Bloggers on FIRE – my interview!

I was interviewed for the European Financial Independence hub website https://firehub.eu/ as part of the Bloggers on FIRE series. In the interview I talk a bit more about my early childhood experiences as well as the the sequence of events in more recent years that I believe led me towards establishing financial independence a goal for myself! This is more personal than my other posts to date, and I debated with myself for some time over whether to publish it here! In the end I decided in favour of sharing this part of my story since it provides some context!
Here is the interview as it appeared on FIREhub.eu
Bloggers on FIRE Featured Image Financial Independence Ireland exp

Bloggers on FIRE – Financial Independence Ireland

In our Bloggers on FIRE series, we interview European FI bloggers to find out what makes them tick. Our aim is to build up a “who’s who” directory for the European FI blogging world. We hope you enjoy the series and discover some new blogs to follow. You can find a full list of our Bloggers on FIRE interviews here.

Bloggers on FIRE Profile Card Financial Independence Ireland exp

Please briefly introduce yourself to FIREhub.eu readers

I am an Irish woman of undisclosed age (sorry folks, I am a bit secretive about my age). I blog at Financial Independence Ireland. I am currently single with no kids. I work in financial services in Dublin. My roots are in a close-knit family in the heart of rural Ireland of the 1980s, but my life’s path changed the day that my parents decided to take a leap of faith and leave that life behind forever, taking their young family to a new life in Germany.

They eventually returned to live in our capital city at the beginning of the Celtic Tiger era of the 90s. Too young still to legally live independently of a parent or guardian I reluctantly returned with my family. However, having lived such a different life for a number of years, I did not see myself staying here long term, and I informed my parents that I would be leaving again once I finished school.

This is exactly what I did, leaving again at age 18 to move to the UK for university. At this stage, I have lived in a number of different countries in my life. I consider myself to be a global citizen, most comfortable in the company of other global citizens!

What’s your backstory?

Without wanting to be melodramatic, I realised a number of years ago that I could not rely on anyone but myself. Not family, not the man I was in a relationship with, not the company that I had worked for for a number of years.

I returned to Ireland after having lived abroad for a number of years. I transferred back through the company I had been working with overseas, but subsequently went through a redundancy. I had returned to Ireland as part of a couple, expecting the guy I had been in a relationship with to follow me. The relationship did not survive the move, and I found myself renting a large luxurious apartment by myself.

My Mother had died a number of years previously, and my Father helpfully informed me that he would rather not have me move back into the family home since apparently I did not get on with the woman he was dating. I had returned to Ireland with a warm and fuzzy feeling of nostalgia for my childhood roots, thinking that I would get my own home here and start the next chapter of my life surrounded with support structures which I subsequently realised existed only in my memory.

It was a pretty dramatic realisation, and I felt myself very alone as I struggled with job insecurity and without the circle of friends that I had enjoyed while living abroad. I battled on, eventually achieving both my masters and purchasing my own home. As a goal oriented person, I found myself wondering, what next? I stumbled across an article about a couple who had retired in their 30s and all the rest is history…

Why do you want to reach Financial Independence?

It is about security and freedom of choice for me, and not having to compromise. Even if you love your job right now and cannot foresee any reason why you would not want to do it indefinitely, you are only one restructure, one redundancy or one change of manager away from all of that being shattered in my experience. I think that most people truly have no idea of how precarious our status as employees really is. Whoever said that “change is the new normal” was not joking!

I experienced this first hand, and remember finding myself in a situation which was making me very unhappy and anxious, and wishing that there was some alternative to putting one foot in front of the other and forcing myself in there every day.

Imagine in the midst of all of this one day discovering that financial independence not only existed, but was possible for ordinary people doing middle class jobs! Jim Collins writing on “F U” money spoke to me personally in that situation!

I want to reach financial independence in order to provide myself with freedom of choice. I think that we all have the same needs, which are pretty much as Maslow has described them in his hierarchy. FI should allow our basic needs (food, security, shelter. etc.) to be met, which should allow us to then focus on our higher order needs (kinship, self-actualisation etc.). If we get stuck at the level of constantly struggling to have those basic needs met, we risk never achieving our full potential and meeting those higher order needs.

My values are probably quite humble. I am not looking to travel the world in my yacht sipping champagne. Basic security and healthcare for myself and those closest to me will suffice! Freedom from financial worry. The ability to choose to say no.

How much is your “enough“?

This is a difficult one. A million is the nice round number that is bandied about often in the FI community. Currently my annual expenses would require a portfolio of this size, but, bearing in mind that about 60% of that expense is mortgages, I would argue that much less will be needed once the mortgages are paid off. With a couple of paid off properties generating cash flow, a couple of hundred thousand may be enough to support my basic expenses.

I think an important point for people on the path to FI to be aware of is that other factors come into play as well, notably how flexible we are willing to be. For example, if I were to throw geographic arbitrage into the mix, maybe I could quit my job now.

If anything I feel that I have deflated my lifestyle in in recent years. I don’t need a sports car, (or indeed any car), a holiday home (isn’t that why they invented Airbnb?), or even €100 nights out. In fact, when a guy tells me he has a sports car, I think “fair enough if it makes you happy (but do you know how many additional years you will have to work to pay for it, or what that money could make for you if invested instead?)”

Where are you on the road to Financial Independence?

We are probably all closer than we think! I would have said “very early stages”. However, a “back of an envelope” calculation this week told me that, if I proceed with my current plan to construct a self-contained unit for rent in my garden and rent a room in my home, and continue to rent out my rental property, these activities could cover most of my expenses.

This leaves some food for thought. I will need to properly rework these calculations, but this may mean that most of my job related income can be funnelled into investments and paying off mortgage debt for a couple of years, and that may suffice to meet my basic needs.

What do you want to do with your life once you reach Financial Independence?

This is the big question. I note advice from those of you who are already there to consider this question in more depth, and I agree it deserves consideration. I am at a stage currently where I have become a bit caught up in the minutiae of day-to-day life in the corporate hierarchy, and on some days, it is difficult to think beyond strategies to emancipate myself from this.

I recently met a man who is FI. He quit his job after building a property portfolio. His advice to me was to remember my social life and needs. Now that he is FI, I get the impression with him that he wishes he had someone to share it with. He explained to me that he turned down a number of social invitations from friends during his accumulation phase, preferring to funnel the €100 that the night out would have cost him towards mortgage repayments. He told me that he regrets that now, and advised me not to neglect this side of my life. He told me that he regrets now not having someone to travel with, etc.

The reality is I have a lot of mental energy, which I will probably need to harness. I think it is likely that I will continue to be active in some form or another, but the honest answer is I don’t have a full picture of this yet. I know that I am very bad with unstructured free time. That’s when I tend to get too much inside my own head. There are a lot of known unknowns, such as whether I will be single or with a partner, whether I will have a family, etc.

What is your strategy for reaching Financial Independence?

Workplace pension combined with rental property. I invest in my workplace pension as a preference over having a taxable investment account at the moment because of the tax saving for doing so. I have one rental property, as well as my own home which I also see an income-generating asset. I have on occasion rented one or two rooms in my own home.

I may consider reallocating a portion of my cash to peer-to-peer lending soon. If I opt to change jobs to earn more money, I may have a need to look beyond this to invest my surplus income. At that stage I may consider additionally opening a taxable investment account with a broker.

What will be your financial strategy after reaching FI?

At present I imagine it will be a combination of real estate and SWR from pensions. This would be the strategy for having basic expenses met. Beyond that I would be very surprised if I did not end up earning money in some other capacity, doing something that interests me and which hopefully adds value to society. I would be the first to admit that I don’t have all the answers, and that my involvement in this community has more to do with trying to learn from others than imparting wisdom myself!

What was your biggest financial mistake?

Not investing in workplace pension, and cashing out of workplace pensions from several jobs. Not saving a reasonable portion of my salary from the beginning. With a little bit of conscious living I could have saved some of my salary while also maintaining a good social life.

Really not living consciously at all. Having no understanding of money. Not taking time out to think about what I want from my life, this job, these friendships, this relationship… Not having an emergency fund. Not making a life and financial plan and reviewing and adjusting it from time to time.

Not having counselling when my mother died. This is financial, because it was a blocking point for me in terms of investing in a pension – I thought, “Why would I invest in this? It will be a loss if I die before I reach the age where I can cash it in”.

What advice you would give to your younger self?

Maximise pension contributions and DO NOT cash them in when you leave your job. Live more consciously. Read Mr. Money Mustache. Work 17 years, invest 50% and then be done! Make your own plan and do not feel the need to follow the crowd. Get parents to open an investment account for you when you were 13 and got your first paper round!

Think outside the box in terms of career and self-development. Who is to say that running a property portfolio is not just as valid a pursuit as going in and out to an office every day?!

Align yourself to people from whom you can learn and try not to spend time only with hedonistic people who haven’t really worked out yet what they want from life!

What’s your wildest dream?

The pursuit of FI is a selfish activity primarily. Once we get there, what would be great would be if we could harness our skills for non-selfish activity. Do good for others, #FIforimpact!

If FI means no compromise, imagine the impact that a whole community of financially independent uncompromising people together or individually could have in the world! We could push the environmental agenda for one, bring financial teachings into primary school for another.

What impact would bringing “the shockingly simple math” to primary school children have on our society in future? Imagine if they left school with this in mind as a blueprint. The knowledge that they can work a certain amount, and then check out and be free to use the rest of their lives pursuing whatever they like. How powerful would having this knowledge right from the beginning be!

What’s your favourite just-for-fun activity that brings you joy?

Reading biographies. For some reason this has been a fun activity for me from my teens onwards. Before we had internet I used to have to get books from the library or buy them. Now we have a host of TV and internet documentaries, and Wikipedia to back it all up. For some reason I have always loved reading about other peoples’ lives. We all write our own story, so it is nice to take some inspiration from other peoples’ lives along the way!

 

The interview was originally published under the following link:

https://firehub.eu/bloggers-on-fire-financial-independence-ireland/

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The story of my journey from financial blindness to intentional living: Lessons learnt and simple high-level steps to put your financial house in order!

This post focuses on the high level, and its’ the target audience is anyone who wants to maintain a fairly normal life while at the same time taking some smart steps to put their financial house in order and secure their future, without necessarily going to extremes.

It seems that for most people, the pursuit of financial independence as a goal appears to have been triggered by an event or a sequence of events in their lives. In this post, I briefly describe the sequence of events in my life which led me to this point, the lessons I learnt, and simple steps that I believe most people can take that do not involve too much sacrifice.

The back story

I lived and worked abroad for a number of years. I had a very nice life – a job that I was very happy with, a relationship, plus a couple of close friends, as well as a number of acquaintances and social contacts. The weather was warm all year round, I lived on a nice resort and had my rent paid by my employer. Life was good!

Like many ex-pats however, I decided to return home after a number of years of living the dream. Like so many Irish overseas there was always a part of me that felt nostalgic for my roots.

Tough Times

Anyway, when I did come home my life changed in all kinds of ways. While I had managed a transfer through my company to one of its’ Irish offices, the job to which I had transferred ultimately ended in redundancy. My relationship did not survive the move. I missed my friends, and didn’t really know where to start with building up a circle of friends in a city where everyone seemed to have their friends since primary school already, and where any social engagement seemed to require weeks of back and forth text messaging to finalise. As an ex-pat it had seemed so easy by comparison, with a collection of other ex-pats already available and keen to add me to their ranks! I started a Masters’ programme and rented what I considered to be a fabulous apartment (expecting to be sharing it with other half). When both the job and the relationship came to an end I suddenly found myself feeling very alone and wondering how I was going to manage.

I eventually found another job. Although the interview process had raised a couple of red flags for me, I ignored them and took the job anyway because it was the first offer I got, and the economy was in a downturn so I felt that I needed to accept it. As I have alluded to in a previous post I had briefly considered during this period whether I could buy a duplex in cash in order to live rent free and finish my Masters in peace before considering my next move jobwise. (More on this here: https://wordpress.com/post/financialindependenceireland.wordpress.com/231).In hindsight I feel that this was an excellent instinct, which unbeknownst to me would have been applauded within the FIRE community. However, it would be another few years before I would discover this community. At the time I pushed forward and took the job and didn’t buy the duplex in cash!

The new job turned out to be quite a negative experience. On a practical level I wanted to complete the Masters before starting to look for a new job. In doing so I tied myself to an unpleasant situation.

The turning point

I finally completed my Masters and found another job with significantly better pay and a nicer atmosphere. Around the same time I finally bought my home, and got myself a 29 year mortgage which I gladly committed to.

Some further volatility followed since the job with the significantly better pay that I had found was a contract, which, following a couple of extensions, eventually ran its’ course. It was around about this time that my health started to suffer. My health was not something that I had prioritised during my working life. I didn’t do regular exercise, nor did I prepare healthy food at home on a regular basis.

Unsurprisingly, this eventually took its’ toll on my health. After a number of medical tests I was privileged to given the feedback that I could restore my health through exercise and healthier eating.

Taking Control

This is when I began to make changes. Since my job contract had run its’ course, I was now unemployed, and free to manage my own schedule. I began by walking in the park near my house every day. Eventually I joined a local gym on a special offer monthly membership which I eventually made into an annual membership.

I started to eat muesli for breakfast, drink apple cider vinegar every day and cook my own food at least some of the time.

I considered employment opportunities very carefully and opted in favour of a good work- life balance over more money.  As I began to track and understand my money I carefully assessed the impact of working hours and taxes and realised that I could easily boost my income by renting a room in my home on the tax free “rent a room” scheme.

By the time I started my new job I had already embedded the routines of health and financial management. Even better, since by necessity (during all of the months of not working) I had become frugal, I made sure not to inflate my lifestyle back up again. Before I started my job I worked out how much I planned to save on a monthly basis, and set up a standing order to have this amount moved automatically to a savings account. I joined the company pension plan on week one and set up an automated deduction from my salary for the amount that would secure the company match. (I would later go on to add additional voluntary contributions to this to further reduce my taxes and invest for retirement, as documented here: https://wordpress.com/post/financialindependenceireland.wordpress.com/304 ).

Lessons learnt

While some things (such as a redundancy at work or a relationship running its’ course) may be inevitable or beyond our control, we can insulate ourselves to some extent against the consequences. In my case, I took the first job offer that I got because I felt I had to. At the same time, I was renting a large, 2 bedroom apartment by myself, had a car in the basement which I was paying insurance and tax for (about € 1,400 per year), and was not really using, continued to pay for my own health insurance, despite the fact that my new job had this included as a benefit (probably about another € 1,200 per year). I could have eased my own financial burdens greatly by simply taking a step back and looking at my situation, sharing my apartment by sub-letting a room, making the phone call to cancel the duplicate insurance policy and selling the car which I was not using anyway.

A redundancy could have been an opportunity to potentially take some time out to reflect, and maybe to have started a new chapter or to have retired completely from the type of work that I had been doing. Had I been living more intentionally, saving and living more frugally throughout my working life to that point, these could have been options. At the time however, I was not aware of any of these things, and all I knew was that I needed to get a job to keep earning money.

Intentional living

My own financial blindness contributed greatly to the anxieties which I felt in this period.

Taking control of these various aspects of my life has given me great peace of mind, and a sense of comfort and control over my life which I lacked during the volatile period described above. I see others around me who are living like I was, without any real awareness. It is understandable that not everyone wants to start tracking every penny they spend, or to become frugal beyond what they are comfortable with. With this in mind, here are a couple of high level steps that can be taken that do not necessarily involve going to live in a motor home in your company’s car park to save on rent!

Simple steps that can have a big impact

Looking at the expenses side of the equation, the following areas typically have the biggest impact:

  •  1) Housing: This is the biggest expense for most people that I know (accounting for 63% on average of my monthly expenses in 2018). Are you living somewhere that is bigger than you need? If so, can you rent some of it out or move somewhere less expensive? Remember, you can earn up to € 14,000 tax free annually for renting a room in Ireland!
  • 2) Transportation: Do you have a car sitting in your parking garage or driveway that you don’t use? If so, selling it should be no hardship and is an instant saving of a couple of thousand per year. If you need a car infrequently, you can rent one when needed through GoCar. In Dublin, I have found that I really don’t need a car, and that I can get an annual bus ticket (a “TaxSaver ticket”) which is deducted pre-tax from my annual salary.
  • 3) Food: This one covers any number of things from going out to lunch and buying take-away coffees every day when in work, to dining out frequently. I used to dine out very frequently just because I couldn’t be bothered to shop or cook. On reflection, this type of activity was pretty wasteful and simply resulted from laziness on my part!

The items discussed above relate to the management of expenses. On the income side there are also a few things we can look at:

  • 1) Increase job-based income: Job-hopping: as far as I can see this seems to be the primary way to increase job-based income and progress in a corporate career. For those who can negotiate raises in their existing companies, this is also an excellent way to go, since job-hopping to a different company also comes with uncertainty.
  • 2) Develop other income sources: The main ones that I have come up with recently are property-related. I have a rental property and in addition I sometimes rent a room in my primary residence. I am also exploring getting planning permission for a new build, and possibly putting a self-contained unit in my back garden to rent out.
  • 3) Invest in Pension Plan: If you work in a job which offers a pension plan as part of its’ benefit package, this is a part of your compensation. As a minimum, it makes sense to sign up to this and contribute the minimum amount that secures the maximum employer contribution. Employers who do not offer a company pension plan in Ireland are obliged to open a Personal Retirement Savings Account for any employee who requests it, so make sure to do so! This tends to grow in the background without any conscious effort, while at the same time reducing taxes and building an income stream for later!

Conclusions

Getting your financial house in order does not necessarily require extreme action. Just a little bit of awareness can already have a big impact!

In my own case, there were some obvious steps which I could have taken which would have reduced my expenses by thousands of Euro annually – sharing my large apartment, selling a car which I was not using, and cancelling my health insurance policy as soon as I secured a job which was providing this for me. None of these required any deep analysis, and in hindsight were very obvious. The third item simply required a 5 minute investment of my time in making a phone call or sending an email and would have saved me € 1,200! Although selling the car may have involved some effort, cancelling my car insurance and tax while I was not using it would have probably required another 5 minutes of my time for a € 1,400 cost saving!

On the income side, as the economy takes off in Ireland once again, the employment options have broadened for many people. This should allow for people to increase their incomes by availing of new opportunities. I have also spoken about developing incomes from other sources. While my focus has been on the real estate side, there are many other options depending on your skill set. The website side hustle nation is a great place to go to get ideas (https://www.sidehustlenation.com/ ).

Contributing to a workplace pension, even for a small amount, is an excellent move for most, and can really build up over time without having too much of an impact on take-home pay, since tax relief is given on this. Again, the initial investment is the time it takes to fill in a few forms, and to authorise the employer to deduct a certain amount from your salary.

In a nutshell

In all, a small shift in mindset can have profound implications over time. I went from a position of financial blindness to acute awareness, and found that, once I learnt to think even just a little outside the box, I am getting new ideas all the time, and constantly learning from others through numerous blogs and podcasts, and through having met some smart and enterprising people, both in Ireland and elsewhere in Europe.

Having initially focused on managing my expenses, I have now shifted my focus to increasing my income. I think that getting a handle of our expenses, and keeping an eye on these is necessary. Once we have a method in place for doing so however, this becomes easy to do and doesn’t take much time or effort. This then allows us focus on income. Currently, I am focusing on increasing my income through non job-related sources. In the future I foresee that I will again re-focus on the job-related income source, which will potentially have a significant impact in allowing me to invest and also to pay down mortgage debt quicker as I increase my income.

Through sharing this part of my story, I hope to have demonstrated that pursuing financial independence does not necessarily need to involve extreme action or frugality. We can pick our own point along the spectrum in line with our own comfort zones, and can make great improvements to our situations by targeting a few high-level items which do not require a major investment of our time.

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2018 – the year in review!

I thought it might be nice to take some time out of the enforced sentimentality of the Christmas season to take a look back at 2018!

The end of the year is a great time to look back and to take stock on the year’s achievements, and to put some goals in place for the New Year! My personal view is that there is potentially nothing more futile than realising that you have worked for a year of your life and have nothing to show for it. This is one of the reasons why I feel that it is very important to track a few key metrics and to establish goals in advance.

On the whole it has been a positive and stable year. I worked throughout 2018 in the same permanent job, and this continues to be a positive experience. My investment property continued to be fully occupied throughout by the same long term tenants generating a stable cash flow. I continued to rent a room in my primary residence for 9 months of the year which generated a nice bit of extra income and allowed me to share my utilities bills with my tenant.

I continued to track my income and expenses throughout the year, and additionally began to track the values of my various pension investments on a monthly basis. I had automated my savings activities on beginning the new job in 2017, and this automation also continued. These activities and behaviours have now become habits and require very little time or thought. I took some additional positive steps in 2018 which I describe below.

This was also the year when I finally began to meet some of the financial independence community. I attended a conference for Financial Independence Week Europe in Romania in June which was like a city break with a focus – great fun in addition to being very informative!  I have also now attended 3 meet-ups here in Dublin, where I was delighted to connect with a network of like-minded people.

So without further ado, let’s take a look at some of those key metrics that I have been tracking. What progress did I make in 2018?

  1. I maximised 2017 pension contributions:

Although this might seem like it should be a 2017 goal, in Ireland we have until the end of October of the following year to top up our pension contributions. This coincides with the deadline for filing tax returns and declaring any income which is earned outside of the employee “pay as you go” system. Since I have rental income to declare, I decided a couple of years ago that, rather than forking out for additional taxes, I would instead try to keep some money aside to make an additional voluntary contribution to my pension at the same time as I file my tax return.

This achieves a number of things – it allows me to put money aside tax free which will then be allowed to grow tax free. Even better, if I manage the amounts correctly, it also allows me to pay no additional tax on the rental income. While tax is payable on profit earned on an investment property, tax is refundable on pension contributions. So, by making a sufficient additional voluntary contribution to my pension, it all nets out and I don’t pay any additional tax.

2018 achievement -> this year (for 2017), I made an additional voluntary contribution to my pension, paid no additional tax on the rental income and even got a bit of a tax refund. Another way of looking at this is that I invested the equivalent amount of the rental profit into my pension plan, allowing me to pay no tax on this.

2019 goal -> this is something that I intend to continue doing in 2019 and beyond, particularly while I remain an employee with the ability to avail of income tax relief for investing in a pension plan. Each year I will review my finances and take a decision on how much I can afford to siphon away to the pension, while also attempting to retain sufficient cash on hand to meet any unexpected events and opportunities. The goal would be to at least contribute sufficiently to avoid paying any additional tax on the rental income.

  1. I arranged to overpay my mortgage:

In Ireland we have the option to choose a fixed or a variable rate mortgage. If we choose a fixed rate, this is typically for a fixed period of time. In my case I chose a fixed rate of 3.6% for the first two years of my mortgage. This period expired during 2018.

2018 achievement -> In 2018 I opted for a 5 year fixed rate of 2.8%. At the same time I put in place an overpayment of about € 300 per month. If I keep this in place for the duration of the mortgage, this will save me € 20 k in interest and wipe 8 years off the mortgage. I can also cancel the overpayment at any time with no penalty. The only downside to having locked myself in for 5 years is that I will not be able to increase this overpayment without penalty during this period if I found myself with additional money to spare.

2019 goal -> the overpayment is automatically deducted along with my mortgage payment each month. I intend to leave this in place for 2019.

  1. Increased rent on investment property and budgeted and planned for major renovation works:

I have an investment property which has been rented out to the same tenants for a considerable period of time. I had always imagined that, during the natural course of events, they would eventually move out, and I would take the opportunity at that stage to renovate the property. However, they have remained in the house, and I decided that the time had come to take action and complete the necessary renovation works to bring the property up to modern standards.

I have budgeted for the work, and I have a builder earmarked to begin work in February of 2019. Currently we are finalising the quote and agreeing on all the little details, so that there will be no surprises once the work begins!

2018 achievement -> In the meantime, I have increased rent to the market rate. As those familiar with the Irish situation will know, this is allowable currently outside of so called “rent pressure zones” in Ireland. As a rookie landlord who had been charging well below the market rate for several years now, on a rental property located outside of Ireland’s current designated rent pressure zones, I was very conscious of the need to take action before said rent pressure zones are extended in Ireland. Once they are, landlords will only be allowed to increase rent by 4% every 2 years. In anticipation of the extension of the rent pressure zones, I did my research and increased rent to market rates, and this will now remain the rent for the next 2 years, by which time I expect that rent pressure zones will be in place, and I will only be allowed to increase by 4% every  years. 2019 Goal -> Renovation is earmarked to begin in February, and is expected to take a couple of months. The builders will work around the tenants, who will remain in the house, so I do not anticipate a gap in rental income. I believe that the key is to agree the costs with the builder up front, and to be firm about the maximum that I wish to spend while focusing on a few key areas.

  1. Savings Rate/ Emergency Fund/ Pension:

2018 achievement ->

  • Savings rate this year was 37%, as predicted at the end of last year given my current salary, as well as income from my rental property and renting 1 room in my primary residence. Rental income from the rental property increased at the end of 2018, so this will increase 2019 income. Income from the rent a room is expected to remain as is.
  • Pension: The value of my pension fund investments increased by just under 10% in the 9 months from March 2018 (when I first began to track this) to December 2018. As many readers know the stock market has fallen over the course of the last few months of the year. The value is up mainly due to the additional voluntary contribution I made in October.
  • Emergency Fund: This has increased by 40% since the end of 2017, and currently could cover 16 months of living expenses. However, renovation works will deplete this to 6 months. (This was another reason why I was content to delay the renovation for a number of months more, to bolster my savings)

2019 Goal ->

  • Savings rate: I have given myself another year in my current job despite having being contacted throughout the year with opportunities paying up to 45% more than my current role. Further detail on my decision making will be discussed in my next post. On this basis I anticipate that my savings rate may be around the same for 2019.
  • Pension: I intend to continue to contribute 6% of my salary from my job on a monthly basis, and have my employer contribute 5%. As noted above, I will then make an additional voluntary contribution in October, of an amount to be determined.
  • Emergency Fund: Renovation works will deplete this to 6 months. The intention would be to build it back up to be 12 months again.

Conclusions:

This year has been all about embedding an infrastructure designed around good financial habits. Now that the infrastructure is in place, I anticipate that maintaining it will not require much additional effort or time. In general I believe that consistently maintaining these habits is the bedrock for building financial independence. While I do have some ideas on how to fast track my way to FI (to be discussed as I explore them in 2019), I intend to maintain this infrastructure consistently.

I finally feel as though I have the basics in place, and have visibility on, and control over, my financial situation. Imagine where I would be now if I had begun tracking, monitoring and thinking about all of this stuff when I first graduated from my undergraduate degree and got my first full-time job! In an ideal world of course, this thought process and discussion would have begun in primary school, but perhaps that is something that we will see (or implement) in the next generation! I would urge anyone regardless of your personal goals to take stock of your finances. Once you have oversight on these, the maintenance becomes easy and the stress of the unknown is removed. While there is always more that can be done, a basic high-level excel analysis is sufficient to give a good idea of your financial position. Start basic, and you can develop this as you wish down the line.

In my next post I will discuss why I have shunned opportunities throughout 2018 to earn up to 45% more than I do in my current job, and what I intend to focus on in 2019!

Happy Christmas everyone! I hope that your 2018 was positive, and and all the best with your 2019 goals!

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The simple path to wealth – Irish-style!

The simple path to wealth – Irish-style!This post looks at Irish attitudes to investing, and sets out 3 simple steps anyone can take to automate their finances and secure their future that don’t require complex research and analysis, or sacrificing today for tomorrow.

One Sunday recently my Dad dropped by my house to say hello. When he arrived I was just checking through my tax return and preparing feedback for an email to my accountant. I felt very pleased to be able to give my Dad the good news that, for the first time in my working life I had maximised my allowable pension contribution for 2017, at the same time capturing a nice tax refund in the process. I expected his reaction to be at least vaguely positive. If I had to describe his reaction in one word however, it would be…disdainful.

He proceeded to make a comment about one of my siblings to the effect that he “Really makes the most of his time and leads a very full life“. His subsequent comment involved something to the effect of: “It’s important not to sacrifice today for tomorrow”. I was a little surprised, and, I must admit, a little hurt. Surely the fact that I have only been contributing to a pension (investing) for a third of my entire working career to date, and the fact that I am now focused on taking very reasonable steps to boost the pension coffers is a positive (and indeed necessary) step. My Dad proceeded to express regret that investing was necessary and that he felt the state should take care of people in retirement, or they should have a workplace pension. This is consistent with his socialist views to which I also subscribe to the extent that I believe that there is a base line below which no one should be allowed to fall. I made the point that, given the ageing population in Ireland it is questionable whether the state pension will be able to support my generation in our later years. In addition – it is currently € 243 per week, so it seems sensible that people may plan to supplement this.

Is the inference that I should be out there living in the moment, and worrying about the consequences later? Didn’t I life that type of life for far too long already? I do not feel like I am sacrificing today for tomorrow. At least, no more than anyone else who is location-dependent due to work. I feel that in fact I am simply making conscious decisions and choices and following through on these.

Maintaining a hearty disregard for saving and investing seems to be quite common in Ireland, as is living in the moment, and feeling that we should show generosity and spend freely. I can only imagine that it holds people back on many levels. Typical Irish traits would be to want to buy a round of drinks, or to fight to be the one to pay the bill when meeting a friend for lunch. I can even remember hearing about young Irish men who had gone to Britain to work and whose pride would not allow them to return until they could afford to buy a drink for everyone in their village. Being “tight” or “stingy” is considered one of the worst things to be. I had also been infected with this attitude and was privately disdainful of others who did not appear to be spending “generously”.

Needless to say I now hold a very different view on this. Perhaps this line of thinking could have been where my Dad was coming from, or perhaps he just doesn’t agree with my choices, which I must just accept. On the other hand, why would a parent hold up one child as an example in this manner when the second has done nothing but make some mildly sensible choices after many years of financial blindness? I wasn’t looking for a medal, but I could have done without the disdain. Let’s look at some of these points more closely:

The sibling comparison – Single versus couple:

It goes without saying that a technically detailed comparison is not possible without having the full financial picture for both parties, so I will stick with what is known to me.

Mortgages: I got my mortgage on my own while my brother and his wife got theirs together. We both bought our houses around the same time, and both make similar monthly repayments. By this I mean, my monthly repayment is similar to theirs, ie. I have to find the same amount of money every month as they do between them.

Even without bringing any other factors into the equation, this already has a significant impact on our situations. It means that I have ultimately to be more careful in making provision for the unexpected, since I only have myself to rely on. It means I do need to make choices between going on frequent trips and stashing aside some money to cover the unexpected. Prior to getting my current job I was unemployed for 9 months. During this time my savings funded my mortgage and the majority of my expenses. This is the second time I have been without employment in recent years. As such, I have personally experienced the need to rely on my emergency fund on 2 occasions in recent years for a period exceeding 6 months on each occasion.

As such, I feel it is quite natural that I have been focused on building my savings back up again since my return to the workforce. When you are part of a couple, and living together, you can (hopefully) rely on each other – when one of you loses your job, the other hopefully doesn’t. As such, the case for an emergency fund is all the more important for the single person.

The bottom line is that as a single person mortgage and related expenses represent over 50% of all of my expenses. Granted, I have been able to offset some of this expense by renting a room out in my home and splitting my bills with my lodger. Nevertheless, I have found that it is a simply matter of making choices based on priorities. At the moment I personally feel that building some financial security gives me greater peace of mind than shopping, eating out or taking frequent trips would give me. I did all of the latter for quite a long time, with no regard for where I was going in my life. I’m all about conscious living these days!

Sacrificing today for tomorrow?

I think that this statement is worth considering further, from a couple of perspectives:

Over the past 2 years I have been 1) working less 2) eating better than in the past, and  working out 2-3 times every week (which I never did in the past). I have a nice home, a job that I actually enjoy. I still manage to get a couple of trips in every year and treat friends and family, and on top of all that am saving and investing at a rate I never was before. It is hard to see the sacrifice there. My social life could do with being a bit fuller, but that is in fact unrelated to my savings and investing choices.

I think it is more a matter of perspective. My Dad may feel I am depriving myself because he hears me saying things about how I haven’t been clothes shopping in a year, or I bring my lunch to work every day. Perhaps he thinks that I am depriving myself of going out at night or buying lunch or more holidays.

It’s hard to understand because I feel that I have greatly improved my quality of life over the past few years since discovering the FI community and living more consciously and planning things out better. Perhaps looking from the outside in it may appear that I am overly focused on investing for the future, and on monitoring expenses, to the detriment of my life now.  Tracking ones expenses is yet another un-Irish activity which may be construed as some kind of extreme action I suppose.

Conclusions:

Priorities, personal circumstances, and taking a sensible approach to personal finance:

It’s all about priorities. While one person may be very happy to continue to work indefinitely, another may wish to give themselves the option to work less, or not at all. My own view would be that, circumstances beyond our control (such as a health related issue) may render us unable to work at any time, so it makes sense to have some kind of contingency. Assuming that you believe you will live beyond age 50, it makes sense to put some money in to a workplace pension, for the tax break alone if for no other reason.

It’s also about personal circumstance. All else being equal, a single person with a mortgage will need to devote a larger percentage of their disposable income to it than a couple who share the same size mortgage. Houses come with all kinds of unexpected expenses. Just last week end, I spent € 240 on plumbers and was additionally made aware of a structural repair to my home which may cost a couple of thousand Euro. Having money saved to cover these very real expenses when they arise is important, and the result is that you don’t experience panic or anxiety when a trades person comes to your house and announces that you can expect this expense at some time in the near future as happened to me just last week end.

The simple path to wealth -3 simple steps you can take today to automate your finances and secure your financial future that do not require sacrificing today for tomorrow:

To take a Jim Collins-like approach to keeping it simple, I appreciate that not everyone wants to spend all of their free time reading blogs about how to make meals for a dollar, or indeed writing such blogs. Not everyone sets themselves the goal of early retirement or financial independence, and indeed, to those outside of the community some of the stories and experiences emanating from within the community seem extreme. Most people (myself included) prefer not to go to extremes, or to sacrifice their today for their tomorrow.

However, assuming that most people do not work for the state and expect a defined benefit pension plan at the a set period of stable employment, the following seem to me to be sensible, moderate actions to take for peace of mind if nothing else:

1. Invest in your workplace pension – My company will pay 5% of my salary into their pension plan, but only if I pay 6%. With tax relief, paying in 6% actually only costs me between 3.6% and 4.8%, depending on which bracket I am in. Effectively, this means that 11% of my salary is invested in various pension funds to grow tax free, and has cost me a maximum of 4.8%. Of course, depending on your age group you can top this up further with tax free contributions up to the following percentage of your salary dependent on your age:

  • under 30: 15%
  • Age 30-39: 20%
  • Age 40-49: 25%
  • Age 50-54: 30%
  • Age 55-59: 35%
  • Age 60 or over: 40%.

I have seen a lot of discussion and analysis on various brokerage funds, which ETFs to invest in, and the tax treatment thereof. In the interest of keeping it simple, I am happy to use the workplace pension as opposed to opening an account with a broker where I need to track my own trades and organise to pay my own taxes. There is no need for any of this with a company pension plan, and remember, if you are in the 40% tax bracket, every € 60 invested will buy you € 100 worth of pension assets. Finally, if your company does not offer a pension plan, you can ask them to set up a PRSA (Personalised Retirement Savings Account). Employers are required to do this by law in Ireland, so make sure to ask for it!

2. Overpay your mortgage – Banks in Ireland are now offering longer mortgage terms in anticipation of later retirement ages in future. I am almost 3 years in to a 29 year mortgage. Overpaying it by a couple of hundred Euro per month (the cost of a couple of nights out in Dublin) wipes 7 years off that mortgage term and reduces the overall interest I need to pay over the life of the mortgage by € 20 000. It has never been easier to get this information thanks to the mortgage overpayment calculators that the banks themselves are making available on their websites. The overpayment I am making can be cancelled at any point in time with no penalty to me. This is a very worthwhile “investment” for anyone with a spare couple of hundred Euro left in the budget, since can save you much more in the long term, and of course get you debt free sooner!

3. Build up an Emergency fund – There have been many blog posts out there on the appropriate amount to keep in an emergency fund. From my own experience to date, I would say 1 years’ worth of expenses is a good rule of thumb. Maybe others feel comfortable with more, or with less. An emergency fund can cover living expenses in the event of a job loss for example, or can simply cover household emergencies as they arise. Just last week end a plumber came to my home and advised me that I can expect to make a structural repair that he expects will cost me € 1,000 – € 1,500. This is exactly the type of thing that an emergency fund is designed to cover in my opinion. My recommendation would be to set up an automated monthly contribution. When you own an apartment in an apartment block in Dublin, typically part of your annual management fee goes into a sinking fund to cover precisely these types of emergencies. When you own your own house (not in a development), it is up to you how you manage this. Enter the emergency fund.

That’s it! 3 simple things that you you can dial up or dial down depending on your circumstances. Automation on these 3 items is preferable. You don’t need to have any particular skill or knowledge to do these 3 things, and you can go a long way towards securing your financial future by putting these things in place, and then simply leaving them in place and getting on with your life!

The title for this post, as well as some of the ideas referenced here were inspired by a book by Jim Collins called this Simple Path to Wealth. The book is written in a straightforward and entertaining way. I have included a link below to the book on Amazon. (In the interest of transparency, please be aware that I will make a commission if you purchase this or other items on Amazon after clicking through this link):

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How to travel without it costing the earth: Holidaying in Hungary

Should I even be spending money on travel when I am trying to save for financial independence?

For the past two years or so I have been very much prioritising building financial stability over travelling. I was of the view that I have been extremely fortunate in my life so far to have had so many opportunities to experience life in different parts of the world. However, for most of my working life I have lacked financial awareness, and as a result I have had relatively little to show for the number of years I have worked. For the past 2 years or so since my financial awakening, I have been prioritising getting my financial act together over travelling for travel’s sake, possibly on some level attempting to overcompensate for the years of financial blindness.

Then, in June I took a few days out to go to Financial Independence Week Europe in Timișoara, Romania. This experience changed my view on this somewhat. I noticed how refreshed I was on my return, how having had the opportunity to see a place that was new to me, (even if only for a few days) was refreshing and inspiring. Furthermore, meeting and hanging out with a group of like-minded people for a few days was a very positive experience. Finally, I noticed that it had not cost me very much at all! For more on the expense breakdown for this particular trip, see this blog post. https://financialindependenceireland.wordpress.com/2018/07/15/financial-independence-week-europe

So, when the opportunity to spend a few days in Hungary hanging out with some of the friends that I made at Financial Independence Week Europe arose, I grabbed it with both hands. I knew that travelling anywhere in August was likely to be more expensive than at other times of the year, what with it being the school holidays across Europe. However, having realised that our need for friendship and a sense of connection is also important – (Mazlow would not have put it on his hierarchy of needs otherwise) – I went ahead and made my arrangements.

The trip

I flew direct to Budapest. Due to a shortage of Hungarian forints in Ireland I had not had the opportunity to acquire any before I left. On arrival at the airport I used my Visa Debit card to pay the cost of the airport bus in to Budapest. Doing so allowed me to avoid the airport exchange rate of Huf 253 per Euro, and instead to get about Huf 318 per Euro by exchanging in the city. I then booked my Metro and train ticket to Lake Balaton. The infrastructure is fantastic, not too expensive and easy to navigate.

Lake Balaton:

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Lake Balaton

On arrival at my hotel there was some confusion with my host maintaining that he had received a message from booking.com telling him that I had cancelled my booking. We soon sorted it out though as he had a room available for me in any case.

I arrived a day before my friends, and spent the day exploring the resort, walking the waterfront, and generally getting oriented. The lake was a popular destination for tourism behind the iron curtain, as well as being a popular spot for formerly West German tourists. Even now, I could hear a lot of German being spoken, along with what appeared to be a number of different Slavic languages.

By the time my friends arrived I was very familiar with the area and was easily able to find my way to join them at the beach. Other than a ferry trip across the lake followed by a gentle hike one of the days, the time was spent pretty much chilling on the beach, swimming, chatting and playing with the kids in the lake. Evenings for me were filled with going back to my hotel for my dinner (which, along with my breakfast was included in the cost of €55 per night). After dinner I would swing by the supermarket for some beverages or snacks, and take a leisurely stroll down to my friends’ apartment to hang out.

After 5 days spent on the lake relaxing, it was back to Budapest via train for 2 nights/ days. I had booked a studio in a fairly central location through booking.com. Subsequent to receiving confirmation, I got a message from the owner saying that the apartment was unavailable. While in Hungary I raised this with booking.com, who recommended an alternative at twice the price and agreed to pay the difference. This was a good start.

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Interior Courtyard in the building where I stayed in Budapest

Budapest:

I always try to avail of a free walking tour when I visit a city, and, after dropping my bags off at my apartment, I immediately departed again to join a Communist walking tour. Having first visited Hungary prior to the fall of Communism, I was keen to see what had changed and what remained. In a nutshell there was very little evidence remaining of Hungary’s 40 years under communism. The tour guide was probably too young to remember it first hand, but told some amusing anecdotes. There was a nuclear bunker which was declassified in 2002, and reference was made to an underground hospital/ bunker which I would like to have explored further had I had more time.

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Communist Walking Tour: Entrance to the underground nuclear bunker which was declassified in 2002.

Continuing with the same theme, I visited the House of Terror Museum which is housed in a building which was both the home of the state police under communism and also to the Nazi leadership in World War II. Unsurprisingly, this ominous building had a heavy story to tell, and I emerged after 3 hours emotionally and physically drained. For this tour, it is worth spending the additional money to get the audio guide which talks through each of the rooms. Hungary’s story during this time period (end of World War II to 1990) is told by means of Soviet-era propaganda films from the time period as well as interviews with individuals who lived through the 2 regimes. This would be of interest to anyone who is interested in learning about life in a Communist state. Most of the statues from the Communist period were gathered up and put together in a park known as Memento Park, which I unfortunately did not have time to visit.

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Entrance to House of Terror Museum: Documenting Hungary’s history under Naziism and Communism

An evening at one of the thermal underwater pools seemed to be the best way to wind down and mull over the many peoples’ stories that I had heard in the Terror Museum. Széchenyi was the spa recommended to me. Once again, the seamless transport system in the form of the Metro made it easy for me. I arrived at about 7:30 pm and stayed until they closed at 10 pm. This consists of many pools of different temperatures, as well as a few regular swimming pools, including a pool within a pool where you are propelled around and around in a circle, which was great fun!

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Caption on a segment of the Berlin Wall on display outside the House of Terror museum

This is what my expenses looked like for a week in Hungary:

Expense Breakdown

Flights

€ 547.82
Hotel Lake 5 nights, incl. breakfast & dinner € 282.50
Apartment Budapest: 2 nights € 70.00
Bus + Train + Taxi € 52.87
Food + grocery + gifts € 74.84
Entry fees / tourist attractions € 35.85
 Total Cost €1,063.88

Having analysed my expenses for this trip, I was surprised to find that it cost as much as it did. Looking at things another way though, I see the flights alone accounted for 51% of all costs, and flights and accommodation together represented 85% of all costs. Actual spending for the week excluding the flights and accommodation was just under €164, easily the cost of a night out in Dublin!

Hungary was good value for money, with a beer costing about a € 1 in the supermarket. A corn on the cob on the beach cost about €3. As you can see, this level of accommodation, food and transport costs makes Budapest an excellent choice for a city break for anyone travelling from Ireland. The infrastructure and the rich availability of things to see and do make it an excellent spot. The price of this trip could have been optimised further by 1) booking flights in advance and 2) either making sure to travel home on a day when there are direct flights to Dublin to avoid additional costs.

Conclusions

In general, things were more affordable in Hungary than they tend to be in Ireland. It seems that it is possible to practice some geographic arbitrage without leaving Europe!

Rather than just avoiding taking any holidays until I get my financial act together, there is no reason why I should not take planned trips where it is possible to do so without majorly impacting saving and investment goals. In fact, travel brings inspiration, and life could otherwise get a little dull!

When travelling, just like when staying at home, I have found that it is possible to proactively manage costs by just a little bit of forward planning. To use the example of my trip to Hungary, during my 2 day whistle-stop tour of Budapest where I was travelling alone, I saw limited value in taking myself out for dinner. In fact, given that I was travelling alone, I was more than happy to return to my modern, fully-equipped studio apartment to have a beer and a bite to eat in the evenings, watch some cable TV or browse the internet using the Wi-Fi where I could relax and feel secure after a long day of walking around the city. I discovered that I can get enjoyment without spending money all the time. I was quite happy to pick up a few groceries when passing an Aldi, and a pizza slice on my way home from the spa. At the same time I was more than happy to pay entry fees for attractions that are important to me.

Having the opportunity to hang out with some new friends in a beautiful lakeside resort in Hungary is something I was delighted that I did. These type of get togethers of like-minded friends are where ideas are hatched and inspiration is born! From this trip, a potential volunteering opportunity arose for me for next year, as well as a number of potential presentation ideas for future financial independence conferences…Watch this space!

Final Thoughts

The trip was a great combination of chilling with friends and exploring a city. I would recommend Budapest to anyone looking for an affordable city break, but suggest flying on days when direct flights are available if going with Ryanair from Dublin to avoid potential additional costs. On this occasion I found the best accommodation options for me on Booking.com. Airbnb also had plenty of options. I would recommend changing money in one of the kiosks in Budapest rather than Ireland, since these places were offering better rates than the Irish banks. Booking an apartment is a great way to go, since there are supermarkets all around in Budapest – (CBA is the local supermarket chain I used a lot). I think 3 or 4 days in Budapest would be preferable to the 2 I spent, particularly for anyone who has not been before, to take tome of the pressure off the travel itinerary and allow sufficient time to do more (like spending a full day in the thermal spa for only slightly more than it cost for the evening, or taking time to see the statues in Memento Park, or explore the nuclear bunker that was used as a hospital in WWII).

Great for healthy travellers who are open to doing a lot of walking. The height of summer may not be the best time to go for a city break, since walking around can be extra tiring in the heat. Also worth checking whether accommodation has air conditioning, and, if not, mosquito nets on windows, to avoid getting bitten at night when leaving windows open.

Budapest is a great city, easy to navigate and foot and by public transport. I found that the information being provided by Google maps was spot on for both Budapest and Lake Balaton. The lake is quite a nice train journey from Budapest (1.5 hrs.), and is basically a nice, holiday resort setup. I was happy with what I paid for accommodation in both places – my hotel in Balaton was € 55 and included both lunch and dinner, while the studio in Budapest was € 35 per night, in a very central location. Since I booked at short notice, my flights were more expensive.

I am considering returning at some stage next year, and will definitely book well in advance to secure a flight deal. I plan to spend at least a few days, and will definitely spend a full day in the thermal baths and and also take a trip to Memento Park next time.

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Financial Independence Week Europe

fiwe2018-exp

I recently attended a conference on financial independence in Timișoara, Romania. This post covers my experience there.

I had heard about “Chataqua” – a week-long event attended by all of the big names in the global Financial Independence community. The cost to attend this this year is €2,000. As much as I liked the idea, I felt that it was too expensive, so back in February I posted on a couple of Facebook groups to see if anyone knew of anything similar but less expensive. I was promptly contacted by Mrs. White with details of this conference. Entrance fee – €15! Mrs. W. explained that, to keep the conference small, she and her husband (the organisers) run an application process, the first step of which required that I make a short video of myself discussing how I discovered FI, where I am in my journey, and life after financial independence looks like for me.

I prepared a brief selfie video as requested and a few weeks later on March 9th I heard back that my application had been successful. The conference organisers Mr. & Mrs. W. suggested a Skype call to introduce themselves and to answer any questions I may have.

I did some basic due diligence by checking that the hotel had a website and looked legit. I booked some flights, and, before I knew it, the time had come and I was on my way. I arrived on the Thursday night, June 7th, connecting through Bucharest with enough time to enjoy an Italian-style lemon ice cream and a good coffee between flights.

Mr & Mrs. W. had arranged for a taxi for me from airport to hotel. It was early evening by the time I arrived, and, after checking with the hotel owners that the city was safe to walk around at night, I headed out in search of some food and a currency exchange. The rate was 4.62 Romanian Lei to Euro. For convenience I initially just exchanged € 100. As it turned out, this was sufficient spending money for my entire stay (from Thursday night to Monday morning). I walked around the main streets of the town, and did a bit of shopping for water and snacks, then picked up a takeaway pizza and headed back to the hotel.

On Friday morning I met some of the other conference participants at breakfast. Since the group wasn’t meeting officially until Friday night, I had planned to spend Friday exploring the city by myself. As it happened, I bumped into some of the other participants leaving the hotel with the same intention, and we ended up spending the day together.

On Friday evening I met the rest of the conference participants when we headed out for dinner. We had a nice relaxed dinner followed by a trip to an ice cream parlour. The organisers had deliberately kept the conference small at approx. 25 participants.

We all had breakfast in the hotel courtyard on Saturday morning, before taking ourselves to the conference venue at the back of the premises.

The conference ran from 9:30 – 4:45 on Saturday and Sunday, and consisted of 10 * 45 minute presentations over the 2 days. All conference participants had been given the option to propose a topic that they would like to present on. Participants then had the opportunity to vote on their choice of topics.

Presentations:

Not surprisingly, there was plenty of discussion around the hard metrics of the financial independence – The 4% rule, savings rates, safe withdrawal rates, knowing when you have enough, but also on the softer aspects, such as the question of what people will choose to do with the free time which they have gifted themselves, and whether they will use it to make the world a better place.

One participant gave a presentation on how to turn problems into websites offering solutions and generating revenue. The idea works by creating useful content to assist readers with a particular problem (i.e. how to extend wifi coverage in your apartment), and included links to recommended products, which generate affiliate revenue for the website owner.

Another gave a presentation on his side hustle story – Building extensions for online marketplaces. Once again I observed how many ways there are to make money for individuals with these specific types of skills!

A young couple living in Vienna,Austria presented on their luxuriously frugal live in Vienna, Austria, their philosophy of minimalism and how they are not waiting to be financially independent to embrace life and pursue their passions, such as developing their You Tube channels. They have managed to keep their expenses low by living in an affordably priced apartment courtesy of an Austrian government scheme.

We then had a presentation from Mr RIP, an Italian guy who lives in Switzerland and earns a ridiculous amount of money working at a major company which he calls Hooli on his blog. He is currently pondering whether he should work 1 or 3 more years at Hooli before retiring at the ripe old age of 40 something!

We heard from a German software engineer who has been saving 75% of his income for some time already and is also considering when to pull the retirement trigger. The presenter shared details of his expenses and there was some discussion around the emotional aspects of ending one’s career and what the next chapter would entail.

The organisers Mr. & Mrs. W. presented on their efforts to reduce waste and to encourage re-use. Mr. W. left his high powered career in Germany behind, and, much to puzzlement of his friends and neighbours, can now be found picking up litter on the streets near where he lives in Romania. He found a company which pays people for their rubbish, and even an app. which matches rubbish buyers with sellers. Mrs. W. has developed a pack containing a knife, fork and spoon as an alternative to using disposable ones. Mr. & Mrs. have found plenty of areas to add value to their local community in Romania.

We had a presentation on the 4% rule. The sustainable “safe” withdrawal rate for a long retirement period is a hotly-debated topic in the FI community, and those individuals within the group who have already saved a lot are particularly eager to get comfort on this! We settled on 3.1415″PI” as a safe number, since it sounds good and is less than 4!

Lastly, we had a presentation from a Slovakian ex-pat living with his young family in Vienna on the feedback from his interviews with conference participants which he had been conducting throughout the week end. The following trends were observed:

Most of the group was investing in ETFs. Most (present company excepted) had avoided home ownership. A few were tech guys who had been saving most of their income for most of their lives, and were more or less ready to leave the workforce at approximately  age 40. Some had already retired through the power of geographic arbitrage: 1 couple currently living in Romania and another in Croatia in a town where houses can be purchased from € 10K.

Logistics:

Restaurants within walking distance had been booked for us for lunch and dinner, and starters had been pre-ordered for the tables by the organisers which we paid for separately afterwards. We each ordered what we wanted to eat and drink at dinner and split the bill accordingly. Things were so well organised that the only thing we had to do was to socialise and get to know each other.

Everything was within walking distance, and we moved about as a group, with our hosts making sure to lead us past good ice cream parlors and supermarkets as we passed, to allow people to pick up drinks and snacks as desired along the way. The situation was very condusive to a good bonding session for a group of individuals already united by their pursuit of a common goal, and most of us stayed up chatting late into the night.

Takeaways:

There is no one right way to do this. While some are focusing on saving/investing a million plus through having well paid jobs in high income sectors/countries and saving 70% plus of their incomes, others have bought investment properties and live off the surplus cash flow, yet others build product websites to generate passive income. Most invest in ETFs and some in P2P lending. As noted, most have tended to avoid home ownership, and manage to rent for € 400 -500 per month, something that is not an option for most of us living in Dublin unfortunately!

As a travel experience, I would recommend this type of trip to anyone who is relatively low-maintenance, in good health and enjoys exploring new places at an affordable cost. I got to see some of Romania – we even had a walking tour of the town courtesy of our host. My cash expenses from Thursday evening until my departure on Monday morning were € 100. In total the trip cost just under € 400 (full breakdown below). Neither the organisers nor any of the speakers took a fee for their work on this. The hotel charged € 28 per night for a single room. The hotel owners were very obliging, delivering what appeared to be a brand new fan to my room shortly after I requested one, and even preparing 2 breakfast rolls for me to take with me when I left early Monday morning.

I had a refreshing city break where everything was organised for me, and met a great group of like-minded people from across Europe, several of whom I would hope to stay in touch with. In the comfort of the conference facility within the hotel grounds I could relax and focus on the topics of conversation. Hearing what other people are doing to get themselves to financial independence was refreshing and inspiring. After more than 2 years of following countless blogs and even creating my own, I finally met the real people behind some of the stories. It felt good to know this stuff exists in reality, as well as in cyberspace! Getting away from my own day-to-day was a great way to think and return with renewed focus. The conference is in its second year, and is intended to be an annual event, and may be of interest to anyone who is interested in making connections and learning about what others across Europe are doing.

Quite a few of the speakers and participants have told their stories on their own blogs, which I have linked to below. Roll on FIWE 2019!

Expense Breakdown:

Flights €151.62
Hotel 4 nights €112.00
Conference €15.00
Cash Spending €100.00
Tips/Other €20.00
 Total Cost €398.62

Links:

http://whatlifecouldbe.eu/    –    Mr & Mrs. W. tell their story!

https://www.superhostcampus.com/ – Blog in German providing tips on how to be a great AIRBNB host!

http://retireinprogress.com/ – Mr. RIP’s story

http://www.hippiesdelandrover.com/ – Blog in Spanish (translation option available) – Erik and Sofia Flores talk about their journey

https://frugalisten.de/ – Blog in German (translation option available)

https://www.p2p-banking.com/

https://www.youtube.com/channel/UCEjZJchPQlnLWANGntwSyuQ

 

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The terrible twos! – Fear and loathing two years in to the journey to Financial Independence!

Recently Word press informed me that it had been 2 years since I set up this blog! It all began with the incidental discovery of an interview with Jeremy Jacobson, better known through his blog Go Curry Cracker. Jeremy and his wife managed to retire in their 30s after 10 years of frugal living and investing over 70% of their income, and now travel the world. Having finally managed to purchase my own home after many ups and downs, I recognise now that I was on some level looking for my next goal to work towards. Stumbling on Jeremy’s story was a joyous discovery for me because I had never realised that this was even a possible goal for ordinary people. I quickly discovered a number of other similar stories and realised that there was even a movement of people who had set themselves the goal of financial independence. This was exciting news, and I began to look for a local community of people in Ireland striving for similar. In an effort to find the community, I set up this blog.

About a year in, I began tracking my expenses in earnest, created an en-suite shower room in one of my bedrooms, and rented a room in my house out. At one point, I even had two rooms rented out. In the same period, I also managed to finally get a job (after 10 months of being unemployed). I joined a gym, started cooking my own food, and eliminated buying lunch out every day, instead bringing my lunch with me to work. Things were looking great, and I had the real feeling of being in control. My expenses were being closely tracked. I expanded my tracking to additionally include a savings rate and to monitor the balances in my various bank accounts and also pension savings accounts. Inspired by many of the blogs I follow, I began to question expenses as they arose. When I was invited to a friend’s hen night recently, I declined to spend €125 to share a room in a hotel, and instead booked myself into a nearby Airbnb for €39. When locally-resident family members expressed a desire to meet up, I would invite everyone around to my house and either cook or order in a bunch of pizzas from my favourite local pizzeria, and buy drink and desserts from the local supermarket, and have a nice relaxing night at my place rather than the pricier restaurant option.

Recently though, around year 2 I suddenly find myself questioning things. Am I alienating myself further from the people in my life by the type of actions I have described? Is it too much isolation? Is it healthy for a person to isolate themselves too much from the mainstream? Is the tracking becoming too much, and by this I mean, can there be such a thing as too much awareness of costs? Do we sometimes need to just let ourselves live in the moment? I am now one year into my “new” job. Conscious that I have very little by way of pension savings to show for the number of years that I have worked, I have taken the notion of “paying myself first” very much to heart, and had not been considering taking a holiday for the foreseeable future, at least until I work out my budget for home renovations and pension contributions for this year. However, I have recently begun to question whether this approach is healthy. Is this a step too far? What are the implications of me not taking a break for all this time? I fear I may have hit “the terrible twos”, self-doubt and angst appear to have crept in underneath my veneer of control and accomplishment.

I went through a volatile couple of weeks where I began to question many of the decisions I have made in recent years, (not least my decision to return to Ireland after a number of years of working abroad), my connection (or the possible lack thereof) to those around me, and many other things. Where does the pursuit of financial independence fit into all this? Does it serve to alienate me further from those around me? Can I sustain the intensity of my focus on this, given that I have a considerable journey left to travel along the path? How am I doing in the here and now? None of these are new questions for me in my life. My recent anxieties revolve around whether I am placing too much pressure on myself.

Then I decided to check my financials. One year exactly into my “new job”, I compared a snap shot of my current position to what it was one year ago. My savings in various pension accounts are up 30%! Approximately 90% of this increase was due to additional contributions. In even better news, my cash reserves have increased by 120%! Yes, more than doubled! In total, I managed to retain just over 40% of all of my net income earned over the past year! Not bad! So this is what a year of financial consciousness can achieve!

After a couple of weeks, my anxieties abated. Seeing my progress in numbers certainly helped. I can only conclude that all people must experience doubts about their past and present choices, and moments of crisis on any journey.

The conclusion I reached is that I will not be walking away from the pursuit of FI any time soon! In just one year of eschewing rampant consumerism I managed to retain 40% of my net income. I did not deprive myself during this year – in fact, I probably took better care of myself in this year than in any other year of my working life! I visited the gym 2-3 times most weeks, cooked my own food, and generally drank less alcohol and more water! The main difference was that I tended to plan things better – like my meals. I kept a bag of muesli in work for my breakfast and prepared my lunch a day in advance. I realised that I had more than enough (too much in fact) clothing, so did not do any clothes shopping.

In general I realised without necessarily taking things to extremes, just getting a couple of things right can make a huge difference over time, and does not necessarily involve self-deprivation! Here are 2 examples of things that do not require a lot of work or to set up, and can make a huge difference down the line without depriving us too much in the here and now:

  1. Workplace pension contributions: In Ireland, a person under 30 may contribute 15% of their gross income to a pension with tax relief at their highest rate of tax, a person in their 30s can contribute 20%, and a person in their 40s can contribute 25%, and so on. The higher rate of tax in Ireland is 40%. At this rate, €100 pension investment will cost only €60. This is a way of both reducing our overall tax, and investing at the same time. A surprising number of people whom I have spoken with at work do not avail of this – meaning that not only do they not invest some or all of % which they are allowed to invest tax free. They don’t even invest the minimum 6% required under our company’s pension plan to ensure the company contribution of 5%! Most companies operate similar pension plans, which require some minimum investment by the employee to secure an investment by the employer. As an absolute minimum, I would suggest that every employee should try to take advantage of this benefit.
  2. Mortgage Overpayment: When the fixed term on my mortgage expired in February of this year, I investigated the available rates, and discovered that I could fix in a lower rate for the next 5 years. The lower rate resulted in about €100 saving per month. As a result, by adding an additional €200 to the original amount which I had been paying, I am effectively overpaying by €300 per month. The result? If I continue to overpay at this rate, it will reduce the term of the mortgage by 7 years AND reduce the interest payable by €20,000! I was able to work all of this out very simply on an overpayment calculator which is publicly available on the bank’s website. If at any stage I can no longer afford the overpayment, I can stop this at any time without penalty. To put it in perspective, €200 is probably the equivalent to 2 nights out for many in Dublin!

It is not necessary to cut out all consumption, and to limit restrain ourselves beyond what we are comfortable with. Making a small overpayment on a mortgage and taking advantage of tax free workplace pension investing are just 2 things that don’t require a lot of time to set up, and which can have a massive impact both now and down the line. Arguably, these are actionable items for most working people.

Personally, I am happy to cut out trips to trips to expensive beauticians, fancy restaurants and overpriced hotels which I do not value, and instead to seek alternatives through the power of AIRBNB and Groupon deals when necessary! After my deliberations of the past few weeks, I have now booked 2 weeks off work over the Christmas period, and will most likely be jetting away on a holiday! By then it will have been over 2 years since my last holiday, and I will be looking forward to it!

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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!

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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!

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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…

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