This post outlines our family’s annual spend for 2022. This is for a family of 3 in Cork, Ireland.

For longer time followers, I know it’s been a while – I will be posting some big life updates soon so stay tuned. In the meantime, see below the details of our spending from last year.

Total spend in 2022 came to:

€34,907

This is just over 3,100€ less than last year which is under my predicted 36k!

Not included in this figure are investments (5k). Also excluded is the tax refund we got from last year’s overpayments (2.7k) and any other income offsets.

Expense tracking and reporting in this article is done using my own excel tracker template.

Overall spend

Here is a summary of the main categories with spend over 400€.

And all main spend categories summarised by annual and average monthly spend.

Food

Food remained our biggest expense in 2022 (10.1k), making up 30% of our annual expenses. This is up 46€/month on average compared to last year.

Our grocery category (8.3k) includes everything you’d buy at the grocery store so can include alcohol, toiletries, cleaning products, the odd centre aisle item like small tools, toys for our son etc.

Grocery spend went up by 300€ compared to last year but take-away spend was 200€ less than last year so we did a bit better cooking at home.

Restaurant spend was our biggest increase by almost 800€ as we were in Canada for 2 months and treated friends/family to meals as we were staying with them.

So even given the rate of inflation this year on food, we don’t seem to be seeing that much of an increase in our grocery bill, this is likely due to an increased effort to eat less meat.

If we convert the full annual food spend of 10.1k into cost per person per week (assuming 2 adults and 1 toddler (I’ll average at 2.75), it comes to 71€/week/person (up 4€/week/person from last year).

Monthly bills

Monthly bills came to a little over 7.2k or 20% of our annual spend. The vast majority of our monthly bills was our mortgage (55% or 3,963€). The rest were made up of Gas, Mobiles, Electricity, Internet, Refuse, Life Insurance (for me only to cover our mortgage). Gas was 300€ more this year due to rate increases. Electricity was 63€ less than last year due to the government credit. Combining the two brings our utility costs up by 238€ from last year. The remaining costs were fairly similar to last year.

Entertainment

Entertainment made up 11% of our annual spend. We spent 140€ more on entertainment this year totalling 3,603€ but sub-categories have shifted. Last year the biggest spend was sporting events which was overtaken this year by video games (double from last year). Alcohol also doubled from last year, some of which was because we could have people over again. The alcohol spend is only those bought directly at an off-license, the remainder is included in our grocery spend. Gadget spend was a bit higher as we treated ourselves to a Nintendo Switch this year. Remaining categories include nights out, sporting events, apps/patreon memberships, netflix, sightseeing (passes to Blarney Castle and Gardens), books, movies, and board games.

Vacation

Travel costs made up 10% of our annual spend coming in at 3,547€. Last year we spent 1 week in Portugal and 2 months in Canada. The one week in Portugal came to 1,482€ – 300€ for flights, 560€ for accommodation, 438€ for food/drink and 96€ for transport (trains and ubers). The only costs included in this category for the Canada trip was the flights coming in at 1,865€. As we were visiting family we didn’t have accommodation costs and food/drink costs were included in our main food/drink category. The other cost included in the accommodation line in this category was our annual membership for homeexchange (149€) which allowed us to host a student for 3 weeks and gather enough guest points to cover our accommodation in Paris this Fall for the Rugby World Cup.

Transportation

Transportation made up 8% of our annual spend coming in at 2,799€. This is 433€ less than last year mainly due to the fact that I paid motor tax for 2 cars last year before we got our “new” car. Petrol was about the same at 1,334€ and car insurance was higher at 728€ as we had a break-in and had to pay an additional 300€ as a deductible to get it fixed. Remaining categories include maintenance (313€), motor tax (180€), taxis (96€), tolls (70€), parking (53€) and public transport (25€).

Home

Home costs came in at 1,892€ (6% of annual spend). Sub-categories include home insurance (393€), accessories (378€ – we got some new bedding and a security camera), maintenance (354€), garden stuff (341€), local property tax (241€ – the additional top up from updates to valuation was paid in 2023), TV license and small appliance costs (spare part for our coffee machine).

Personal

Personal spend came out to 1,477€ and includes things like clothing (both Mr. MH and I needed a wardrobe refresh which we did in Canada), accessories (travel bag, backpack, earrings, shoes and a travel mug), vape and toiletries.

Medical

Medical costs came in at 1,449€. The biggest expense last year was therapy at 656€ (more on that to follow in the life update post but thankfully I am doing MUCH better), supplies (356€) includes things like multi-vitamins, probiotics and other non-prescription stuff bought at a pharmacy, Mr. MH’s glucose sensors ran out while in Canada and we had to pay out of pocket (221€), GP visits (200€), prescriptions (172€) and dentist (50€). Health insurance is a minus because we switched to monthly payments for 2023 instead of paying the full year up-front and we got a refund mid-year due to reduced services resulting from COVID.

Other

The remaining categories had a spend of 1k or less and include things like:

Gifts/charity came out to just over 1k. This was for birthdays and Christmas and charity giving.

Blog costs came in at 842€ for insurance, website and subscription costs.

Kid stuff came in at 321€ including clothing, accessories, toys, books and other supplies. We get most of our clothes from my sister-in-law (thank you!).

Misc includes postage and lottery tickets (238€).

Weddings/Special Occasions (168€) was for accommodation and food/drink for family events.

Goals for next year

I’m actually fairly happy with last year’s expenses and would be happy to aim for the same amount again this year. That said, we have some big changes coming up this year which will hopefully reduce our cost of living even further, potentially by another 8k bringing our annual spend down to 27k/year. Stay tuned for more on that!

My family of three is nearing the end of our three-month mini-retirement. Both Mr. MH and myself were off work for the summer. We spent two months in Canada and one here at home in Ireland. This post goes into how we managed it, what it cost and how it went.

I contemplated not writing this post, as in the wake of the cost of living crisis, it feels a bit insensitive. But after some thought, I think different people will be at different points of their journey at different times and it’s ok to show what can be achieved along the path to financial independence should you choose to follow it.

Starting off I should say, we did not get here overnight. We are probably 15 years into our journey of getting and staying out of debt, consistently spending less than we earn and using the remainder to either pay for big life expenses in cash such as cars (albeit old), our wedding, two down payments, renovations and extended maternity leave or building up some investments such as paying down our mortgage, stocks and exchange-traded funds (ETFs)).

It’s important not to compare the beginning of your journey to the middle of someone else’s, so keep that in mind as you read on.

What is a mini-retirement?

In short, a mini-retirement is an extended break from your regular work, it can be for 2 months or even a year or more.

This will be our family’s second mini-retirement. The first was 2 months in duration in Portugal at the beginning of 2020 right before the first lockdown at the tail end of my maternity leave. You can read that series in the posts below.

Why we took a mini-retirement

The short answer is, because we felt like it and because we could.

The long answer is, the pandemic was hard, as it was for many. I hadn’t seen some of my immediate family for 3 years. My twin nephews were 1 the last time I saw them, now they are 4. There were points during the pandemic when I wasn’t sure I’d ever see them again – this may seem dramatic but my mental state was not normal at that time – actually it still isn’t but I’ll get into that later. I wanted to be able to visit and catch up without being rushed. I wanted to make up for lost time.

Second, I was and still am recovering from burnout.

How we managed a mini-retirement

You can read more about how to plan for a mini-retirement in general in my previous post, but for this time for us, we made the decision in January 2022.

Budgeting

First things first, could we afford it?

I track my expenses in detail 3-4 times a year so I have a fairly good idea of what our monthly expenses are month on month. At the moment, our monthly expenses are 3,000€/month on average.

We knew we wanted to take 3 months off and that if I went back contracting it would take 2 months of working before I would get paid again – when you work on contract, you invoice at the end of the first month and the company generally has 30 days to pay it so you have to work for 2 full months before you are paid. This meant we needed money for 5 months to get us to our next paycheck.

Simple math is 5 months times 3,000€/month = 15,000€.

Our bank balance at the beginning of January was 15k. We like to keep 10k as an emergency fund so we had 5k extra to put towards our next goal. I figured we’d be able to save the additional 15k back up by the end of my contract so I added 5k to my ETF investment portfolio in Degiro*.

I finished my contract at the end of June but had 1 final paycheck due at the end of July, so by the end of July we had built our savings back up to 26k (including our 10k emergency fund). Meaning we were saving about 2,500€/month towards this plan.

Getting off work

I was working contract work and Mr. MH was already off as a stay-at-home-Dad, so we only had to worry about getting work off for one job. In March, I told my Manager I would not be extending my contract at the end of June but that I would like to come back in October if they had work for me. I was told it wouldn’t be guaranteed but that I should get in touch a month before I wanted to come back and they would see what they could do. Worse case, I would be applying for a contract somewhere else. With the way the job market is at the moment, this was a risk I was willing to take.

Preparing to go

In terms of preparing to go, we installed a lockbox for our house along with a Ring battery operated security camera for the outside and we re-purposed the camera we used as our baby monitor to watch the back door. We told our friends and family to use our house while we were away, which was made easier by the lockbox. They kindly watered our plants when they stayed meaning we only needed to bug friends of ours to drop by twice while we were away.

The last time we were away for a long period, our car battery died which we solved in the past by taking the battery out and putting it back when we returned. We thought we’d do the same this time however since we now have a hybrid, this caused the battery to prematurely die. We have since learned that hybrid cars, especially those with stop/start functions need a special battery and for that battery to be fitted by a garage in order to sync it up properly with the onboard system. So, depending on what type of car you have, you may need to get friends or neighbours to drive your car intermittently while you are away, if gone for extended periods.

Packing-wise, due to all the baggage delays and stories of lost baggage, we only brought our stuff in carry-ons. As we are fairly minimalist and used to travelling light for the likes of Ryanair, I’d been doing some research into the best/biggest carry-on which fits even Ryanair’s size limits. I invested in this Osprey 40L backpack which I’m fairly pleased with and managed to fit all my stuff in for the 2 months. We did have one suitcase filled with baby stuff for my sister but even that managed to make it through ok.

What our mini-retirement cost

The below table outlines what we spent our money on from July-September 2022. This includes 2 months in Canada and 1 month in Ireland and the flights we purchased in March.

In total, we spent 9,741€ or an average of 3,247€/month. Adding on the additional 2 months of 3,000€ to our next paycheck, this comes to 15,741€ which is almost 1,000€ over what we had estimated.

As the flights were purchased in March, that brings our actual monthly average for Jul-Sep down to 2,625€ and our total actual spend during that timeframe to 7,876€, add onto that the additional 3,000€/month until our next paycheck and that comes to 13,876€, so slightly under our estimated actual spend for that timeframe.

Out of curiosity, when I looked at the money we spent while in Canada only (including ongoing Irish costs such as mortgage etc), the monthly average came to only 1,874€/month.

How our mini-retirement went

On the surface, we had a wonderful summer. We got quality time and catch-ups in with friends and family. Mr. MH and I had date nights and nights away on our own. We got to go to the cinema and splashed out on a fancy-tasting menu. Little MH learned to swim. We had pool time, beach time, lake time, boat time and nice weather. Little MH had lots of play dates with cousins. Mr. MH read lots of books. I made jigsaw puzzles while singing along to my favourite songs. We got to eat food we hadn’t had in years. We shared many meals in good company and ate in restaurants.

Once we were back in Ireland and back into the routine, Mr. MH and I had a few hours each day to ourselves as Little MH had started back to playschool. We went on long walks in nature on our own in the fresh Autumn air. We got to catch back up with Irish family with cousin play dates for Little MH here too.

For all of this, I am so grateful.

Digging deeper, I am still struggling mentally and physically. I am tired all the time. I don’t have the energy to do the things I want in life. Mood-wise I feel mostly numb. About a month into our time off I was frustrated with myself for not feeling more rested, even with all the support and no work, I was still running on empty. For the first month, I was obsessing, planning and analysing our next move (more on that to follow). I remember basking in the sun on my parent’s pontoon boat surrounded by family feeling nothing and being mad at myself for not being able to be present and feel joy at what should be a most joyful moment. I then vowed to stop my planning and to spend the last month being more present. This helped somewhat but not as much as I’d hoped.

Reading some other FIRE blogs, for those that had already retired, some said it took them a year to decompress from the working world. So maybe my expectations for feeling rested are too high.

Somewhere along the way, I decided I needed to take some more time to try and heal. I feel like I’ve been troubleshooting for a year and although I’ve definitely levelled off and am much more stable, I’m still numb most of the time. I do get moments of joy every day and some moments where my heart is just brimming with love and gratitude but I very quickly fall back to my baseline of numbness.

So, Mr. MH will be going back to work while I focus on getting better. I’m very lucky to be in this position and am thankful for that. Since we’ve been back, my routine looks like this:

• Wake up with Little MH between 6:30 and 7 and have breakfast together
• I’ve started taking the Revive Active energy sachets before eating/drinking anything each morning
• Get Little MH off to playschool
• Come back and exercise with either a brisk walk in nature if it’s nice or some strength training and/or yoga for 30-60 minutes
• Shower, clean the house, make the beds and collect Little MH
• Have lunch
• Food-wise, we’re following a 4-week gut health program featured in the book Fibre Fuelled.
• Putter around in the afternoon, go to the shop, library, playground, give Little MH snacks (so many snacks) etc
• Start dinner around 4
• Chill out for a bit after dinner
• Get Little MH to bed around 8:30
• Go to bed myself between 8:30 and 9 – I downloaded a sleep tracker and have been seeing that my sleep quality is very poor (very little deep sleep, awake for 1.5 hours most nights) so I have to go to bed very early if I’m to get 7-8 hours actual sleep.

I’m about 2 weeks into this routine and feeling more energized most days, not waking up as groggy. My default mood has not really improved so I will give it one more week before heading back to the GP. I think it may be a matter of going back on anti-depressants for a while and maybe getting referred to a sleep clinic.

All-in-all, I’m so grateful for having this time with friends and family. For being able to take time to get better.

I do think that as we are living and working longer, mini-retirements will one day become the norm. People will be able to take extended career breaks to enjoy life while you are still able to do things you love.

The beauty of reaching financial stability is being able to choose when to do things like this and not feeling trapped to keep going when your body says stop.

What do you think? If you could take a mini-retirement what would you do? Has anyone experienced what I’m going through and what did you do to get better?

* This post contains a referral link where I get a bonus if you sign up and use the service at no cost to you. Note investing comes with a risk of loss. Do not invest any money you can’t afford to lose.

The correct term is mortgage neutral, meaning we now have more in liquid investments (non-retirement accounts) than we have left on our mortgage.

I feel incredibly blessed and thankful to be in this position. Looking back at the 9 stages of wealth we are now somewhere between stage 5 (net worth positive) and 6 (security where passive income covers basic expenses).

As the path to full financial independence is a long one, I think it’s important to stop and notice the milestones along the way as a way to keep motivated. Also, to look back at all that we did to get here.

Firstly, I think it’s important to say that luck definitely plays a part in where we are today in as far as

• where we were born
• the families we were born into
• being born white and all the privilege that comes with that
• the housing and job market where we have lived
• being introverted and able to stick to long-term goals and spend less money
• being part of a long-term couple which lowers expenses
• and so on

There is a really interesting scientific read on the impacts of luck on the path to success here which I think is important to keep in mind – especially when comparing your own journey to others.

Secondly, we did not get here by mistake or overnight. We’ve been on this journey since I was 22, although being mortgage-free was not always the main goal, living within our means was always at the root.

At a high level, I think the major factors that contributed to getting here have been:

1. Tracking expenses in detail, taking stock at least once a year and assessing if there were trends we could change
2. Saving and paying for big expenses in cash (cars, wedding, renovations, maternity leave)
3. Never financing a car
4. Carefully choosing where we live to ensure that we would only need 1 car between us to get to work
5. Avoiding credit card debt
6. Educating ourselves on investing
7. Educating ourselves on doing our own taxes
8. Not inflating our lifestyle as incomes increased

Each of these actions have easily saved 10s of thousands over the last decade.

Our own journey looks something like this:

• 2005: Met at age 19 and 24 (those eyebrows were a choice?)

• 2006/07: Travelled and amassed almost 15,000$ in debt

• 2008: I lived with my grandma for 3 months and walked to work while Mr. MHs visa was being processed and he had to stay in Ireland. Mr. MH moved to Canada and went a few months without work. Consolidated debt to lower interest line-of-credit and paid off in full within the year. Shared a 3-bed apartment with a friend and my sister. Public transport was sufficient for commute, no car needed. Ottawa was fairly insulated from the economic crash and we maintained our jobs (insert luck here)
• 2009: Moved to the suburbs with younger sister and brother in a house bought by my Mum. Mr. MH, myself and my Mum split all expenses including mortgage as a way to “invest” (again insert luck into the equation here). Commute on public transport was brutal for me so bought 10-year-old Toyota for 4,200$. Started earning more than I needed to cover expenses. Started reading about investing and started contributing to workplace pension matching scheme.
• 2010: Renovated house to add value – paid in cash, bought furniture, saved towards down-payment

• 2011: Bought first apartment on our own at 26 and 30 with 20% down-payment

• 2012/13: Enjoyed life in the city, travelled, ate in restaurants. Paid a number of lump sums off the mortgage. Saved for move back to Ireland.
• 2014: Moved back to Ireland, I went 8 months between paychecks while waiting for visa to come through. Rented out Canadian apartment. Figured out international tax requirements savings at least 5k in accountants fees. We rented a 2 bed apartment in Cork City. Public transport was not great. Bought a 10-year-old manual Toyota for 2,100€ with the hopes I would learn how to drive manual – I didn’t (insert trauma lol). Got back on our feet money-wise, built our emergency fund back up

• 2015: Got engaged! Bought 10-year-old automatic Toyota for 4,500€ (notice a trend?). Started saving towards wedding.

• 2016: Got married! Paid for wedding in cash. Started saving for down-payment for house

• 2017: Bought 2nd house with 20% downpayment. Purposely bought close to Mr. MH’s work so we’d only need 1 car which also happened to be in an area with a reputation of being rough but cheaper as a result – see our full house buying guide here. Got pregnant! Saved for maternity leave
• 2018: Renovated and furnished house. Had our son. Started reading about investing in Ireland. Mr. MH maxed out stock option in work. Spent less on maternity leave than expected and invested in ETFs.

• 2019/20: 18 months maternity leave. Started this blog. Saved for and took mini-retirement in Portugal. Sold Canadian apartment. Figured out taxes, again saving thousands in specialist accountancy fees. Used proceeds to halve mortgage. I went back to work and Mr. MH left work to be stay at home Dad.
• 2021: Saved for and bought a 9-year-old hybrid Honda for 6,500€. Renovated garden. Continued adding to ETF portfolio

• 2022: Irish stock/ETF value exceeds remaining mortgage at age 36 and 40!

In terms of accessibility, while we have certainly had lucky events that propelled us forward, we have still lived fairly traditional lives with a number of intentional financial set-backs.

Setbacks: Over the last 14 years, we have lived off 1 income for about 4 of those due to moving countries twice, having our son and not being able to find childcare at the start of the pandemic. We also had a number of large costs like moving country, a wedding and renovations and still managed to progress on our path to financial wellbeing by following the key factors outlined above.

In terms of income, over the last 7 years, our take-home income has averaged less than 100,000€ gross combined so while this is high it is not like we’re both earning 6-figure incomes.

In addition to the key factors of tracking expenses, living within (or even under) means, staying out of debt and self-education on financial matters, the other 2 key factors are consistency and time (like with all long-term goals).

No matter where you are on your journey, keep it up and make sure to celebrate your successes along the way, big or small.

Total spend in 2021 came to:

€38,064

This is only 4% less than last year instead of the 18.5% we had forecasted this time last year due to halving our remaining mortgage and selling our Canadian property, getting rid of that negative monthly cash flow.

Not included in this figure are the costs of our garden renovation which added to our home equity (12k), the capital costs of our “new” car (6.5k) and the income taxes we paid on our additional income here in Ireland (<1k) as the taxes are income-related expenses. Also excluded are any tax refunds we got from last years overpayments (8.6k).

Last year’s graphics were from YNAB but I converted my expense tracking to my own excel tracker template which I used to create the below graphics/reports.

Overall spend

Here is a summary of the main categories.

Food

Food became our biggest expense in 2021 (9.6k). Our grocery category (8k) includes everything you’d buy at the grocery store so can include alcohol, toiletries, cleaning products, the odd centre aisle item like small tools, toys for our son etc. Obviously, the food bought out of the house like lunches, restaurants and coffees are minimal due to COVID.

If we convert the full annual food spend of 9.6k into cost per person per week (assuming 2 adults and 1 toddler (I’ll average at 2.75), it comes to close to 67€/week/person.

This is a 23% increase from last years food spend. We got a lot more take-away in 2021 (38% or 400€ more than the previous year). Spend at the grocery store went up 18% (1,468€ more) compared to last year. We did less meal planning and more ad-hoc shops. Our son is eating more now so this could account for some of that increase. Also Mr. MH is coeliac so we spend a bit more on gluten-free pasta and bread and since Mr. MH is now the main grocery shopper and chef, we’ve been eating more meat and more red meat which is more expensive. We really did try to cut back on meat for a while in 2019 and 2020 which did reduce costs but it took a lot of effort to try and find new recipes all the time that didn’t end up all tasting the same. I found veggie recipes use a lot of the same base ingredients and eventually most of our meals ended up tasting very similar. I’d still like to eat less meat but this change has been bumped down the list with everything else that’s been going on.

Monthly bills

Monthly bills came to a little over 7k. The vast majority of our monthly bills was our mortgage (56% or 3,978€). The rest were made up of Gas, Mobiles, Electricity, Internet, Refuse, Life Insurance (for me only to cover our mortgage). Electricity was up 20% from last year (126€ more) and Gas was up 16% (139€ more) – this could be because we were away for the most expensive months in Jan-Feb 2020 in addition to rate increases. Internet was up 20% (100€ more) due to an increase in contract cost despite shopping around for intro offers.

Home

House related costs were our 3rd largest expense coming in at 5.2k. Sure, what else did we have to spend money on last year? We bought a new bed and mattress, a BBQ + supplies, picnic supplies (for all those COVID picnics meeting people outside), an awning for the garden, a humidifier and Christmas decorations etc. Our oven and hob gave up and needed to be replaced. Home maintenance was up this year too. We needed to replace a few taps and sink parts, and a roof repair for a leak as well as a few garden supplies. And the usual home insurance and TV license.

In terms of increases from last year, we spent 27% more on furniture, 45% more on small appliances and 86% more on maintenance than last year.

The joys of owning a 16-year-old home and all the appliances start to go at the same time. Something to keep in mind when looking to buy a house.

Entertainment

This category is slightly inflated by the cost of 2 rugby world cup packages, half of which we will be repaid for at some point. Mr. MH’s lifeline during COVID was sport so there are increased costs for sporting events and sports tv packages, he also got a second-hand bike. The next biggest cost in this category was sightseeing. We got annual passes to both Blarney Castle and Fota as some of the only outings we could do during lockdowns. The gadget category includes some podcast memberships, headphones, a PS4 controller and SAD lamp. The alcohol spend is only those bought directly at an off-license, the remainder is included in our grocery spend. We both play video games so spend a bit there.

Transportation

Transport costs were up from last year too coming in at just over €3,200. We paid cash for our car so have no car payment in this category. Despite not commuting to work we still spent almost €1,400 on petrol. We did have a few trips up to Sligo/Mayo and even though I am not commuting, we still drive around a good bit to various playgrounds and nature walks with our son. Even still, when we were both commuting to work, me with the car and Mr. MH on the bus, and able to drive to visit friends and family, we spent closer to 2k on petrol and public transport alone. Car repairs cost 71% more than last year as our previous car was starting to need more maintenance, part of the reason we got a new one. Motor tax was 33% more as I made a mistake paying for a full year on the old car before we traded it in which I didn’t realise I couldn’t get back. NCT was also up as we had to NCT both the old and new car.

Medical

Our next biggest expense was medical (3k), the biggest part of this was health insurance (almost 2k). We used to have cover through Mr. MH’s work and when we decided to go down to one non-permanent income, this was an additional cost we had to cover. The 2 other biggest costs were Mr. MH’s glucose sensors and GP/counselling costs.

Other

The remaining categories had a spend of 1k or less and include things like:

Weddings/Family events for a friends wedding and a 50th birthday party which we all went away for.

Work expenses wise, my biggest expense was a 49″ widescreen monitor.

Personal expenses such as clothes, shoes, accessories, Mr. MH’s vape.

Gifts/charity came out to almost 1k. This was for birthdays and Christmas and charity giving.

Goals for next year

When I did this exercise last year there were very obvious expenses that I could see we wouldn’t have this year (mortgage reduction, Canadian property costs gone). Looking at the above, I don’t see anything that really stands out.

Food-wise, we may be able to cut down on costs by getting back into the habit of meal planning and eating less red meat. Buying a whole chicken and throwing it in the crockpot is a handy/cheap 2-3 meals. Maybe we could shave 800€ off there.

Hopefully, we won’t have anything else crop up in terms of home maintenance and I don’t think we’ll have any big furniture costs again for a while so that might bring us down another 2k.

I also don’t intend to spend any more on work-related expenses so that’s another 1k.

Car related expenses should also be close to 800€ less as we won’t have the costs from getting an old car ready for trade-in.

That would bring us down to 33,400€. However, we do have travel plans this year so that may cost 2,300€ more than last year, bringing us back up to 35,700€.

My goal for 2021 was 32k. I was off by 6k. My biggest oversight perhaps was the amount of additional food costs my son would add to our bill, and inflation.

This year I’ll target 36k.

Early retirement impact

In terms of early retirement planning, I think I need to be more realistic in my forecasting on cost of living, and subsequently the amount of money we need invested to cover those costs.

Our latest projection was to reach financial independence in 11 years to cover an annual cost of 24k (once our mortgage is paid off) and spending 30k/year from now until then. After increasing the cost of living during accumulation to 36k and increasing cost of living in retirement to 32k this brings our estimations up to 14 years on 1 part-time income. If we go up to 2 full-time incomes once our son is in school, this may reduce further. Still, retiring at 50 and 54 as a worst-case is not a bad goal to have.

If you’re interested in calculating your own time to retirement, I have a questionnaire format excel template in my paid member’s area.

Do you really need a car?

This wouldn’t be a very good financial independence blog if I didn’t pose this question first. Do you really need a car at all? When our car started to become less reliable and cost more money to maintain, we asked ourselves, could we get away with not having a car at all? Or perhaps if you have 2 cars, can you do with only 1?

Looking back at our expenses since moving back to Ireland in 2014, it has cost us on average 350€/month to own 1 car between us. That includes car, petrol, tolls, parking, NCT, taxes, maintenance and license costs.

As we live near the city centre and could walk/bus/train to main amenities like grocery stores, schools, playgrounds, work etc could we get away with alternatives to owning a car like:

• An electric bike/scooter with child carrier
• Renting a car for longer journeys
• Signing up for car-sharing like GoCar or Fleet

For us, we do a lot of longer journeys to Mayo and Dublin and do regularly drive around to different playgrounds and sightseeing with our son so it felt like the cost and hassle of renting a car or car-sharing for each of those journeys on top of the public transportation costs would not be feasible for the time being, nor would it be cheaper. Maybe once our son is older we can make the switch but for now, we feel we need 1 car.

But it’s worth asking yourself the question and thinking outside the box if you can give it a go. If you do need a car then read on.

Determine your search criteria

Do some soul searching about what you want out of your new car.

For me, my main reason for upgrading our car was reliability for as little cost as possible. I also wanted the new car to last us for another 5-6 years minimum before having to dish out again. Your core criteria may be different but it’s important to keep coming back to them when you need to bring yourself back down to earth.

Cost

Budget

How much are you willing to dish out? Like any big purchase, getting a new car is exciting and it can get very hard to stop your emotions from guiding your purchase. If you have very clear criteria for yourself it can help you to stop getting carried away.

We always try to live beneath our means and only buy cars in cash. If we don’t have the cash, we don’t buy the car. Getting loans for things like cars is very easy to do these days and can make it very hard to keep spending in check. Just because you can “afford” it, doesn’t mean you should get the most expensive thing you can. It can end up costing you way more with all the administration and interest.

What we try to aim for is buying a new car every 5-6 years for around 5,000€-7,000€. This means we need to put aside 833€-1,400€/year (or 70€-117€/month) so that we have enough to pay for the new car in cash when it’s time.

For us, financial security is really important and so when we frame a big purchase in this light, it helps us keep our spending down. If you spent 20,000€ on a car, and you typically save/invest 20,000€ a year, then that new car purchase will mean we need to work for an extra year before reaching financial independence. If you feel that is a reasonable exchange of your limited life, then it’s worth it but if not, it can help you prioritise your spending.

If you’re not focusing on your time to financial independence, another way to look a the purchase is how many hours of your life will you spend working to pay for this car? Figure out your real hourly wage after taxes including things like commute time and cost, work clothes etc – take the cost of the car and divide it by your real hourly wage. This shows you how many hours of your life you will spend at work to pay for this car. A good calculator for this is here.

For example: If you earn 50,000€ for 38hours/week for 48 weeks/year – you take home about 36,800€. Say you spend 30 minutes getting ready each morning and spend about 50€/month on new work clothes. You spend 1 hour a day commuting and about 70€/month on fuel (for work alone). You buy your lunch for 4€/day in a subsidised canteen. This means your real hourly wage (including the additional costs in time and money to work) comes to 13.37€. To buy a 20,000€ car you will spend 9.8 months working to pay for it. Imagine going to work every day for almost a year JUST to pay for your car. If you keep the car for 10 years that spreads it a bit more so that 1 entire month for each of the next 10 years will go towards paying for that car. Converting costs to time really helps put things in perspective as it truly is the most limited resource.

Comparison

It also gets hard to compare costs when you have multiple factors to consider. How long can I expect this car to last? How much is the motor tax? How much is the petrol/diesel/electricity? How do these compare to keeping my current car?

To help compare apples to apples, I came up with a calculator that takes all of these criteria into account and boils each car down to an average monthly spend so you can compare the total cost of ownership side by side of each car you are considering. You can find this in my paid member’s area but it’s not hard to calculate yourself in a simple spreadsheet. Again, this helps to take the emotion out of it somewhat when you can see the true cost over the lifetime against all options. Read on to see an example of our full search.

Mileage

To translate mileage into search criteria I took our average annual mileage of 15,000km and multiplied that by 6 years. That comes out to 90,000km. So I would want a car that I could get another 90,000km out of without needing major repairs to keep it going. The mileage range to put in your search criteria will differ depending on the brand of car.

From our experience, we feel that 200,000km is a reasonable mileage to get out of the likes of a reliable brand like Toyota and Honda without needing any major repairs. This may be more or less for other brands, you will have to research car buying guides for a realistic figure for whatever car make you are interested in.

So if we take 200,000km minus 90,000km, that means we’d need a new car with at MOST 110,000km on the clock.

Year

Putting the max price and max mileage criteria into DoneDeal came back with a range of cars from 1994-2017. We felt for the reliability and lifespan we’d be looking for we’d want at least a 2010 so we added that to the criteria.

Make/Model

Seeing the cars that came back in the search we tried to refine our search further again based on our preferred make/model. I’ve personally only ever owned a Toyota and have found them to be very reliable requiring very little maintenance. My perception of Honda comes a close second. I then filtered for Toyota and Honda to further refine the search.

Fuel type

Being concerned for the environment, we really tried to make this next car an electric one but after much research, we felt the used car stock in our price range at the moment does not have the distance range we would be comfortable with. As we do regular trips to Dublin/Mayo with a 3 year old, we weren’t prepared to need a 20-40 minute stop to charge up once or even twice on the already long journey. We felt that by the time we need to trade up next time, the battery charging technology or infrastructure will be much farther along and the range of the batteries will be much better too so we are holding off another while. As a compromise we favoured Hybrid’s in our search so prioritised those in the filters. Petrol would have been our next choice and then Diesel.

Further research

In the end we broadened and narrowed our search criteria out of curiosity for my calculator. It ranged between 2009-2019 and 3,990€-18,900€. From an average of saving 25€/month compared to our current car for a 2018 Kia Soul EV with 32,000km to costing 663€/month for a 2013 Yaris Hybrid with 146,000km.

We looked at Honda’s, Toyota’s, VW’s, Ford’s, Kia’s, BMW’s and Nissan’s.

Once we boiled it down to a handful we dug deeper into the car reports for that year and make. We watched car buying guides and reviews to see if there were any recall’s, safety concerns or other considerations. I even joined a Facebook group for BMW i3’s in the UK to get an idea of what trouble’s owners are experiencing. Mr. MH talked to our mechanic about their take on the model we were considering as well.

The cheapest options per month were the electric vehicle’s where we would actually save money per month (between 11€ and 25€/month) compared to our current car ownership costs but they came with a sticker price of between 17,500€ and 18,900€ which we weren’t prepared to pay this time around. Also as mentioned above, we weren’t ready to commit to 100% EV due to lack of range. The BMW i3 with range extender was a tempting compromise but our additional research into them ruled them out as they can be expensive to fix, which was a strike against my main reliability/low effort criteria.

The next on the list was the Honda Fit Hybrid at a cost of 18€/month on average if we kept it to 200,000km or 8.2 years. This is the one we ended up going with although on the day we were going to collect it, Mr. MH got reading up on the expected battery range and found that we could likely only expect to get 160,000km out of it (180,000max) and replacing the battery would be too costly at that point, so that brought our estimated average monthly cost to 51€ as we could only expect to get 5.5 years out of it.

Detailed research

Here is a list of all the cars we looked at from cheapest monthly cost to highest monthly cost.

The savings were based on our current road tax of 358, current annual petrol costs of 1,596.

We estimated the savings of an EV would be 100% of the 1,596/year (though this should probably have been lowered to 95% assuming electricity will cost something) and 25% savings of the 1,596 for an older Hybrid. From our reading it was optimistic to expect 30% savings in a Hybrid so we took 25% to be conservative.

Now that we have our Hybrid we are seeing about 31% savings (getting 725 km per 40L tank vs 500km in our old Vitz) so that brings our cost per month back down to 41€ if we keep it for 5.5 years.

Expected mileage for petrol or EV was 200k while Hybrid were reduced to 160k.

Japanese import considerations

Low mileage but tired engine

If you’re looking for the above criteria, you will find a lot of almost brand new looking older import cars from Japan with very low mileage for the year. There is a reason for this:

In Japan it is very costly to own a car older than 3 years old due to their high cost of emissions certifications. Ireland is one of limited number of right hand drive counties that they can export these to when no one in Japan wants to pay the high costs of owning them.

The mileage is also low because it takes them much longer to get short distances. So while the mileage is low, the engine may be tired. A bit like you measure tractor use in hours rather than miles. When you are considering the longevity and how may years you may get out of a car, you’ll need to take this into consideration. For example: A non-import Toyota may last 300,000-400,000km but an imported Toyota may only get 200,000km before they start causing you trouble.

Insurance for imports

It can be hard to get insurance for Japanese imports because the replacement parts are not easy to find if needed. Be sure to check with your insurer first before your purchase the car. We have found only Liberty or Aviva will even quote for Japanese imports and you cannot fill out quotes online as they do not have them in their databases so makes shopping around each year more difficult or even pointless. Luckily we have found Liberty to be fairly competitive anyway so we haven’t found sticking with them to be painful from a cost perspective.

Higher spec

Still, we like the imports because the interor’s are impeccable and the spec is typically higher (tinted windows, automatic transmission, windows and mirrors etc). For our last car for example we had a 2005 but it was equivalent to the 2008 Irish models.

Radio limits

The other weird thing is that the radio stations in imports are limited to a different frequency so if you don’t get a range extender/adaptor you will be stuck listening to RTE radio 1 – not all bad as if I hadn’t had this limitation I likely wouldn’t have discovered FIRE when I did as it was an interview on that station where I first heard Kristy from Millennial Revolution talking about their experience retiring early.

You can get radio adaptors relatively cheaply and if you get the car from a dealer, sometimes they will convert the radio/console to an Irish one. Ours put in an android console which catered for the Irish radio stations.

Toll card reader

In Japan, they have electronic toll car (ETC) readers in some of the newer cars. If you don’t have a card in the reader or don’t have credit, when you start the car, there is an audio recording in Japanese that will play. These are wired into the car so you will need to get it removed by a mechanic if you don’t want it to sound every time.

Reversing beeping

In both of our imports, when you put the car in reverse, it would beep inside the car. The wires for this were very deep in the car so could not be disconnected easily and was quite annoying. The newer car still has the beeping but it’s a much more pleasant tone and volume.

Irish FIRE event

In other news, there is an Irish FIRE event coming up on Thursday Sept 16 at 5PM for 4 hours. Speakers include Irish FIRE aficionados and even the godfather of the FIRE movement JL Collins. Get the tickets for 10€ here (50% off) using promocode MMH50. You can access the recording for 90 days if you can’t attend at the time. I’ve presented at one of these in the past and the time and effort that goes in to just 1 presentation is massive so the 10€ or even 20€ for the tickets is a steal. These events are great inspiration to keep going and keep thinking outside the box on your own financial independence journey!

Of note:

• I submitted my citizenship application!
• we finished off our back garden renovations which involved a bit more work by us than we had planned
• I ripped up some old carpet and prepped, sanded and stained the floor boards
• we got a “new” car which required a good bit of research
• we took a week off to visit family and have been spending a bit more time catching up with friends now that we are vaccinated

I have plans to write up a bit more on our renos and the car research but this weekend I started researching the security of my investments in terms of where they are held and I wanted to document it so I don’t forget. Hopefully, it’s of use for you too as a consideration for your own long term due diligence. Caveat: I’m in no way an expert and my findings should be taken with a grain of salt and I’m happy to be corrected if my understandings are inaccurate.

Lesson 1: Securities lending

When signing up for a Degiro account you are given the choice of a Basic account or a Custody account. The main difference is that the basic account allows Degiro to lend out your shares which lowers your fees.

But what does this really mean and why do they do it?

This sent me down a rabbit hole.

What is securities lending?

Lending out shares is also known as securities lending. This is where stocks, commodities or other securities are loaned out to other investors or firms.

Benefits of securities lending for the lender (you)

The benefit to the lender (you) is that the borrower is charged interest on what they borrowed. This results in an extra income stream for the fund/investment firm on top of capital gains and fund fees which is usually passed onto you. In the case of a Degiro Basic account, this results in lower fees than the Custody account where securities lending is not done.

Benefits of securities lending for the borrower

The borrower typically borrows securities in order to short stocks. Ultimately they believe that they can make more money by shorting stocks than the cost of the interest from borrowing the stocks.

Risks of securities lending

This practice has different regulations depending on where the investment firm is located. I believe the location of the investment firm determines the regulations rather than the location or domicile of the funds themselves but I’m happy to be corrected. For investment firms regulated within the EU, I believe borrowers need to secure the loan with non-cash collateral of equal value to what they are borrowing. In the US, there is slightly more risk as cash can also be used as collateral which can be easily spent but they also need to put up 102% of the value being borrowed as collateral. The collateral regulation reduces the risk to the lender (you).

Another thing I learned is that most low free brokers operate with something called an omnibus account. What this means is that individual stocks/shares that you purchase are not technically in your name, instead a type of ledger is used to keep track of who owns what but the share remains in the brokers name so that they can loan them out for securities lending. I’m not 100% sure on the true risk here but have seen on reddit forums that some people have had very long delays getting money out of some of these brokers which I can only assume are somewhat related to securities lending through this omnibus structure.

Who does securities lending?

Most low fee brokers do securities lending. Even exchange-traded funds (ETF’s) do securities lending.

Stocks, commodities and other securities

Degiro Basic account, Trading 212, Bux Zero all likely do securities lending.

ETFs

No matter who you buy ETFs through, my understanding is that the firm themselves cannot lend out the underlying funds but the ETF fund manager can and usually does. You can see the level of securities lending done by each fund on their annual report.

From what I can tell, Vanguard do LESS securities lending than other funds like iShares. Additional reading on securities lending in ETFs in the EU here.

As an example: The Vanguard 2020 Annual report here, shows that for the Vanguard S&P 500 there are 24 trillion in net assets and 7.1 million lent out for securities lending. This means that only 0.029% of the net assets are lent for securities lending. On page 557 you can see that of the 7.1 million lent out, there is 7.5 million in collateral held against that mostly in AA and AAA bonds (less volatile). On page 585 you can see that across all the Vanguard funds, only 6-9% (14,000) of the securities lending income (146,000) goes to the lending agent with the rest going into the fund. Only 0.009% of the income for the year came from lending securities (146k of 1.6 trillion).

Who doesn’t do securities lending?

Interactive brokers, Degiro Custody account (for non-ETF securities like stocks and commodities)

Take away

As I’m investing mostly in ETFs through Vanguard, I’m happy to leave my account in a low fee broker as the securities lending is managed and regulated through Vanguard rather than the investment company and I’m comfortable with the level of risk as the level of securities lending done by Vanguard is relatively low.

If I was investing more heavily in individual stocks, I would probably move to an Interactive Brokers tiered account which seems to have lower fees for an account that does NOT do securities lending according to this analysis by the Poor Swiss.

Lesson 2: Delayed withdrawals

In addition to lending shares, most low fee brokers operate in the Stock Exchange with Chi-X (known as Chi square), which allows significant cost savings. As Chi-X’s market share is small, they have less liquidity and volume compared to others, which usually results in delays for both buying and selling as far as I can tell, so it can take longer for you to access your money if you need to sell but I’m not sure how long these delays can take. Degiro’s site for example says it takes 2-5 business days to process withdrawals. I can confirm that I have withdrawn large sums in this time frame with no problems but something else to consider in due diligence for the longer term.

Lesson 3: Security of investment firm

The second rabbit hole I went down was the security of the investment firm themselves. As I eventually plan on having a large portfolio that will fund our livelihood I want to be comfortable that my money is secure in the off chance the broker/investment firm goes into liquidation/bankruptcy or mishandles my money.

While some people may say the chances of this are very slim, it has happened three times in Ireland alone since 1999 with Money Market International, W&R Morrogh stockbrokers and Custom House Capital Limited.

In the W&R Morrogh case, some investors lost between 50,000£ and 500,000£.

Firms that provide investment services are under a statutory obligation to segregate their own capital from their customers’ investment assets. This ensures that such assets are kept safe if anything should go wrong. However, if a failing firm has not sufficiently segregated these assets, it runs the risk of taking investors’ assets down with it. 

If for example, the investment firm owes more in debt than it has in assets and it goes into liquidation its existing assets go towards paying its creditors which include investors (you), but in some cases, there are not enough assets left to repay everyone.

In 1998, the Investor Compensation Scheme was brought into existence. This is an insurance scheme that investment firms pay into in the case they or other firms go into liquidation. If after the creditors are paid, you are still at a loss, you can claim 90% of your net loss up to a maximum of 20,000€ from this compensation scheme.

The ICS only pays you compensation when:

• A firm is put into liquidation by the High Court or
• The Central Bank determines that the firm is unable to meet the claims of clients

The ICS doesn’t pay compensation if:

• You incur losses due to receiving bad investment advice
• Your investment is poorly managed or
• Your investment performs poorly due to market conditions or other economic forces.

Each EU country has its own scheme regulated by its central bank equivalent. I believe Degiro falls under the German scheme, while Bux 0 falls under the Dutch scheme while Interactive Brokers Ireland falls under the Irish scheme. In the UK, their scheme covers up to 85,000£ per person per firm though I’m not sure if as an Irish resident you can open an investment account in the UK?

In Ireland, the scheme is run by the Investor Compensation Company Limited and regulated by the Central Bank of Ireland. I can only assume there is a similar structure in other EU countries. The success of this scheme relies on the successful running of the holding company as well as the contribution into the fund by the investment firms themselves. You can see if your investment firm is covered here. At the moment this seems to be going well per the 2020 annual report, but that may not always be the case and cannot be taken as a given.

Additional CPCC guidance here.

Although I could not confirm this for Ireland, it seems the ICS scheme in other EU countries is per person per firm including if you hold a joint account.

The investment compensation scheme is separate from the Guaranteed Deposit Scheme which covers up to 100,000€ per person per institution in uninvested cash held in bank accounts.

Take away

No matter what you invest in there will be risks, both with the investment themselves but also with who you invest through. To help hedge our risks on the investment firm front, I think both myself and Mr. MH will each hold our own investment accounts or at least hold a joint account in multiple investment firms preferably covered by multiple counties’ investor compensation schemes. This will not only hedge the risk of all of our funds being managed by one company but also the risk of all of our funds being subject to the successful operation of one ICS company.

If we each have our names on 3 different accounts in 3 different investment firms covered by investment compensation schemes in multiple countries we are reducing the overall risk of any one of those companies going into liquidation including the investment compensation scheme operator themselves. We also increase our maximum compensation from 40,000€ (20k each) to 120k (60k each).

The downside to this is managing 3-6 different accounts both in terms of asset allocation and tax reporting but that is a price I am willing to pay for more security on our livelihood longer term.

This approach also hedges our risks of there being delays in withdrawing money if one firm has delays as we will have access to money in a different firm if needed.

Did I miss anything?

Financial independence in the context of this post refers to building a portfolio large enough that you can withdraw 4% per year to cover your annual living expenses meaning you no longer need to work for money.

I should also start by saying that the maths behind deciding whether to rent or buy is only one part of the equation. Owning your own home is a very personal choice and allows for much higher levels of customisation and control but what I want to demonstrate in this post is that owning your home is not a requirement to achieve financial independence.

Also to note that if you are not great at saving then a mortgage can nearly be a forced way for you to grow your net worth and reduce your cost of living over the long term. If you are good at saving though then the rent vs buy debate can start to be more comparable which I will demonstrate below.

General Assumptions:

• Jointly assessed couple earning 100,000€ combined (68,609€ take home)
• Couple is 36 and 37 with kids
• Annual living expenses without accommodation: 36,840€ including childcare averaged at 900€/month for the full time to FI, this is averaged out over the long term to include multiple kids in creche, school and college over the years.

Buy assumptions:

• Purchase costs
  • An average house price of 400,000€ – the average between North and South Dublin prices as per Daft’s latest house price trend.
  • First time home buyer scheme with 10% downpayment of 40,000€
  • Other purchase costs including stamp duty, legal fees, valuation, engineer estimated 8,600€
  • Furniture costs: 10,000€
  • Total outlays: 58,600€
• Ongoing costs:
  • Monthly mortgage payments: 1,341€ (16,088€/year)
  • Mortgage rate: 2.75% over 36-year term
  • Estimated annual homeownership costs: 4,750€ including home insurance, refuse, mortgage/life insurance, local property tax and repairs/maintenance/upgrades (estimated on average at 3,500€/year)

Total annual expenses: 57,678€

Total annual savings: 10,931€ post-tax or 15,304€ pre-tax in a pension

Couple decides to max pension contributions and saves 15,034€/year towards financial independence

• Pension details:
  • 100% allocation rate
  • 1% annual management fee
  • 0.20% annual fund mgmt fee
  • 10% annual growth
  • 1.9% inflation
• Note that to get this kind of pension performance and fees is not typical, it would require a very hands-on approach to ensuring the underlying funds are high performing and that the fees are low and the allocation rate is high. Not included are any commissions, bid/spread offers or monthly administrative charges which can also be charged.

Rent assumptions:

• An average rental price of 2,166€/month (or 25,992€/year) – the average between North and South Dublin prices as per Daft’s latest rental trend report.
• Invest the money they would have put to a downpayment into an ETF portfolio: 58,600€
• ETF portfolio earns 8% per year and 2% in dividends which are reinvested, 0.19% management fees, and 1.9% inflation
• To maximise their savings the couple decide to invest the rest in a pension with the same performance and fees as the “buy” scenario

Total annual expenses: 62,832€

Total annual savings: 5,777€ post-tax or 8,087€ pre-tax in a pension

Time to Financial Independence: Buy

Using my FIRE calculator (which you can access on my paid member’s area), let’s see how the buy scenario plays out.

As they will not be overpaying their mortgage and maximising their pension instead, the annual expenses they will require to be fully financially independent will need to include their mortgage costs as they reach FI before their mortgage is paid off. They will no longer have childcare as their kids will be grown.

Annual expenses for FI: 57,678€ minus childcare 10,800€ = 46,878€

Time to FI if buying and investing: 29 years

So this option will take the couple 29 years to reach financial independence. 7 years after that their mortgage will be paid and they’re portfolio will be larger than they require, so they can reduce their withdrawal rate which will even further increase the chances of their portfolio not running out. This option leaves them with a higher net worth in the long run which could result in a better estate for their kids.

Time to Financial Independence: Rent

Again using the calculator, let’s see how this scenario plays out.

Keeping in mind their annual living expenses once financially independent will no longer include childcare so their 62,832€/year will go down to 52,032€/year.

Time to FI if renting and investing: 32 years

So renting and investing compared to buying and investing with these assumptions only makes a difference of 3 years.

Considerations

Neither scenario looks at the option of renting out a room in their home for additional income/savings to put towards investments. If they didn’t have kids or even once their kids are moved out they may want to bring on a lodger then OR even downsize and reduce their time to FI even further.

Once they get closer to FI and no longer need to work for money, they could decide to sell their home or rent/buy elsewhere in the country for cheaper and reach FI sooner.

Another option I didn’t look at in the buy scenario is to pay off the remainder of their mortgage with the tax free lump sum from their pension once they reach the access age, which MAY speed up their time to FI as their annual expenses would be reduced at that time.

I did not take into account any capital growth of the property as that is hard to estimate over a 30-year term and could go either way, though generally over that time frame it would go up potentially giving the opportunity to sell at a higher price and use that money to buy elsewhere in the country for cheaper and either reinvest the gains or buy a holiday home if that’s what they wished.

All this to say that if you want to become financially independent and are committed to investing, it doesn’t really matter if you rent or buy. Even in Dublin at current average rental and house prices.

If you work at fine-tuning your expenses to keep them low while not impacting happiness and investing what you can, when you can, you will reach your goal.

Keeping expenses low in the context of buying a house also means not buying a house outside of your means which is another post entirely but you can check out some of my own house buying tips here.

If you want to weigh up your own scenario’s with your own figures, my FIRE calculator is a great tool for comparing various options on your own path to financial independence. I’m always open to feedback and try to incorporate updates once a month to keep providing value.

Charitable giving in religion

The first piece of this puzzle came to me on a financial independence facebook group. A muslim member of the group was asking about how the concept of zakat fit in with reaching financial independence.

Zakat is a religious duty for all Muslims who meet the necessary criteria of wealth to help the needy. It is a mandatory charitable contribution, often considered to be a tax. Zakat on wealth is based on the value of all of one’s possessions. It is customarily 2.5% of a Muslim’s total savings and wealth above a minimum amount known as nisab.

The member of the group was trying to figure out how financial independence is possible while still following zakat. Their interpretation was that they would need 2.7 million in investments to cover their family’s living expenses of 40,000€/year as well as to pay the 2.5% to zakat if they were to use the 4% safe rate of withdrawal. For them, this means they will never reach FI in their lifetime.

A very interesting discussion followed.

Some compared this to tithing in Christianity which says to give 10% of your income to the church/charity.

One reader said that they personally try to look at the spirit of the law and the intention/culture at the time it was written. The spirit of the law was to look outside yourself and help those in need. When that law was written, the culture likely didn’t have taxes to the extent we have now. Today, part of our taxes go towards the poor through social assistance, welfare and disability programs as well as to education and recreation programs. If the government is collecting from you to give to the poor, could zakat be reduced to 1% for example. They also asked that if someone is volunteering and giving in time in lieu of money how does that play out?

There were many more ideas shared on how to interpret the spirit of this law if you want to read the full thread here but this concept sat with me and then I was presented with another piece of the puzzle.

Why don’t we donate more to charity

I know someone who is a nurse in the COVID ICU ward and I heard morale was very low just after Christmas when they were inundated with very sad cases. I wanted to do something to make them feel more hopeful so I ordered them a food hamper as a small token of appreciation. They were so touched and reciprocated by sending us some books for our son as I had mentioned we were sorely missing the library for having to re-read the same books at bedtime over and over and over. They also included a book for me. I never would have read or bought this book on my own but when offered it, it seemed interesting and ended up being really good.

It’s a book by an Irish professor called “Never mind the bollox, here’s the science – A scientist’s guide to the biggest challenges facing our species today”. It covers topics like free will, the anti-vax movement, the cost of medicine, dieting, depression, drug legalisation, gender differences, racism, climate change and so on. It includes a bit of history as well as a scientific viewpoint on each topic based on fact and scientific studies. Not one bit of fake news, so refreshing.

One chapter asked “why we don’t donate more to charity?”. It talked of various motivators for people to donate to charity. One study found that 85% of donations were made “because they were asked”. Another study found motivators to include:

• trust in the charity
• the need to help others
• to contribute to a cause important to them or someone they know
• to get a tax break
• to look good to other people

It also gave some very stark stats demonstrating how badly divided the world is (and perhaps always has been) when it comes to wealth:

• As it stands half of the world’s net worth belongs to 1% of the world’s population
• The collective net worth of the world’s poorest half (3.6 billion people) is equivalent to that of just eight of the world’s wealthiest men
• The top 10% of adults hold 85% of all the wealth, with the other 90% holding the remaining 15%

It covered how most of the super-wealthy actually do a lot of good with their excess cash through donations and philanthropy but that the decision on what cause to donate to is left up to individuals and what might be important to them personally. This spreads the wealth ineffectively.

More than half of billionaries are involved in philanthropic giving either through organisations that they themselves established or by other means. 35% of them have their own charitable foundations.

66% of billionaires give towards education (scholarships, educational support, outreach programs and teacher training) with

• 29% of all billionaire donations going to education
• 14% goes to healthcare
• 10% goes to arts, culture and sports
• 8% goes to environmental issues and
• 5% goes to religious organisations

Enter taxation

While it’s easy to complain about our governments wasting taxpayer money where money is seen not to have been spent effectively, it’s also important to look at the bigger picture and see what our taxes actually pay for.

First let’s see how much of our government’s revenue comes from which taxes.

In 2016 (I was too lazy to dig out a more recent report), 31% of the annual government revenue came from income taxes including USC, 21% came from VAT, 14% came from PRSI, 11% came from corporation tax and 9% came from excise duties. Only 1.4% combined came from dividends and CGT.

Looking at the 2020 Ireland Expenditure Report the country had 70 billion to spread across various departments. Below is the breakdown by department for all expenses of 2% or above.

• 32% went towards employment affairs and social protection
• 28% went to health (twice as much as the billionaire donation trend)
• 17% went to education and skills (12% less than the billionaire donation trend)
• 7% went to justice

Below is the detailed monetary breakdown per department including core and capital expenses.

Core expenses is money spent by the government on a regular or ongoing basis. The majority of government core expenditure involves the day-to-day provision of essential public services. Operating costs and wages for public sector workers account for a large portion of government core expenditure.

Capital expenses are ‘once-off’ projects or on infrastructure that will have long-term benefits for the country. Infrastructure refers to basic facilities, structures and services needed for the country to function including water, power lines, transport, communications systems, schools and hospitals.

This might start to sound familiar for anyone that’s ever played anything like Sim City or Tropico.

If you’re interested in the detailed split for each department you can check out the related sections in the full report. To give an idea of what each department pays towards:

Employment and Social Protection

• old-age pensions
• working-age income support
• working-age employment support
• illness, disability and carers
• child benefits
• jobseekers’ benefits
• supplementary payments

Health

Core expenses include:

• public healthcare hospitals and services (day to day running costs of hospitals and healthcare facilities eg: staff wages, buying medicines, light and heat
• primary and community services
• mental health services
• disability services
• services for older people
• palliative care
• health and wellbeing initiatives
• ehealth
  • electronic health records
  • infrastructure upgrades for national systems such as national medical lab information system, medical oncology clinical management system, national integrated medical imagining system

Capital expenses include:

• building new hospitals
• buying new equipment and ambulances

Education and skills

Core expenses include:

• expenditure to enable schools and colleges to operate eg: teachers salaries, light, heat and maintenance of school buildings
• national training fund
• higher education
• skills development

Capital expenses include:

• building or extending schools
• buying furniture and ICT equipment for schools

Justice

Expenditure to ensure our legal and judicial systems operate, e.g. judges’ wages, garda wages and operating costs of prisons.

Agriculture

Expenditure to help farmers and ensure the sector is maintained, e.g. income supports to farmers and funding for a wide variety of rural development schemes.

Defence

Expenditure to maintain defence of our country, eg: wages to members of the defence forces and civilians working for the sector, maintenance of facilities, training costs, etc

Transport and tourism

Money spent on maintaining our existing transport systems as well as providing funding for tourism promotion agencies such as Fáilte Ireland.

How to feel better about taxes

The book ended the chapter talking of the role of taxation.

Instead of the approach taken by most of the super-rich, which is to avoid taxes as much as possible to grow their wealth well beyond what they could ever spend in a lifetime, then to turn around and give most of it disproportionately to charities of their choosing, why not pay taxes to a government who democratically decide how best to distribute that money in the best interests of the country that you are living in?

Imagine how much better off we’d all be if corporations did not have ways of avoiding taxes? If the government had more money from taxes, could we live in a community with universal basic living income for all? Which has a whole range of benefits from better work conditions, fewer working hours, more time with family and friends, less money stress allowing people to be more creative and innovative to solve big world problems like climate change, gender inequality and racism for example.

While I’ve always had it in the back of my head, that taxes pay for our infrastructure and services, it never really made me feel better about handing my money over to the taxman but when I think about the bigger picture and of the path to financial independence I feel like I’ve had an aha moment.

What is the path to financial independence?

1. Keep your expenses (and taxes) as low as possible without compromising happiness
2. Invest 50%-80% of your income for 10-15 years
3. Have 25 times your annual expenses invested to cover an annual withdrawal of 4%
4. Reach financial independence and spend your time as you wish which could include earning even more income if you chose to continue working on projects that interest you
5. If you continue earning once you’ve reached FI like I intend to do, it means I will have more than enough money to remain financially secure and continue to build wealth beyond what I need to sustain my family until death.

What will I do with that extra money that I will possibly never fully spend? Will I donate to a charity of my choosing? Will I leave it all to my kid?

Personally, I’m not looking to build a legacy. I want just enough to be financially free to spend my time as I wish without worry of money and eventually to be able to make a contribution to the world and my community by advocating for financial literacy and security for all. I hope to impart financial literacy to my son so that he can build towards his own financial freedom. I do not want to hand it all to him as I think it’s important to instil a good work ethic and self-sufficiency.

So if my end goal in financial independence is to have more time to contribute more value to society (remember maslow’s hierarchy of needs?), why not contribute to society along the way in the way of taxes?

Instead of trying to avoid or optimise paying taxes as much as possible on the way to financial independence, pay as I go knowing that a good portion of those taxes is going to those less fortunate than me. Paying more taxes along the way may take me a bit longer to get to full financial independence but I’m not going to feel angry or annoyed when paying my investment-related taxes going forward and instead look at it as a way to give back to the community I’m living in. It’s actually been a really liberating change in viewpoint.

What do you think?

A little while back I did a guest post on the Wolf of Harcourt Street’s blog on ETF investing. WOHS is an Irish based investor who is building his way to financial independence with growth and value stocks rather than ETFs. This post goes through his:

• Investing strategy
• Tax considerations
• Due diligence when picking stocks
• Tips for someone trying to follow this strategy

As well as how you can follow along his journey and get access to his newsletter.

Thanks WOHS for this insightful post. I hope it gives readers some food for thought on other investment strategies and considerations here in Ireland.

My Investing Strategy

My investing strategy revolves around investing in a combination of growth and value stocks. First off, what is the difference between a growth and value stock?

Growth stocks are companies that come with a significantly higher growth rate compared to the average growth rate in the market. This means that the stock grows at a faster rate than the average stock in the market, consequently generating earnings at a faster rate. Growth stocks have the potential to achieve high earnings growth but have not established a history of strong earnings growth. Growth stocks concentrate on growing their revenue often at the cost of delaying profitability. Examples include Amazon, Facebook, Tesla.

Value stocks are companies that are being traded at a value lower than their intrinsic value. This means that value stocks are being traded at a price lower than their true value and are therefore undervalued. Value stocks are usually larger, more well-known companies that are trading below the price that analysts feel the stock is worth, depending on the financial metrics that it is being compared to. Examples include Coca-Cola, McDonald and Procter & Gamble.

If you are interested in learning more about the difference between growth and value stocks check out Growth vs Value.

Tax Consequences of Investing

My investing strategy is designed to minimise the amount of tax that I pay over the long-term so that I can maximise the effects of compounding. As a result of this, I do not invest in any ETFs and I try to limit my exposure to dividends. Investing related tax can be summarised as follows:

• Individual stocks – CGT of 33% – €1,270 annual exemption
• ETF/Index funds – Exit tax of 41% on gains – no annual exemption
• Dividends – Marginal rate of up to 52% – no annual exemption

I am a full time PAYE employee taxed at the marginal rate of 52% on any additional income I earn such as dividends. As an example, €100 worth of dividends results in only €48 in my pocket. Looking at ETFs, €1,000 worth of gains results in only €590 in my pocket. With ETFs you also have the added headache of calculating the deemed disposal. For comparison, €1,000 worth of capital gains in a tax year results in €1,000 in my pocket based on the current tax rules. If you want to know more about the tax consequences of investing check out the Let’s Tax About Tax Series.

Due Diligence

Investing in individual stocks means that I have committed to spending a lot of time on research and analysis. This strategy is not for everyone. I have chosen the active investing route because I have a passion for studying and researching individual stocks, I am willing to put the time in because I view it as a hobby and I like being in full control of my own finances. Additionally, I can see the tax benefits compared to other strategies. Decide what works best for you. If you are not interested in individual stocks or do not have the time to spend on research then passive investing in ETFs might be more suitable for you.

When performing stock research I follow a Due Diligence Checklist. The idea behind this checklist is to ensure that I do not skip over or miss any important areas of focus. Below is a summary of the items included:

My due diligence process can take days or weeks depending on how familiar I am with the company already and of course balancing a full time job. Check out the most recent investment thesis I published on Square, Inc for an example of this process put into practice.

Implementing a Similar Strategy

Are you someone who is looking to move from a passive investing strategy to an active investing strategy? Establishing your investing goals and an emergency fund are two other really important aspects to investing. This is something every investor should do regardless of whether you invest in ETFs or individual stocks. This 5 Point Framework can help you to get started investing. For current investors, it can also serve a role in validating whether your actions to date are consistent with your long term goals or if changes are required.

Defining your risk tolerance is what ultimately separates growth from value investors. Growth stocks are more volatile than value stocks by their nature. I personally adopt a 70/30 split between growth and value stocks. I am a long-term investor with time on my side so I am prepared to buy and hold quality high growth businesses through volatility in the hope of achieving outsized investing returns. If you would not be comfortable seeing your portfolio decline 10% or 20% in the short term then it might be best gearing more towards value stocks. You can view the current stocks I hold under My Portfolio.

Skin in the game will massively accelerate your learning when it comes to individual stock picking. By having a small amount of money on the table you will pay far more attention to the stock without often without realising. Start small and build your positions up over time as you become more familiar.

Lastly, but most importantly, always do your own due diligence. Advances in modern technology mean that it has never been easier to be a retail investor. The most accurate and up-to-date information is at our fingertips and is just as accessible to you and I as it is to the largest investment bank. There are a lot of really useful websites and accounts that share investing information for free. However, never follow another individual blindly. Every investor is operating under a different set of circumstances and with different goals to you. The only person that is responsible for your investment decisions, is you.

My Newsletter

I write a free weekly newsletter with the mission of making investing knowledge accessible to all. Whilst I am far from an expert, I was inspired to start the newsletter because I found that many people with less financial literacy than myself really struggle to know what to do with their hard earned cash.

By documenting my portfolio insights, stock analysis and learnings I hope to inspire others to start investing and take control of your financial future. I would estimate that I spent about 10 hours a week writing content for the newsletter and twitter account @wolfofharcourt

Sharing information in the public domain can have its drawbacks too. Everyone has got an opinion and that can differ from your own. Ultimately, this is what investing is all about – every time you buy, somebody else is selling and both parties think that they are going to profit from the transaction. I try to be as transparent as I can with my readers. If you like what you have read you can sign up to my free weekly newsletter here.

Moving to Ireland from the US

This post is about a family of 5 that moved to Ireland from the US on a critical worker visa. The couple is technically already financially independent as they are in receipt of 2 early retirement pensions but in order to gain citizenship here in Ireland they need to work for 2 years in the career they applied for on their visa. Once they have citizenship, they may look to move towards a more financially independent lifestyle, working on projects that have meaning or interest to them.

Earnings vs Expenses

The income they are earning here in Ireland is fully funding their living expenses here while their pensions are being paid into their US bank account and are growing to a large sum. They are a bit torn about what to do with this extra income. They think their move to Ireland is permanent but aren’t 100% sure yet as they moved over just before the pandemic hit and have not really gotten a true taste of what life will be like here longer term.

Opening US investment accounts

Before coming to Ireland, they opened various US investments accounts, some for their kids and some for themselves as they had read that the tax treatment and ability to invest in these can get more complicated if they were opened from abroad when they were no longer tax resident.

Shipping goods to Ireland

They also looked to ship over some of their belongings in a container and put the rest in storage in the US while they tested the waters and got settled, only to find out later that they only have 1 year from arrival to ship things before customs and VAT would be applied. This resulted in them buying a shed here and shipping another container over. In hindsight it would have been cheaper to ship everything over in 1 large container but in researching a move to a new country, there will always be these types of things that will be missed.

Personally, it took us 9 months of research and planning to get everything ready to move our lives over back in 2014. There are so many things to consider, there’s no way you’ll get everything right. If that’s the only lesson learned then how bad and hopefully by sharing on here, it will save someone else on their move.

Selling their home

They owned a home in the US and tried renting it out for a while but quickly found it was not worth the headache. Even with a local property manager, they still seemed to be getting calls regarding maintenance and routine inspections on the house. The rent covered most of the costs but the minute anything unexpected cropped up it was additional expense that ate into the small amount of income they were clearing. They decided to sell even though they expect they could have made a bigger profit if they’d held on for a few more years.  

We talked about the trade off of simplicity vs potential future returns. I very much experienced this internal battle when deciding to sell our property in Canada where the property market is on the up. Ultimately, we both prioritise a simpler life with less stress over the potential to make more money.

Buying a home in Ireland

They are not in any rush to buy a home here in Ireland as they are tied to Dublin for the time being due to work commitments. They quite like where they are but are happy renting and not sure where they will be in a few years time. Also in talking to a mortgage broker they were told the income from their pensions would not be considered in determining what they could borrow and so they would likely need to be cash buyers or would only be eligible for a very small mortgage. Not really feasible in Dublin at the moment.

Financial planning

The couple recently met with a financial planner but felt very much pushed towards traditional managed investment vehicles here in Ireland. They were left feeling this was very much a sales pitch rather than a holistic review of their medium and long-term goals, which led them onto reaching out to me for a consult.

Their main questions were:

Do we:

1. Add to US investments
2. Save for a house in Ireland
3. Start investing in Ireland
4. Invest in pension?

Basically, what to do with the money considering they don’t know where they want to be longer term

In talking this through together we came to the below conclusions:

Child benefit

One thing the financial planner mentioned what that he did not see the couple was receiving a child benefit payment for their kids. He did advise that they could apply for this so that is one nugget they did get out of their session. You can apply for this once you can prove you are habitually resident in Ireland. You can read more about this here but essentially it would mean another 140€ tax-free per child per month until they are 18.

Leave Irish money in Ireland and US money in the US

• While they are earning an Irish income here, use that money to fund their living expenses here.
• Leave the money that’s in the US there and invest it there.

Consult a cross border tax specialist

• I mentioned it would be good to get in touch with a cross border tax specialist as even if they have tax efficient/tax efficient investments already in the US, like an IRA or ROTH IRA, the growth of these may NOT be tax free in Ireland essentially removing the benefits of those accounts while adding to the tax filing headache of filing in both countries and claiming back tax credits under the double taxation treaty. These accounts MAY only be taxable for a non-Irish domiciled person on remittance to Ireland (transfer to an Irish bank account, spent here on a US credit card) but I haven’t been able to confirm that one way or the other so best to consult a specialist there.
• Depending on the outcome of that consultation it may determine what best to invest their US dollars in within the US. The ROTH IRA has limitations both in what you can contribute per year and around withdrawal before a certain age. If the growth on these will be taxable in Ireland then it may make more sense to invest in a regular post-tax investment account so that it can be accessed at any time.
• I also mentioned they may want to check out Our Rich Journey on YouTube as they recently retired early to Portugual from the US and may have some insights into investing, withdrawing and filing taxes on investments in the US while tax resident in Europe.
• They may not be able to contribute to the ROTH IRA once no longer tax resident. I know for the Canadian equivalent, the TFSA, once you are no longer a tax resident you stop gaining contribution room and you can no longer contribute to the TFSA (outside of reinvestment of dividends of existing funds). If you do contribute more, you may be liable for interest and penalties. This may also be the case for the ROTH IRA.
• Even if they can max out their annual contribution room in the IRA, it would be good to invest outside of that as they will have easier access to that money should they want to use it for a house in Ireland eventually, so that should form part of their decision/strategy.
• As US citizens they will need to file and pay taxes in the US regardless of their tax residency so having investments in one country over another will not simplify their tax requirements so that somewhat removes the consideration for having all investments in one country or the other for simplicity’s sake. While US citizens can revoke their US citizenship to get out of filing US taxes every year, this is not an option for this couple as it would cancel out their pensions and benefits.

Pension loophole

• The couple did consider contributing to the company pension for the job here in Ireland. They took a look at the forms required to sign up and postponed putting it into place. As mentioned, the person earning the income only plans to be in their current job for 2-3 years. I did come across a potential loophole that may be worth looking into.
• If you contribute to a company pension in Ireland but leave before the 2nd anniversary you will be presented with various options. You can leave the money invested, transfer to a buy out bond or have the money paid back out to you, although this payout will incur income tax. If you are in the higher income tax band while you are contributing to the pension, you will have reduced your taxable income by 40% but apparently, when you receive a payout, you are only charged the 20% tax rate. This needs to be confirmed but there is a possibility here to make a 20% return/ year on the 2-year investment into the pension. Of course, it’s important also to be aware of what the pension is invested in and what the fees are as these can quickly erode any tax savings and tax-free growth you may have made. Also as this investment strategy is a short term one, the risk rating of the underlying investments should also be taken into account. Worst case scenario, if after 2 years the market has tanked and they are at a loss, they can choose to leave the funds invested and allow time for them to recover. That said, the money would then be locked into that pension until age 50 at the earliest, so that needs to be taken into account into their strategy.

Saving for a house in Ireland

• My input here was that as they don’t know how long they’ll be here or where in Ireland they may end up, this seems less sound from a monetary perspective for the time being as the cost of buying and selling a home alone usually mean that you may not break even if you plan to own a home for less than 5 years. There is also the risk of a loss of property value in that time frame which could leave them worse off. That said, owning a home is not just a financial decision.
• For us, part of the decision was based on security and the ability to customize a home to our preference. We have friends who were kicked out of their homes as the owner wanted to sell. For one family, as rents had increased in the area, it resulted in them having to move further outside the city and uproot their kids. The house they moved to out of the city also got put up for sale a few years later though luckily at that point they were able to buy that home from their landlord and stay put. This lack of security was a big driver in our decision to buy.
• All that said, the couple is happy renting for the time being and enjoy the flexibility that comes with it. By building up their US income they will have the option to buy in the future should they wish.

Upon retirement

• Once the couple receive citizenship and no longer need to work to satisfy their work visa, the income from their pension and passive income from their other investments in the US can start to be withdrawn as needed and transferred to Ireland to cover their living expenses. As they need to pay taxes in the US regardless of where their investments are it makes sense for them to leave those investments there and withdraw/transfer to Ireland only as needed.
• We talked about withdrawal strategies and I mentioned that some people withdraw and transfer the money they’ll need to live for the next 12 months in one lump sum to give them some comfort around currency fluctuations and market performance throughout the year while others withdraw/transfer a month or so at a time. That will be down to them to decide what works best for them at the time. I did mention the site monito.com to find the best currency exchange rates and to be aware that while the flat fees can seem reasonable they should also check the exchange rate offered against the live rate as banks and currency exchange companies often add the majority of their cut into the exchange rate rather than the flat fee. A difference of 0.01 in an exchange rate essentially means a 1% fee of your entire transfer.
• The income from their pensions are a defined benefit and so are not subject to underlying investment fluctuations so they do not need to worry about a safe withdrawal rate for those. 

Estate planning

• As the income they receive from their pensions more than cover their living expenses here, they don’t have to worry too much about access to their ROTH IRA’s or complicated withdrawal strategies to access those funds before the traditional retirement age. Instead, they will need to focus on estate planning to ensure the tax-efficient treatment of their estate to leave to their kids. There are ways to structure your investments to ensure more goes to your kids and fewer taxes are paid though they will need to consult a specialist in this area to see how best to structure their investments for these in the US.

Final thoughts

Ultimately, I ended with that they are already technically financially independent and no matter what they do with their money in terms of investment strategy, they are still growing their net worth and financial security and freedom. They can always change tack a few years down the road and consolidate investments for ease of maintenance and tax filings etc if that becomes more important to them at that time but to take comfort in the security they’ve already built for themselves.

It was an absolute pleasure talking with such a like-minded person. We were both so enthusiastic about this topic, which is rare to find. Most people I talk to about money get blurry eyed and quickly change the topic. I wish them all the very best on their next chapter and hope they get to enjoy Ireland in it’s proper form once restrictions lift in the coming months.