Irish Financial Independence & Personal Finance Podcast

October 2021 Portfolio Update

Wednesday 3rd November 2021

The Inability to Jump

When I was teenager, I had a very good friend. We played golf together. When we first started playing together, we had a similar ability, Both playing off around a 14 handicap. He had great natural talent and a real passion to become better.

As the years went by, his passion grew to desire and I soon noticed that he was working harder than ever on his game. He started missing his study and investing more in his game. He paid for regular lessons and practiced nearly every day.

His scores started to get better as well, and his handicap dropped as a result. He soon found himself with a clear goal - he needed to get to a 3 handicap to qualify for golf school. This would allow him to eventually become a pro-golfer. I admired his work ethic when it came to golf and he was a pleasure to play with and watch - he made it look effortless.

I will never forget the day that he finally got his handicap under 3. I was so excited for him - I remember saying something like “well, are you going to get the paperwork and apply for golf school”..... “Na, he said…. I like playing as an amateur too much, I don’t think I will go for it”.

To this day, I don’t truly know why my friend didn’t want to push himself - he had so much talent that it has been hard for me to come to grips with his decision, even all these years later. To see someone sacrifice so much, and to be given such a gift that hasn’t been able to live up to its full potential. I have never come close to his ability on the golf course, in fact I am far worse than a 14 handicap these days!

In October, I started to reduce my workload. I gave notice to clients who I have worked on and off with for many years that I was no longer going to be available to work on their software projects. I started the journey into the semi-retirement phase of my FI journey.

At the same time, I started to notice more and more opportunities. I get contacted on LinkedIn several times a week for contract roles. I would often go back and say something like “what is the day rate that is budgeted”, often more out of curiosity than anything else. To my surprise, an opportunity came through a couple of weeks back, and when I got the reply on the day rate, I nearly fell off my chair - it was nearly double what I have been making now, even when I was working full time.

I started to look back on my 18 year career. All the terrible projects and clients that I had been through. Starting out working for free for the first year or two, earning very little and all the stress that came with the work of being a software developer. Software development is easy once you know what you're doing - but very hard when you get stuck, or have no idea how to solve an issue.

Ironically, software development and golf have a lot in common - the good golfers make the game look easy, yet most of us struggle to even hit the ball straight!

My earning potential has never been better as a software developer and I am in the age in my life where my experience is highly desired, without being considered “too old”. Would I be doing what my friend did when he finally got down to a 3 handicap by moving to part time work, at a time when my hard work is finally starting to pay off?

The numbers are scary. Keep in mind, we were saving around 50% on my full time income. If that were to double again, it effectively triples the amount of money I would have each month to add to our portfolio, as our expenses will still remain the same.

Of course, this is the problem. Greed VS time - it is the FIRE trade off that everyone on this journey will face at some point. That inability to jump when one can. The whole “just one more” challenge that we all have to try to overcome.

Would I be the biggest hypocrite to talk about how much I am looking forward to going back to part time, to then simply sell out when the money gets high enough. I guess deep down we all have a price.

And the problem of course, is the thought about what that money can buy. Yes, it would potentially allow me to retire years earlier, but then you think of all the other things. Forget about securing your own financial future - now I could save up enough money to ensure the kids have a great future, oh and my own parents and inlaws and anyone else that comes to mind...

Greed is never good, and the ability as humans to say no when we are made an offer we can’t refuse is very difficult.

Of course, no job is hardly ever worth the money. Higher money usually means more stress, longer hours, more time away from the family and being brain dead when the day is over. Worrying about someone else’s dreams rather than your own. But would my older self thank me for taking it?

And here lies the issue. We know that our FIRE journey is ultimately about sacrificing today to give ourselves a better future, but where do we draw the line?

Most of you are likely aware by now that I am a pretty black and white person. I like to have binary decisions - simple yes and no decisions suit me. I decided to play along with my idea of building a portfolio of €500k. Last month I mentioned that it was likely that given the State Pension, inheritance and our ability to return to work if we had to, that it was likely we could retire on €500k if we wanted to.

So prove it, I thought to myself. I was super excited, I thought I would show how I could retire in eight years time (aged 45) with my €500k portfolio. I planned to have around €200k in a pension, and €150k in equity on my buy to let investment property, leaving €150k in either cash, or invested in the market.

But guess what… the numbers started to fall over. I had too much in my pension that I couldn’t access to at least 50 - and even then, it wasn’t going to last me long enough so I could access the state pension at around age 68. Drawing down 6.25% of €500k is simple in theory, but when it comes to working out the specifics, it’s suddenly so complex.

Furthermore, there was still one major issue. As long as I needed to support my children, there was very little chance of early retirement. I need at least €44k a year to cover our current expenses (and rising with inflation) and as a family we struggle day to day to ensure we keep to a tight budget - raising kids in Ireland isn’t cheap! I had this issue where my income with supporting my children was going to be so much higher than after I didn't need to support them any longer. I’ve been working off a calculation of €32k in income, which is the income I will need from age 55 once my kids have left the nest - not really trying to factor in before then!

No matter what way I tried to make the calculations, it was clear that it would require a lot more capital if I were to try to retire before age 55. My decision to go down to part time work basically meant I would be working part time in some form for the next 17.5 years.

Here is the issue. Part time work in IT is hard to get. Most contracts are full time roles and even if it is part time, chances are the company is just fitting a full time role into a part time budget.

Yes, I could just keep freelancing, but the big draw back of freelancing is that I am typically “on call”. If there is a problem at 3am, I am getting the phone call. You would be amazed how many times I look to take a day off at the same time an urgent issue happens - sometimes I feel the internet doesn’t work probably when I am not at my desk!

What do I gain from working part time? The stress levels are largely the same - in many ways, the stress levels are more, because there is still this expectation that I will be available 9-5, even though that might only be 9-1 now. Sure, I could work 3 days a week, but the emails and work will be waiting for me when I get back. In many ways, working part time is just fitting 40 hours of work into 20.

What I really wanted was the option to just walk away from work completely - but this wasn’t going to be possible no matter what road I took.

So what now? I think I need to plan my FI journey from here. If I take a high paying role, does that give me an earlier path to FI before 55? Would I be better off to take a stress free, cruisy role and focus on lifestyle design and just accept I won’t be able to fully retire until I am 55. Or do I focus on working full time for 6 months a year, and taking 6 months off. These are the questions I will be looking to answer in my next update!

Shout out to Ben

I just wanted to give a quick shout out to Ben, who I know from the Limerick FI Group. Ben is bullish on property, but is a wealth of knowledge when it comes to working out tax efficient investments in Ireland. He recently started a blog, which can be accessed by clicking here.

Let’s jump over to the numbers

I wanted to give more transparency on the portfolio changes, so I will start breaking down the numbers in more detail.

Change in Pension Value

My pension is made up of investments mainly in index funds (with some REITS, investment trusts & cash to cover broker fees). Pensions grow tax free in Ireland, so having funds invested in a pension is extremely tax efficient.

October 2021 Pension Changes
Opening Balance €96,375.47
New Pension Contributions €3,500.00
Dividends Received €3.52
Capital Gains €4,745.49
Closing Balance €104,624.48

Change in Property Equity

The following table highlights the change in the amount of equity I have in our buy to let property.

October 2021 Property Equity Changes
Opening Balance €83,803.32
Capital Repaid €648.88
Closing Balance €84,452.20

Change in Cash

My cash balance changes due to two factors.

1. Any new savings I add during the month.
2. Net Income Received from my buy to let - this is any left over cashflow after paying off the property loan, property management fees and any other expenses.

As a result, it can be confusing to see why my cash balance changes, but I will highlight the change in cash balance below:

October 2021 Cash Changes
Opening Balance €13,161.19
New Cash Contributions €500.00
Buy to Let Net Income €−19.65
Closing Balance €13,641.54

Overall, my change in portfolio can be summarised as follows:

October 2021 Portfolio Changes
Opening Balance €196,943.50
New Contributions €4,000
Pension Capital Gains + Dividends €4,749.01
Property Income €629.23
Closing Balance €206,318.22

Portfolio Breakdown

The table below shows how my portfolio is currently broken down:
Portfolio Breakdown (as at 31st October 2021)
Pension (Equities) €104,624.48 50.71%
Property €84,452.20 40.93%
Forestry €3,600.00 1.74%
Cash €13,641.54 6.61%
Total €206,318.22 100.00%

Passion Projects

Finally, it isn't all just about money! I also work on projects because I want to make positive changes to the world! Here are some projects I am part of:

The Irish FIRE Podcast

I launched The Irish FIRE Podcast in June 2019. While I did run ads back on the podcast when it first launched, these days I run the podcast as a passion project. The podcast shares my story on my journey towards financial independence.

An Dúlra Co-Op

An Dúlra Co-Op is an Irish initiative hoping to make a positive difference, by establishing Irish native woodlands. Irish residents can become shareholders of the co-op and become part owners of newly established Irish forests. I co-founded the co-op in September 2020. We are still looking for new investors, so definitely check it out!

Portfolio Tracker

Portfolio Tracker is designed for those who are pursuing financial independence and are looking for a software that will add accountability to your FI journey. Portfolio Tracker is a simple, flexible investment software that will allow you to see the growth of your portfolio over time, without being complicated to maintain. Click here to track your own portfolio.

Hockey Clubs

I helped co-found four new hockey clubs in North Munster, introducing over 300 children to the game of hockey. Interested in your children playing hockey? Feel free to bring them along to any of the following hockey clubs - Castletroy Hockey Club, Ennis Hockey Club, Nenagh Hockey Club and Thurles Hockey Club.

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