How I almost bought a house for cash!

It was early 2012 – just over a year since my return to Ireland after a number of years of living and working overseas.

I was settling in to my job, having transferred back to Ireland with the same company that had hired me some years previously to work in one of their overseas offices.

I had also started into my first year of working towards my Masters part time, and was beginning to get settled in back in Ireland, and starting to look for my own place, when suddenly, in early March, the company laid off my whole department….

I had already begun the mortgage application process with the bank, but, given that the company was fully aware that it would be laying me and the rest of the department off imminently, they told me that they could not in good faith have filled out and signed the bank’s form indicating that I would remain in their employment for the foreseeable future.

Suddenly the possibility of getting a mortgage from a bank had been pulled out from underneath me, along with my job security, and right at the time when the housing market had reached its’ bottom point! I was well aware that this was the opportune time to buy, having been monitoring the Irish housing market remotely though the power of internet since 2008!

Unfortunately though I had not been much of a saver! Since a bank mortgage was no longer an option, I took a look on the property websites again, this time filtering my search by price, cheapest first, rather than by location. I came across a 2 bed duplex which was priced at € 70 K. I did a quick calculation in my head of the redundancy payment I had coming to me, along with my meagre savings, and the possibility of a small credit union loan, and thought I could just about do it.

The 2 bed duplexes are up the steps, and cover the first and second floors:

Canice's Court

I remember thinking at the time that I just wanted to know that I did not need to worry about paying mortgage or rent, and wanted to just be able to complete my Masters and enjoy the year without needing to go back into the world of work immediately. I didn’t realise it at the time, but I had stumbled on to my first piece of financial independence thinking. I went to view the apartment a North Dublin city suburb. I noticed some horses grazing freely on the green spaces nearby, and a pub that looked like it was possibly busy all day. Guys worked on their cars outside even though it was early afternoon. There seemed to be a lot of people about. The estate agent helpfully pointed out that a lot of people had lost their jobs, (this was not news to me), and that many of these were in North Dublin! It was tantalising at the time to think that there was this place that I could maybe buy, and just live in, and just do my Masters and enjoy it without having to go and look for a job right away again to be able to pay rent, or, worst case, work a couple of shifts somewhere just to earn enough to cover my basic costs.

As tantalising as this was, I did not go ahead with this purchase. I took some time to go to visit the neighbourhood alone as well as with family members. I walked around and tested out the bus route that would take me in to town to work or to college. The duplex was on the end of a row and looked from the back into the back of a factory warehouse and out on to an open green (on the side). The conclusion that I drew from my visits to the area was that I would quite possibly not be safe coming and going from my home, or indeed in my home at night. This fundamental concern for my security led me to pass up on this opportunity and move on with other plans.

I stayed in my rented apartment, and after 6 blissful months of being a student immersed in my masters, making new friends and enjoying some related social activities while sending out the occasional job application and going to the occasional job interview, and generally not having to worry about going into a job every day, I took the first job offer I got. This job would lead to a lot of stress and anxiety over the next couple of years. Combined with the fact that I still had the Masters going on the side. I recommenced mortgage applications and started searching for houses once I became permanent in the new job. We were now into 2013 and house prices had started to rise steadily from their bottom point. At a certain point I realised I was juggling too many things and put the house search on hold until I could complete my Masters, eventually buying my own home in 2015 after the housing market had been consistently rising for about 4 years!

In some way I had reached out and latched on to the concept of financial independence, although I did not now this yet. I had briefly considered the possibility of buying a home in cash and taking a voluntary break from the working world. For a fleeting time, it appeared to be a possibility which I explored briefly. Interestingly, when I closed the door on this opportunity due to fundamental security concerns which I could not overlook, I did not pursue the thought process further, but seemed to return to the well-trodden path of seeking out more of the same type of employment and signing up to a 29 year mortgage.

Fortunately, this was not the end of the story for me! In 2015 I discovered the blog “Go Curry Cracker”, which led me into a world full of people who showed me that there are alternatives to working 30 0r 40 years! I discovered Jim Collins and the power of “F you money”. (Had I been conscious of this sooner, of course, I would have been saving my entire working life, and would have been ready to buy a house in a safer neighbourhood in cash in 2012 while the market was near its bottom point, or at the very least would have had a year’s savings accumulated in cash so that I could enjoy some time out to complete my Masters, to settle back in Ireland, and indeed to allow me to be more discerning about which job offers to accept.

I am sure that some will wonder whether I regret not having bought the duplex! The answer to this is that I do not! Along with shelter, security/ safety is one of the most fundamental of human needs. I had seen enough to know that my safety was in question here. When I doing my research for this article, I looked for the apartment online, and discovered that a murder had occurred in the pub around the corner shortly after I looked at the duplex! I do not regret my decision not to buy!

Pub shooting in the local pub near the duplex, and opposite the bus stop:

Pub shooting

I like to think however that I have learnt some lessons from my experience in 2012. As the housing market in Ireland (and in particular in Dublin) continues to soar, each day becomes a less opportune time to buy than the day before it! Due to a cessation of all building activities for about 10 years from the banking sector & housing market collapse in 2007/8, I believe it will take some time before the building supply catches up with demand. In the meantime, the cityscape is again covered with cranes, as building appears to try to catch up with demand. Some have begun to speak about signs of a new housing bubble appearing again, similar to what we saw here in 2007.

I believe it will be a while before we see a downturn in the housing market. I hope it will be a while before I encounter another redundancy. When that time comes, I intend to be ready for both! The next time, I would like to be ready to walk away from the working world for good if I choose to, and in a position to take advantage of the housing market collapse! Getting to a position of financial security which will allow me to take advantage of these and other opportunities as and when they arise is my focus now!

Advertisements

How I spent more money than I earned in 2017, and why I’m ok with that! 

This, and other things I learnt from an analysis of my expenses for 2017…

2017 was the first full year of expense tracking for me. It was probably March or April before I began to log all of my expenses in a spreadsheet, based on receipts that I had been collecting since the beginning of the year for this purpose, along with all transactions on my online bank account statement. I wrote in a previous post about how I procrastinated for some time before actually sitting down and doing this:  https://wordpress.com/read/blogs/110850157/posts/120 Even now, I can sometimes let more than a month pass before I sit down to update my tracker. When I analysed 2017’s expenses, I was more than a little surprised by how much it actually cost to keep my household and my life running for the year. Below are some highlights from what this exercise revealed!

I spent more money than I earned in 2017 – My savings rate was a negative 8%!

Considering that I had been unemployed for the first half of 2017 (and the last quarter of 2016), and that I had made some large non-recurring investments in my home during the year, I was pleasantly surprised to find that only 8% of the expenses came out my savings. The rest came from a combination of the Jobseekers Benefit which I received as an unemployed person during the first part of the year, the salary from my job in the second part of the year, along with some rental income received during the last few months of the year (more on this momentarily). When I re-ran the numbers excluding the large non-recurring investment in my home, I found that my savings rate would have been a more healthy 28% had I not made this investment!

PIC 2.pdf

Monthly average expense breakdown: 

1

• 44% of expenses were mortgage -related! This includes my mortgage, life and home insurance & TV licence. I don’t expect my expenses in this area to change much in 2018.

• 31% were household expenses: 87% of this category related to home renovation. Specifically, the creation of an en-suite, the complete renovation of the main bathroom, and attic insulation. I purchased my home almost 2 years ago, and took the advice of friends and colleagues who suggested that I live in the house for at least one year before deciding what home renovations to invest in. I tried to be strategic in what I invested in in this category. The conclusion that I reached was that an en-suite shower room attached to one of the bedrooms would be a good investment, since it would provide a perfect setup to rent a room in my home (and down the line, an additional toilet/ shower for the household). At the same time, I completely renovated my main bathroom and insulated the attic (another sound investment, in terms of reducing heading costs). Although I have been told that the cost of building the en-suite immediately added the equivalent value to my home, my purpose in building it was to add a passive income to offset some of my mortgage and utilities costs by taking in a lodger. The intention was to retain “the best of both worlds” as much as possible, by creating an independent bathroom facility for the lodger, and, of course to attract a higher rent through having the en-suite. Conversely, I retain the main bathroom as my own. Knowing that 1) we are in midst of a housing crisis here in Ireland and 2) I live next to a university meant that this was a good investment. The remaining expenses in this category included items of furniture, bedding, towels, etc. purchased for the lodger’s room.

Other Expenses:

Several other expenses, in particular entertainment and travel are much lower than I would expect to see in years to come. I took no holidays during the year, and minimised expensive entertainment, such as eating and drinking out outside the home, instead entertaining friends at home as much as possible. This was a particularly frugal year in this respect, because I was unemployed, and did not know how it would take me to find a job. As such, I was ruthlessly frugal in some areas, so that travel category typically represents things like the cost of getting the bus into town for a job interview, as opposed to going away for a holiday, or even a week end away!

Other includes everything from driving lessons,  a driving test application, gifts, non-recurring medical expenses, bank charges, entertainment, hair & beauty, clothing, vet fees, etc. (Some of these got their own categories as the year progressed, and I tweaked my tracker spreadsheet). Utilities includes electricity, gas, phone and internet. See my earlier post on how to optimise these: https://wordpress.com/read/blogs/110850157/posts/91

Income:

During the second half of the year, things started happening for me. After countless job applications and interviews, I was at last successful in securing a new job, which I’m very happy with. Just when I was on the brink of deciding that I would need to start to think of other ways to cover my expenses (a combination of renting a room on AIRBNB and trying to get some lecturing work was one potential idea that I had), the job offer came through for me, and I began my new job in June.

Then in September, I got a lodger to occupy the room with the brand new en-suite. I rent this room under the Irish government’s rent-a-room scheme which allows me to earn up to €14,000 tax free!  https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/land-and-property/rent-a-room-relief/what-conditions-must-be-met.aspx Frankly, I have not looked back! The only thing better than passive income is tax-free passive income in my opinion! I have compared how little effort I have to make to make this money, versus making the equivalent amount from job-based income, and I am hooked! I am and am even considering renting a second room in my home to further boost my savings rate.

Projections for 2018 savings rate: 

Here are my projections for my savings rate as a % of my net income in 2018. I have included a few scenarios – 1) savings rate assuming I do not rent out any rooms in my home 2) rate assuming that I rent out 1 room in my home (my current situation), and 3) projections for if I were to rent out a second room in my home (something which I am considering):

PIC 3

Currently, I have one lodger, so my projected savings rate for 2018 is 37% in my current situation!

Conclusions:

In all, it was a very frugal year. Since I started earning job-related income again in the latter part of the year, and also passive income through taking in a lodger, my focus now is to build up my cash reserves again, and also to try to manage my tax rate effectively by contributing as much as possible to my work place pension. Outside of this, I continue to explore options to shorten my path to financial independence. Having seen how little work is involved in renting a room in my home, I feel that the path my well end up being a mix of real estate and the tax deferred pension option. We are in the midst of a housing crisis in Ireland due to the lack of building over the past 10 years since the banking collapse, and there may be opportunities in this area for a good saver with an ability to demonstrate income-generating capability to the banks to acquire an investment property! With house prices starting to soar here again, I may however just decide to take this year to consolidate, and possibly just continue with the steady path which I have put in place this past 6 months, with the potential option to rent a second room in my home to boost my savings rate further.

I will continue to track expenses, because doing so has given me a deep awareness of my  financial situation which I had not had previously, (and which I believe most people lack).  I have been able to use the data to calculate my savings rate, and can now tweak various inputs to understand what has the biggest impact! Doing this analysis tends to lead me to thinking as I go about my life of ways to boost savings, or to reduce the time to financial independence. Seeing the analysis has been a powerful way of really understanding what is driving what, and in a way has led me to analyse my own life and movements a bit like a business.

I am also planning on taking a holiday in 2018, and socialising a bit more. While I would like to make smart money decisions, I also intend to loosen my grip where things like travel, entertainment, and even grocery shopping!

Tracking Expenses & other life changing habits I developed during an 8 month stint of being unemployed

Spending months going through countless job application processes without results can become disheartening. I decided to do what I could to remain upbeat, and to try to make the most of the time off work by forming some good habits that would hopefully stand me in good stead once I re-entered the workforce. Since finances were a concern, there was no more suitable time for me to begin getting a handle on my expenses. First step – to start tracking expenses:

1. Tracking my expenses:

This is possibly the most important routine that I formed while unemployed, and I intend to keep up the habit now that I am working again! I have lost track of the number of blog posts I have read which told me that that tracking my expenses and understanding where my money is going is a first and essential step towards financial independence. Yet, for some time I had resisted this. Since the beginning of 2017 though I have been saving my receipts in a in a chocolate box. Finally, some time in April I sat down one evening with my laptop and my box of receipts and began logging them all on a spreadsheet, month-by-month. I continue to collect my receipts, and sit down regularly to log them all into a spreadsheet, along with all debits from my online bank statement. Over the months I tweaked the data until I got it into a visual pie chart which gives me a high-level overview of my monthly expenses. I would recommend this as a good exercise for anyone, if only to enable them to answer questions like a) how much do you spend per month on groceries, electricity, etc.? Below is my little pie chart reflecting my June expenses.

Overview of June expenses:

IMAG6265

I have been living frugally, since I am coming out of the longest period of unemployment of my life. For this reason, discretionary expenses such as entertainment are at a minimum. Vet bills involved necessary vaccinations in order to keep a new pet healthy!

Tracking expenses heightens awareness, and influences behaviour. (“That which gets measured gets managed” etc.). For me the process of increased awareness and resulting changes in behaviour had already been developing slowly over the past year, since I randomly stumbled upon the FIRE community and began to realise the amount of waste involved in our first world consumerist lifestyles. Since for me the process of becoming aware had already begun, some behaviour modifications had also already begun to creep in. Tracking expenses crystallised this awareness for me. Ultimately, I would have to agree that we cannot know how much we need to live on unless we understand exactly what our annual expenses are! Doing this at a time when I had eliminated pretty much all discretionary spending was a bonus in that it showed  my costs at a fairly basic level – how much it costs per month just to keep the show on the road, and even if I never buy anything other than the bare essentials (groceries, power, insurance). This led me to make other positive changes as well, such as shopping around for a cheaper energy supplier, and getting a better deal from my existing mobile phone company, leading to reducing my expenses by €850. (For more information on this see this blog post – https://wordpress.com/post/financialindependenceireland.wordpress.com/9).  Ultimately, although a little frightening at first, this process is eventually empowering, because there is no longer a “great unknown”, and, armed with the raw data, we can make decisions about things we would like to change (or not). In addition to shopping around for the best deals on utility and health insurance, I began to cook more and eat out less (more on this under point 2. below). Most importantly, I realised that I could significantly reduce my expenses by renting out a room in my home!

Having made a number of positive changes, I will continue to track expenses to keep an eye on them, at least until the end of this year, but hopefully on an ongoing basis.  As a next step, I am now shifting my focus to tracking my net worth!

2. Meal planning/ Cooking more, eating out less:

Tracking expenses also led me to the realisation that I had been spending an average of €10 per day on food and coffee while working. Using this conservative estimate I was spending €50 per week, or a whopping €2,400 per year just on food and coffee during the workday! (Calculation based on a 48 week year, since I had about 4 weeks’ holiday per year). Some days I was so disorganised, that I would buy breakfast on the way to work, or forgo breakfast altogether if I was running late and didn’t have enough time to go to the shop. Additionally, I would buy 1 or 2 lattes per day at a cost of €2.85 each (later increased to €3, because according to the shop owner, the extra 15c would not make any difference to people – I beg to differ – I could probably buy a new pair of shoes each year with the difference! ). Then of course there was lunch, usually about €6.

Now my routine is very different. Since starting at the new job I have been bringing lunch with me. I cook at night and make enough for lunch the following day. I hindsight I realise that it is much more relaxing to actually know that I have my lunch with me, and not to have to spend half of my lunch break walking/ queuing for something to eat, not to mention the fact that I spent most of my working life eating white bread rolls which did nothing for me health wise! Add to that the fact that the company where I now work has a large, fully equipped lunch room, means that lunches are more relaxed, healthier and much less expensive. I even find time to take a walk and get some fresh air before going back to my desk. As for breakfast, I leave a big bag of muesli at the office, and start my day with getting in a bit early and having a coffee and muesli at work. I have now done 2 whole months at my new job, and with the exception of my first day, I have not spent any money on food or coffee during my working day. Other than the obvious cost saving, I am also saving time, and am eating healthier.

muesli__large

3. Getting regular exercise:

I had been walking regularly for most of the period I was unemployed. I then decided to up my game by joining the gym for a month, availing of a 1 month special offer available to the unemployed. Around the same time that I got my job offer, the gym had a special offer for the remainder of the year for about the price of 2 doctor’s visits, so I joined up! My routine now is to pack a gym bag 2 days a week, and go to a fitness class after work, and I try to go once at the week end too. I try to look at this as as much a part of my routine as going to work. I’ll allow myself some choice in which days I go, but I try to make sure it is 2 days during the work week. At first my only goal was to make it to the classes and participate to be best of my ability. Over the 2 months that I have been doing this I find that my flexibility has improved, and that I have more stamina. The classes are becoming less of a big deal to me as my fitness level improves.

download

In summary:

All-in-all, the fact that it took 8 months to secure my new job forced me to adopt more frugal routines. Going through 1st, 2nd and even 3rd round job interviews, and sometimes not even hearing back was a humbling experience, to say the least. The result of this is that these days I take nothing for granted, and actually appreciate having a job! I feel like the routines that I adopted while unemployed are benefitting me greatly now that I am back in work. My health and my finances were both aspects of my life that I had ignored until now. In all, I have found that these routines put structure on my life, and I tend to organise my time better, knowing that I will be leaving the office to go to a gym class, or that I will be getting myself in there bright and early to have my breakfast and hit the ground running. Financially, I have stopped burying my head in the sand, and to my amazement have found that, through my new awareness, and with just a small amount of planning, I have eliminated quite a bit of waste, which has translated to more money in the bank at the end of the month, with no sense of sacrifice!

Next up – the interesting bit – how will I choose to invest the savings…

 

How to save € 850 tonight without leaving your couch!

Have you ever heard those ads on the radio or on TV offering you money off to switch your electricity supplier, your insurer or even your bank? Have you told yourself you must look into it some time, and never got around to it? The good news is that this takes very little effort, can be done from the comfort of your sofa and can save you thousands of Euro per year in expenses. I have more reasons than most for focusing on my expenses right now. I have been “between jobs” for the past number of months, so I am more “time rich and cash poor” than usual, and these savings translate to more money in the bank for me at this time where I am particularly budget-conscious.

Here’s a breakdown of how I reduced my expenses by € 850 this evening without leaving my couch, starting with the biggest savings!

  • Home Insurance: Saving of € 484 per year / (61% reduction)

In order to avail of a mortgage, the bank required that I take out home insurance. Like many people, I took a policy out with the bank that offered me the mortgage. I spent an hour or two one evening recently reviewing comparison websites and submitting enquiries, which resulted in a few call backs with quotes the following day. In the end, switching the policy reduced my yearly expense by 61%, or €484 per year in real terms. I made this saving by switching from the policy I had with the bank/ mortgage provider, and by reducing the amount of cover I had in the policy for rebuilding costs as well as contents, since the original policy included more cover than I actually needed. Over the course of a 29 year mortgage, this couple of hours one evening spent looking into alternatives would result in a saving of over € 14,000, and that’s without taking into consideration the effects of compounding (the interest which could be earned on the money saved over the time period). A simple Google search will produce many comparison websites. Below are a few which I used, which are specific to the Irish market:

www.bestinsurancequotes.ie ; www.insuremyhouse.ie www.paddycompare.ie www.quoteme.ie www.123.ie www.chill.ie www.quotedevil.ie

  • Gas and Electricity: Saving of € 261.76 per year (15% reduction)

I used the switching website www.bonkers.ie to search for the option with the biggest savings. Bonkers arranges the entire switch, and ensures that the process is seamless

  • Mobile Phone: Saving of € 60 per year (17% reduction)

My plan cost € 30 per month for 15 GB Data, unlimited calls and texts. I discovered that my provider was now offering the exact same deal for € 25 per month for 6 months, so I switched to this plan. A useful comparison website is:

http://www.moneyguideireland.com/irish-mobile-sim-only-plans-compared.html

  • Internet (mobile broadband): Saving of € 45 per year (20% reduction)

I was paying € 15 per month for 15 GB Data. While I didn’t find a cheaper offer with any other provider, I did notice that my existing provider currently had an online offer of 30 GB for € 15, so I switched to this deal and got double the data for the same price. This will save me, since I have gone over my data allowance in the past year to the tune of € 45. Since I have both mobile phone and internet from the same supplier, I was able to switch both with just one call.

Savings Breakdown:

Home Insurance: €484.00
Gas & Electric: €261.76
Mobile Phone: €60.00
Internet: €45.00
Total Savings: €850.76

Thoughts:

With a minimal amount of effort, I was able to reduce my expenses by € 850. I feel that it is well worth the effort, and plan on making this an annual exercise from now on! This is extremely easy to do thanks to the proliferation of comparison websites, some of which even arrange for the switch. It is also worthwhile since some utilities, such as gas and electricity, reward switchers as opposed to loyal customers. For these utilities in particular, it makes sense to review, and probably even to switch, on an annual basis. In the case of my phone and internet bills, it was simply a matter of looking on the provider’s website to see that they had reduced the rates for the particular package which I had. The next step was simply a matter of calling their loyalty team to kindly ask that they put me on the latest pricing for that package, which they did with no objection. In the case of life insurance, (another mandatory requirement to take out the mortgage), I discovered that my current policy is about the most competitive in the market, and it did not make sense to switch. In the case of health insurance, I purposefully held off on looking into this for the moment, since I am currently looking for a new job, and this is often provided by employers in Ireland as part of the benefits package. As such I will review this once I have secured a new job. By far the biggest saving for me came from switching my home insurance policy. This represented over half of my total saving from this exercise – €484. If you have time to look at one expense only, this would be the one I would recommend looking at, particularly for anyone who took the policy out with the bank who provided them with the mortgage, as I did. In some cases, banks have “oversold” in this area, leaving people paying for more insurance than they need. Also, the quotes which the banks themselves offer are often not the most competitive in the market. In my case, this exercise resulted in an € 850 saving for just a couple of hours of my time!

The websites I have referenced here are relevant to the options available in Ireland. A Google search should produce similar options for other countries.

Continue reading

Why start this blog?

I decided to start this blog to talk about and share ideas on financial independence and early retirement with interested individuals living in Ireland. About a month ago I randomly stumbled on an article about a couple who had retired in their 30s, and my curiosity about how they did it led me to spend the past month or so researching the stories of several others who had achieved financial independence. Their stories and value systems struck a chord with me and led me to establish this as a goal for myself. Having just begun my own journey to financial independence – a journey which has no clearly-defined path as yet – I took a look online for others in Ireland pursuing similar goals, and could find no evidence of an online community. So, I’ve decided to document my own journey…

Early Retirement for beginners…

Have you ever had the audacity to consider that there may be an alternative to working 40 years or waiting until you are 60, 65 or even 70 years of age before you can leave your day job?

I had been keeping my head down, pacing myself for my 9 am to 7 pm daily grind when one evening about a month ago by chance I stumbled upon an article about a US-based couple who retired in their 30s – “Go Curry Cracker”. Mildly curious about how this seemingly ordinary couple had somehow managed to retire in their 30s, I began to research this further, which led me over the course of the past month to the blogs and podcasts of Mr. Money Mustache, Mad FIentist,  Jim Collins, Frugalwoods and others…

Curiouser and curiouser, I began to look for an Irish-based community of like-minded individuals, and to my surprise my search yielded very little! When asked whether he knew that there was a community of like-minded individuals out there working towards financial independence back in the 1970s, Jim Collins replied that he didn’t even know that there was a path! Similarly, I do not know my aim of bringing together the Irish-based FI community to share advice and trade stories on financial independence is an overambitious one, and indeed whether there even is such a community!

Over to you – What’s your story?