that he felt a €750,000 portfolio was too low - he suggested I aim for a portfolio of at least €2 million euro. Don’t get me wrong, I fully get that €750,000 isn’t a huge portfolio in the grand scheme of things, especially when it is going to need to last the bones of 50 or 60 years. I got home after the meetup group and got out my favourite compounding interest calculator. At a 5% interest rate, and assuming I continued putting €5,000 into the portfolio each month, it would take me another 10 years for me to grow my portfolio from €750,000 to €2 million euro.
You see, no matter what, there is always going to be a feeling of never enough. That quote from The Richest Man in Babylon sticks out, something like “A man’s desires will always rise with his income”. My oldest child is now 13, my youngest child is 7 - there is no better time than now for me to spend as much time with my family as I can. By taking the alternative path, and grinding for another 10 years, I would miss the most important time as a parent.
By adopting a semi-retired path now and moving slowly into casual work once my portfolio hits €750,000, I save myself 10 years of grinding. In the meantime, I will continue to work a little here and there - there will be no gaps in my CV. If somewhere along the way, through either high inflation, a few bad years of market returns, or a few unexpected expenses, I can always ramp up my work again in the future as a worse case scenario.
Remember to, the critical thing for our portfolio, is that we are going to be living of mainly cashflow from our rental income. Our portfolio is going to continue to grow over time - even with a modest 4% return on property prices and our stock portfolio, our portfolio will hit €1.1 million after about 10 years.
The important thing about FIRE is adopting the low cost lifestyle that comes with making all of this happen. I asked Chat GPT the question recently “What is the average cost of a family of 5 to live in Ireland in 2024?”. The answer might surprise you, but Chat GPT suggested the average cost for a family of 5 to be between €6,000 and €8,000 per month. Based on that number, it is no surprise my friend suggested a portfolio of at least €2 million would be needed!
However, our lifestyle is clearly not average. We have been able to keep our mortgage costs low, send our children to public schools, reduced our electricity costs to nearly zero with solar panels and have never needed to worry about child care costs. We drive one old, economical car and do our grocery shopping in Aldi. For the most part, our day to day living costs are very manageable, and it costs around €3,000 per month to cover our day-to-day expenses.
And what reward do we get for this low lifestyle cost? The ability to buy back our freedom years earlier than most because we don’t need to build a huge portfolio to cover our lifestyle.
For me, one of the key aspects of FIRE versus traditional wealth management is the ability to factor the importance of time freedom into the equation. Don’t get me wrong, I would love to have a bigger budget than €3,000 per month - but not at the expense of grinding away for another 10 years.
November 2024 Portfolio Update
Our stock portfolio took a massive jump in November and there were no major issues to report on our properties which were business as usual. I made another contribution of €5,000 to the portfolio and we made another additional mortgage payment on one of our investment properties of €7,500 - the balance now around €12,000 and we expect to be mortgage free on this property in December.
We are due to revalue our properties next month, and I am expecting to see some further price increases overall. I expect we will be close to the €700,000 mark next month, which is absolutely insane when you consider we only crossed the €500,000 mark in January. 2024 has been by far our best year for our FI portfolio.
Another huge milestone in November, our year to date return on our portfolio crossed the €100,000 mark!
Here are the overall portfolio numbers:
| Portfolio Summary (as at 30th November 2024) | |
|---|---|
| Opening Balance | €653,182.15 |
| New Contributions | €5,000.00 |
| Portfolio Growth | €16,134.16 |
| Closing Balance | €674,316.31 |
Monthly Portfolio Growth Report
| Monthly Portfolio Growth Report | |
|---|---|
| Capital Gain + Dividend Income from Equities | €12,184.20 |
| Real Estate Income + Capital Gain | €3,931.00 |
| Interest on Cash Savings | €18.96 |
| Total Growth | €16,134.16 |
| % Return | 2.45% |
Portfolio Breakdown
The table below shows the breakdown of my portfolio into the various asset classes:
| Portfolio Asset Breakdown (as at 30th November 2024) | ||
|---|---|---|
| Equities (Stocks) | €195,769.00 | 29.03% |
| Real Estate | €474,874.96 | 70.42% |
| Cash | €3,672.35 | 0.54% |
| Total | €674,316.31 | 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 | €73,280.00 |
| Equities Capital Gains + Dividends | €42,208.12 |
| Real Estate Capital Gains + Rental Income | €59,796.85 |
| Interest on Cash Savings | €130.95 |
| Closing Balance | €674,316.31 |
| Portfolio Return | €102,135.92 |
| % Return | 17.85% |
Lifetime Portfolio Returns
Here are my returns since I started in 2018.
| 2018-2024 Growth Report | |
|---|---|
| Opening Balance | €0 |
| Contributions (Money Added) | €415,147.78 |
| Equity Release* | €41,220.21 |
| Real Estate Capital Gains + Rental Income | €150,936.98 |
| Equities Capital Gains + Dividends | €70,745.12 |
| Interest on Cash Savings | €130.95 |
| Other** | -€3,864.73 |
| Closing Balance | €674,316.31 |
| Lifetime Portfolio Return | €217,948.32 |
* 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.