Tuesday 1st November 2022
Back in 2017 our family was deep in the rat race. I was working 8 hours per day as a freelance software developer and we had a spending problem. Money was coming in, but going out even faster. After learning about FIRE, it all made sense - if we can reduce our expenses, increase our income and save the difference, I can finally get away from working 8 hours per day managing multiple clients and dealing with multiple problems per day.
Since then our savings rate has increased from 0% to 75%. That is, for every 20 days that I work, we only need 5 days to cover our expenses - with the other 15 days going toward our portfolio. This is a dramatic change from our family in 2017.
Yet the core issue still remained. Even with a 75% savings rate, I was still unhappy at work. But I am only a few years away - another few years of grinding and I will get there...
You likely have already seen my issue. My motivation for early retirement was about escaping something - not going towards something. It was like trying to dig myself out of a hole.
At some point I decided, well I am in this hole, I may as well keep digging. I took on more work and more stress. This was largely offset, as the opportunities got bigger, and as did the money. This was how we increased our monthly savings from around €3k a month in 2018 to €10k a month in 2022.
But I made a critical mistake. By chasing money I missed the actual problem - I was solving the symptom not the cause. Money wasn’t going to make me any happier at work - the core issue that needed to be solved was to find a way to be happy working.
I am pleased to report that over the last couple of months, I have been solving this core issue. I have eliminated and changed projects as needed - removing the stressful projects and sticking with the projects that bring me joy, that have more flexible working hours and that allow me to balance work and family life.
I have stopped taking on projects solely for the money and started asking myself “would I take on this project if it wasn’t solely for the money”.
It still isn’t perfect. My workdays are still too long and I risk burn out. I need to find more balance in my life - but I have made massive improvements in this area.
And there is one hugely ironic thing in all of this. When work becomes enjoyable and fits around your life (rather than your life fitting around work), the need for chasing early retirement as quickly as we have been, starts to fade. Why not enjoy the journey a little more along the way than rush and miss out on so much living!
I wrote last month about cashflow in retirement, but I have since reflected, it doesn’t matter. Ben from the Limerick FI Group often gives me grief for my pension - “it will only end up going to your kids' inheritance”. He is likely right (as he often is on these things), but I actually think most of our portfolio will likely end up going to our kids anyway - whether it be in a pension or not.
This is because the fear of a portfolio not sustaining us in retirement is a real fear. It reminds me of electric car drivers who fear range anxiety - the fear is real man! The reality is, it is far easier to simply build a biggish portfolio and let it compound in the background while working a little bit in a semi-retired state to cover your expenses - no more fear of your portfolio running out.
After my article last month, I was really excited about the possibility of retiring from rental income. The trouble is, can a person safely stop working only relying on rental income? If a tenant is late with a rent payment, do you want that to impact your ability to pay your bills? I think regardless if one focuses on cashflow or capital growth from their portfolio, one needs to have confidence in the ability to live off your portfolio. This is why the 4% rule is a good guide. It doesn’t really rely on cashflow, one can always sell a house if needed to release the capital to live - but at least it gives us more options when trying to live off our portfolio.
It is because of this, that I have come to the realisation that trying to live of cashflow is likely too much of a short cut. I don’t want to be dependent on rent being paid to live - at least the 4% rule gives some additional security when it comes to withdrawing from the portfolio each year.
As a result, I will be looking to build a portfolio based on equity value rather than cashflow. Cashflow is great - but it will be a bonus and simply make withdrawing the 4% each year easier. Next month, I hope to cover our latest FI number again, as this is always something fun to try to define. We are certainly getting closer, and finally crossing the €300k mark in October was another big step for us.
I have recently started a new community project, looking to buy an 18 acre plot of land on an island in the Shannon Estuary. I first told my newsletter subscribers about it a few months ago, and the project has slowly started to take off. Click here to learn more about the project and feel free to register if you are interested in visiting the island with me.
Electric Ireland increased their standard rate to 39.7c per KwH in October - gulp! We have a 26% discount at the moment which is due to end in November, so for now, our KwH rate has moved up to 32c per KwH when our discount and VAT is accounted for. As it is, the first energy credit was received for €200 from The Irish Government, so this will definitely help. Our Solar Panels were definitely not as effective during October as the shorter days kicked in.
We consumed 323 KWh of electricity during the month, buying 179 KWh's. Our solar panels covered 45% of our electricity usage, saving us €22.98 (based on 32c per kWh). Our annual return after depreciation was 2.86%. Keep in mind that our return will be much lower in the autumn / winter months.
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)||Annual Return|
We got a letter in the post during October to inform us that one of our buy to let interest rates went from 3.95% to 5.95%. The net result was an extra €170 a month added to our monthly repayment. Just like that, the property went from being cashflow positive to cashflow neutral. This highlighted the risk in relying solely on cashflow. Situations change and income isn’t guaranteed one month to the rest.
We also had some issues with our third investment property during October. We are ‘Sale Agreed’, but the sale is less than smooth at the moment. Our Lender confirmed that they needed me to set up a new subsidiary company as their lending criteria had changed. This will add at least €1k a year to our accounting bill and mean more paperwork. I nearly pulled out of the deal, but I love the house and think we got it for a great price (another house in the same estate just went ‘sale agreed’ for €30k more), so we are pushing ahead with the new company.
To add a bit of salt to the wound, we got confirmation at the end of October that our lender has increased their interest rate from 5.15% to 6.4%! The lender is the only one that lends to companies, so we are taking on a little bit of risk. It may get to a stage where it makes finance sense to pay down the mortgage early - but we will wait and see.
Finally, we had to replace a dryer and electric hob on our first rental property in October, so our rental profit is down compared to normal.
On a positive note, equities were up and our portfolio crossed the €300k mark for the first time. October also saw us add €100k in new contributions so far in 2022.
|Portfolio Summary (as at 31st October 2022)|
|Monthly Portfolio Growth Report|
|Capital Gain + Dividend Income from Equities||€4,026.37|
|Real Estate Income & Capital Gain||€104.05|
The table below shows the breakdown of my portfolio into the various asset classes:
|Portfolio Asset Breakdown (as at 31st October 2022)|
I currently have three different brokers that I use for buying Equities. At the moment, 100% of my equities are within a pension, though this might change in the future. The breakdown for equities is as follows:
|Broker Name||Total Invested|
My real estate investments can be broken down as follows:
I thought it might be nice to show my portfolio growth on a year to date basis, as well as the portfolio returns since I started in 2018.
|2022 Year to Date Growth Report|
|Real Estate Capital Gains + Rental Income||€7,566.52|
|Equities Capital Gains + Dividends||-€16,799.73|
|Annualised % Return||-2.87%|
|2018-2022 Growth Report|
|Contributions (Money Added)||€236,445.78|
|Real Estate Capital Gains + Rental Income||€30,197.57|
|Equities Capital Gains + Dividends||€8,556.98|
* 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.