How we managed a mini-retirement

As you may have seen in previous posts, I alluded to the fact that my family would be in Portugal for 2 months trailing a mini-retirement. This post goes into why we did it, how we’re managing it from a financial perspective and how it’s going so far.

What is a mini-retirement and why do it?

A mini-retirement is an extended break from your regular work, it can be for 2 months or even a year or more. Jillian Johnsrud (formerly Montana Money Adventures who also has a really good free email course on living with intention) mentions she uses them for things that have an expiry date. Things like backpacking with friends (before everyone settles and/or has kids) or taking an RV around the country with your family while your kids are small. Another reason might be for you to focus on building a side income, a passion project or taking on renovations for your home or investment property etc.

For us, the idea came to me last summer. As I was still on maternity leave we decided to take an extended 6 week trip to Canada, where my husband got approval to work remotely for half. While we thought this would be a chance for us to catch up on our sleep as we would have family around as well as both of us to mind our son for most of it, it didn’t work out that way for whatever reason. My husband had also just taken over for a team member who was on rotation while training someone new to cover his work and the trip left us both more tired than when we started.

To help remedy this, I proposed the idea of a mini-retirement where my husband would apply for parental leave and I would remain on maternity leave for an overlap period before I went back to work while my husband stayed home with our son, which also allows us to delay putting our son in childcare for as long as possible.

I also liked the idea of my husband being off with our son as I think it’s good for their relationship/bond and for our son’s development. My cousin’s partner stayed home with their child when my cousin went back to work and as men tend to be less risk averse, my cousin felt that their daughter was more confident and self assured by the time she started daycare.

In Ireland, each parent has a statutory parental leave where you can take 22 weeks unpaid (going up to 26 weeks this Sep) before your child’s 12th birthday where your job is protected in the same way as the initial maternity leave. You can take this leave as:

• One continuous period of leave or
• 2 separate blocks of a minimum of 6 weeks each
• If your employer consents, broken into working days and/or hours

The vast majority of parents will use the 3rd option where they work 4 day weeks, and as both parents can take it, some parents work it so their child only has 3 days in child care while one parent takes off Friday and the other Monday or something like that. Still others use it for summer or term time once their kids are in school to ease scheduling. While these are all great options, we hope to be financially free by the time our son is in school and possibly even be homeschooling so won’t have to worry too much about the schedule shuffling required for term times etc.

But what if you don’t have kids or need to use your parental leave a different way? Check out this post (also by Jillian) on some other ideas on how to negotiate a mini retirement.

How much is it costing?

Before I went off on maternity leave I had saved up a year’s worth of living expenses (for just my expenses), I also got a big tax refund throughout the year on top of the state maternity pay and child benefit, adding that to the fact that our expenses are low enough to live off just my husband’s income, it ended up that I hardly touched the savings. At one point I decided to invest a big enough chunk of it but kept a cash cushion just in case. When I decided I was ready to go back to work, we still hadn’t touched that cushion so this is what we ended up using to fund our mini-retirement.

As I track my expenses in detail, I had a pretty good idea what our outgoings would be for each month we planned to be off basing it on the same month last year. I looked at a few options in terms of where we could get the best bang for our buck. First I figured out what our expenses would be if we stayed in Ireland. Then I looked at accommodation and estimated food and remaining expenses for Tenerife, Malta and Portugal.

I also figured in the fact that even if I started back to work in March, I wouldn’t get paid until the end of April and so we needed to have enough cash to cover us from Jan to Apr as well cash to cover the costs of a family wedding when we return at the end of Feb.

Each month nearing Jan, I reviewed the budget to ensure we were still on track.

Staying in Ireland was going to cost us an estimated 11,000€ from Jan-Apr

The below options looked at staying away for Jan-Feb and returning home for Mar-Apr. It also took into account the fact that we would have fixed expenses at home like mortgage, electricity, gas and internet which we would still need to pay while we were away.

Tenerife came out at 300€ more than staying home.

Malta was going to cost 70€ less than staying home.

Portugal came out on top at an estimated 1,600€ less than if we stayed home.

Why not rent out our home?

Obviously renting out our home would have reduced the cost of being away even further but we crunched the numbers on that too and decided against it for the following reasons:

There is new legislation in place banning short term rentals in rent pressure zones for any period over 2 weeks (you can rent up to 90 days in a year but no more than 2 weeks at a time). There is no limit on renting out rooms in your house so we figured a loophole around this would be to rent out 2 of the 3 rooms and knock off a few hundred from market rate. We even took out an ad and found someone to rent it out to but then…

We had a hard time finding insurance. Our existing policy was up in December but very few insurers provide cover for short term rentals within a home owners policy. We could have taken out a home owner policy, cancelled it, then taken out a rental policy for the two months, then cancelled on our return and taken out the final home owner policy but you are racking up cancellation fees. Some brokers said we could ring up and ask for a mid-year change team but that may have resulted in the cancellation/new policy route anyway. We also looked at rental policies and couldn’t find any that covered stays of less than 6 months and the fine print required a lease for a min of 6 months (which we would not have). We finally found a non-standard policy that would cover both us as homeowners and letting out to short term strangers while we are away, including home swaps but the cost was almost 800€ for the year (just over double our standard policy rate).

Add onto all that the rental income tax we’d need to pay (even with reduced rates as we’d have less income from being off for 4 months), it was only going to net us 1,800€ extra for the two months.

Adding onto that the fact that we would have had to get the house “rent ready” on top of getting ready to go away at Christmas and then away for 2 months, it just didn’t seem worth the hassle and the risk to us.

We may have even needed to finish our attic in order to store some of our belongings up there while it was rented out which would have further reduced our take home.

If furniture or flooring got damaged by the rental on top of that, it would have totally wiped out our earnings.

So all that to say, we decided it wasn’t worth it to us, at least this time.

How is it going?

As the point of this mini-retirement was for us to get rested up (as much as possible with a toddler who still doesn’t sleep through the night), we are taking it pretty easy.

We also wanted to see for ourselves what the cost of living might be like for our lifestyle if we did end up wanting to spend more time here once we are financially independent and get a feel for what it would be like to live here longer term. So we are doing our best to live like we would at home.

That said, we are somewhat in holiday mode and buying more alcohol and eating out a lot more than we would at home.

We are also checking out two or possibly three locations: Portimao, Lisbon and still to be determined.

I’m also trying to work more on the blog, but don’t really have much more time than before.

Our daily routine looks something like this:

6:30-8am	One of us wakes up whenever baby wakes up, while the other sleeps, I usually try to let Mr. MH sleep to at least 7 if baby wakes up earlier, otherwise Mr. MH gets up first and lets me sleep.
8am-9/10	One of us (usually Mr. MH) feeds and dresses baby and goes for a walk while the other sleeps
9/10	Wake and have breakfast, throw on some laundry, potter around the flat – if I’m the one up early this is usually a second breakfast
10-11	Entertain baby
11/12-12/1	Baby naps and we do our own thing, I usually work on the blog while Mr. MH plays playstation
12/1-2	Have lunch, tidy up the flat
2-4:30	Go to the beach or a walk, sit on a terrace and have a drink or some food or go to the shop and get food for dinner
4:30-5:30	Get home and make dinner
5:30-7	Entertain baby and get him ready for bed
7-10	Usually if we’re lucky, we get 3 hours to ourselves before baby wakes and one of us go into settle him. I usually try to wind down and go to bed then too
10pm-8am	Try to sleep but usually woken at least twice before morning

And some pics of where we’re staying which is costing us about 30€/night excluding water, heat and electricity (unsure of those costs and only additional as we are staying for longer than 20 nights but will be good for us to get a sense of what our usage would be if we lived here).

And some beach pics

I’ll do another post further on in our trip to let you know how the cost of living stacked up against my estimates.