Planning

This 6 week workation was part of 2.5 month workation between Portugal and Ireland. See details of the Portugal portion here.

Flights

Per the Portugal update, we booked the below route for about 2,872$ (1,967€)

• Montreal – Lisbon return (2,424$/1,660€)
• Bus Lisbon – Portimao (80$/55€)
• Faro – Cork 1 way (214$/147€)
• Dublin – Lisbon 1 way (154$/105€)
• Lisbon accommodation 2 nights (Free via homeexchange)

Accommodation

Accommodation in Ireland is expensive and hard to come by. It took a good bit of searching but we managed to find a lovely spot close to the sea. As it was not in the city we also needed to rent a car to get around which added to the expense.

Sites I checked to find accommodation:

• Daft.ie – search for short term rentals or holiday homes
• Homeexchange.com
• Booking.com
• Hogans Irish Cottages
• Trident Holiday Homes

As we wanted to catch up with as many friends and family as we could we decided to split the trip up.

We spent 3 weeks in Cork, 2.5 weeks in Mayo/Sligo and 4 days in Dublin.

In Cork, we stayed in one rented accommodation that came to 2,654$ (1,818€) for the 3 weeks. We also had to pay an additional sum at the end for utilities which came to 365$ (250€).

For the 2.5 weeks in Mayo/Sligo, we spent 1 week in Ballina for free using our guest points from Homeexchange. A few nights in Strandhill with Mr.MH’s sister and the remainder at Mr. MH’s home.

For the 4 days in Dublin, we split it between Mr. MH’s siblings.

We also had a 2 night stop over in Lisbon to break up the return trip which we again had for free through Homeexchange.

Car Rental

There used to be a day when I would go out of my way to save money by using public transport, but my relationship with money has shifted over the years, especially now that we have Little MH. Now, I am willing to pay a bit more to make things easier on ourselves. It was also important for us to be able to get out to visit our friends and family while we were in Ireland so renting a car made the most sense.

Renting a car in Ireland is, let’s say, interesting.

I’ll try to summarise how best to go about it, to save hassle and added costs.

Before you book:

• See if you have a credit card that offers car rental insurance as an added benefit or see if you can apply for one before your trip.
• Call the credit card insurance provider and get a letter in writing that states that coverage includes the Republic of Ireland. The wording has to be exact. The car rental will not accept terms like “Worldwide” or “Ireland”, it has to state Republic of Ireland specifically for them to accept the waiver. The credit card company may point you to the standard terms and conditions but insist that you get a separate specific letter with the card holders name on it.
• Make sure the credit card is in the name of the person that will be driving, if it isn’t, see if you can order a supplementary card with their name on it
• Make sure you have enough credit to cover the 5,000€ hold that will be placed on the card for waiving the car rental company’s insurance.

When you book:

• Make sure you select an automatic transmission if you can’t drive manual as most cars will be manual, especially if in our case, you converted your Canadian license to Irish, there may be a restriction to only be licensed to drive automatic cars.
• Make sure you waive the car rental company’s insurance when booking.
• Use the credit card that has the car rental insurance as a benefit for the entire booking. The name on the card should also be who will be the driver.
• Decide who will be the driver if you don’t want to pay extra to have both people covered to drive. As above, the driver is whose name should be on the credit card used to waive the insurance.

When you pick-up:

• Make sure you have the letter printed off that states your credit card’s insurance includes coverage in the Republic of Ireland, or better yet send the letter by email in advance to the car rental to ensure they have no issues with it before you arrive.
• Make sure you have the credit card in the name of the person who will be driving
• Make sure you have 5,000€ free on the card for them to place a hold. This will be held for the duration of the rental.
• Make sure you have an in-date license to present
• Walk around the car, taking a video and pictures, to show any damage already on the car, before you drive off the lot.

You can only rent a car for a max of 1 month so if you need it for longer you can just do another booking and get another car for the remainder of the trip. You’ll need to pay again for the extras like car seats and one-way transfer fees if you’re dropping at a different location but that’s not too expensive for the hassle you save from taking public transport with 2.5 months worth of luggage and any groceries you will have accumulated from the stay.

We booked through rentalcars.com and got an automatic Toyota Yaris for the full 6 weeks for 1,112$ (761€) and paid an additional 445$ (304€) for 2 car seat rentals and 2 one-way fees as we had to swap cars at the one-month mark. So about 37$(25€)/day total.

School

We continued some of the activity books we got from the school but also borrowed some lego’s from Little MH’s cousin and some new activity books from friends. Social-wise, we had so many play dates, catch ups and sleepovers with friends and family. It was wonderful.

During the week, Little MH got to go to the sea, climb some sand dunes, go to an indoor trampoline park, meet an Irish wolfhound pup, eat award winning ice-cream, drive a car out to Coney Island, visit playgrounds and other activities.

What it cost

The below details what it cost for the 6 weeks in Ireland in Mar/Apr. Flights are proportioned 60% to this portion of the trip and 40% to the Portugal portion. It also includes a 2 night stop over in Lisbon on the way home. The total cost excluding ongoing costs at home was 9,901$ (6,782€) which averages 6,601$ (4,521€)/month.

• Accommodation: As above, the only costs we paid for accommodation was for our 3 weeks in Cork.
• Food/drink: included groceries, take-aways and restaurants.
• Flights: included 60% of the costs of our flights from Montreal to Lisbon, Faro to Cork, and Dublin to Lisbon for 3 people.
• Transport/Parking: included car rental, petrol, tolls and ubers.
• Entertainment: included a night out, a spa day for me, the trampoline park, and entrance to see the Palace of Monserrat on our stopover in Lisbon (highly recommended).
• Shopping: includes a clothes top-up for Little MH who had outgrown some of the clothes we brought.
• Costs at home: included rent for the full 2 months (not proportioned for 6 weeks), mobile and internet.

Our current estimates on what we will spend per year in Canada is 64,000$ (44,000€) or 5,333$ (3,652€)/month. Averaging out the 6-week stay into the average for 1 month the stay in Ireland was about 1,500$ (1,000€) more than that not including the ongoing costs at home or 2,800$ (1,900€) more per month including ongoing costs at home.

How it went

Overall, it was a great stay. It was a big contrast to Portugal where we saw very few people. Once we were in Ireland, we had catch-ups with friends or family once every few days. We:

• had a dinner and a few sleepovers with some of our best friends
• had a birthday party at Little MH’s cousin’s house
• had a few friends call out to us at ours
• had a dinner with Mr. MH’s whole family and all of Little MH’s Irish cousins at a restaurant
• climbed and ran down some sand dunes (I still have sand in coming out of my shoes months later)
• had the best dinner I’ve had at a restaurant in quite some time (check out Stoked if you’re ever in Strandhill in Sligo – go with a group and order one of everything (tapas))
• had proper catch ups with family.

I also got to go into the office and catch up with workmates and had a full spa day and dinner with a friend. I also got to go for my morning walks in beautiful locations a lot warmer and greener than I would have at home, some through forests, by lakes and by the sea.

For our stopover in Lisbon, we met up with some new friends I had reacquainted with when we were in Portimao, and went to Sintra, had some of the freshest and best pastel de natas I’ve had so far, went to the Palace of Monserat (some of the nicest architecture I’ve ever seen, Little MH was so excited and impressed to be in a real castle – it looked very regal), took the scenic route back to Lisbon through the most Western point of Europe (Cabo da Roca), and stopped in Cascais for dinner at a vegetarian restaurant where they have all the dishes prepared on a table for you to see before you order.

After all that, however wonderful, I was dysregulated and tired and looking very much forward to getting home and back into a routine, keeping in mind that I was still working 3-4 days a week between all those visits and activities for most of the stay.

Once home, while my Dad collected us from the airport, my Mom turned the heat back up in our house and had a fresh pot of homemade soup and homemade apple crisp with apples off last year’s tree waiting for us in the oven when we got home. My Dad had also finished the extension he had been working on in the house so we had a whole new space to expand into. These are just some of the things that continue to remind me that the move home was the right choice for this chapter of our lives.

The first few weeks home were very low-key, not including the first few days where I rearranged all the furniture to make the best use of the new extension.

I had also put on an extra kilo from all the restaurants, pastries and fresh food, so definitely tried to up my exercise game to shake that, which I’ve thankfully been able to do (months later). Totally worth it.

Lessons learned

The only thing I think I’d do differently about this trip, next time, would be to do a bit less moving around so I don’t get so dysregulated. Other than that it was pretty great.

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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!

Mr. MH used to get shares from his company and we both found the taxes really hard to understand at the time. We have since figured it out and once you do it once, it makes a lot more sense. I’m hoping that by writing down our experience we can de-mystify the filing of taxes.

Filing taxes can be scary and frustrating. Tax guides use all kinds of technical jargon and you often cannot get the right answer unless you ask a very specific question which you already half know the answer to based on hours of trying to decipher tax language.

That said, it has taken me some time to come to this conclusion but in all my years of filing my own taxes (in Canada it is not PAYE and all individuals file taxes every year), I have finally come to be less afraid of the taxman and of getting something wrong.

My latest ethos is: as long as you file and pay what you think is due based on your best assessment, then at least you will not have any penalties for late filing and you will have less interest due if you get the calculations wrong.

Also Revenue can be very helpful if you have some specific questions that you need help with. Either write to them in your MyEnquiries in ROS or call them to get validation that you are on the right track.

What is an employee share purchase plan (ESPP)?

As a benefit or bonus, your company might give you shares, either at a discount or in their entirety as a bonus. I’m not sure if the bonus shares are taxed at source but the discounted shares usually aren’t.

As far as I know, these are classed as “ordinary shares”. If you are awarded shares of any other class (preference, redeemable, deferred etc), this article may not give you what you are looking for. For information on other stock classes and tax calculations, check out the linked articles.

The issue with receiving these shares in a pay as you earn (PAYE) tax culture is that many people avail of these share options and are oblivious to the need to file and pay taxes on them not only when they are sold but also when they are purchased.

How discounted shares work

I suspect different employers work this differently but in our case, Mr. MH set aside a percentage of his gross salary each month to go towards the purchase of company shares at a discount.

This money did not purchase shares each pay period. Instead they go into a savings pot and the company purchases shares under this scheme at a set schedule, typically twice a year.

When the company purchases the shares under this scheme it is called “exercised”.

The price you get is a set percentage lower than market value. Let’s say 15%. BUT the benefit of the purchase once every 6 months is that you get the LOWEST market value in that 6 month period minus the 15% discount.

So if you set money aside once a month out of every pay, and the value of the shares in January was 100€ and by June, when your employer goes to purchase the shares, the value is 200€, you get to buy them for 100€ minus the 15%.

You cannot by fractional shares so if you have any money left over after the purchase this will be carried over to the next exercise period.

The only downside is, this discount is NOT tax free and is classed as income in terms of taxes.

When your company “exercises” your share purchase, you need to file and pay taxes within 30 days of the purchase.

Unfortunately, these details or guidance on what to do are not typically shared by the employer (at least in our case).

If you have been part of a share scheme for a long time and you have NOT filed and paid these taxes along the way, firstly, check to see if your employer is doing this for you (some do but not all). If they aren’t you may want to get on this as soon as possible. If you are upfront with Revenue, they can be forgiving of your ignorance and can be open to negotiating on penalties and interest you may have incurred.

Where Revenue are less forgiving is if they catch you or audit you and you have not made it look like you have made any attempt to be compliant.

Revenue are starting to crack down on these, and audit people working for big companies, who they know offer these share schemes as many employees are not aware of their tax liabilities.

Worth noting is that a penalty will only be applied if you have not FILED what is due, and interest will only be applied to the amount owed for as long as it is not PAID. So if you do not have ALL have the money to pay what is due, you are still better to file and pay as much as you can to eliminate penalties and reduce interest. You may also be able to work out re-payment options with Revenue if you are struggling to pay off your full amount upfront.

Tax rates on share options

There are 2 types of taxes that apply to shares bought on discount.

1 is on the discount itself. This rate is your marginal income tax rate including PRSI and USC. As your income tax credits are usually used up by your payroll, this is straight forward enough to calculate. It’s typically either 52% if you are in the higher tax band or 21% if you are in the lower tax band.

The second are the capital gains taxes due or losses incurred when you actually sell. CGT is currently taxed at 33%.

How/When to file

Firstly, before I go into all the details below. I have built a calculator to help with all of these calculations which is available in my paid member’s area.

That said, as I say in my detailed disclaimer, I want to reiterate I am not a tax specialist and the views in this post and calculations in my calculator are based on my own experience and research. Please refer to Revenue directly for the latest rates and guidelines. If any tax specialists do read this and have any feedback on things I may have gotten wrong, please do let me know in the comments below so I can update and benefit all who read.

Gains on discount at time of purchase

The gain you make on the discount needs to be filed on an RTSO1 form. This needs to be FILED and PAID within 30 days of purchase/exercise.

To complete this form you need:

• Name
• Address
• PPSN
• Date the share was exercised (purchased by your company)
• Total gain made on the discount (this is different to the gain on sale)
• Total liability (taxes due)

If you have multiple purchase periods to report, I think you’ll need a separate RTSO1 form for each purchase period.

How to calculate

To calculate the gain made from discount you’ll need the details from your employer. In our case these were made available in an employee portal. What you need are:

• Fair market value on exercise date (purchase)
• Exercise period price (price you bought at a discount)
• Number of shares purchased
• Exchange rate on exercise date (on date of purchase)
• Your marginal income tax rate inc PRSI and USC

To calculate, you take the:

• Fair market value on exercise date (purchase)
• –
• Exercise period price (price you bought at a discount)
• x
• Number of shares purchased
• x
• Exchange rate on exercise date (on date of purchase)
• x
• Your marginal income tax rate inc PRSI and USC

Example

• John contributed to his company’s ESPP scheme from Jan-Jun 2020 and built up 1,000€ in his pot.
• In June, when the company purchased the stocks, the shares were at a market value of 150$USD
• The lowest value of the stocks in the last 6 months was 117.65$USD.
• John’s company gives him a 15% discount on the lowest price.
• This means John gets the shares at a cost of 100$USD each.
• The exchange rate at the time of purchase was .84 making his 1,000€ worth 1,190$USD
• This means his 1,190$USD buys him 11 shares for 1,100$USD.
• The remaining 90$ (75.60€) is kept in the pot for the next purchase date.
• John is in the higher tax bracket.
• As the company purchased the shares on June 1, John has to file his RTSO1 form AND pay the taxes due by June 30 (30 days).

The taxes due in this scenario would be calculated as per below:

Follow the steps on the RTSO1 to file the form and make the payment.

Gains on sale

When you eventually sell the stocks, you will incur a capital gains tax (if the shares are worth more than when you bought them) or a capital loss (if it worth less than what you bought it for).

Again you will need the details from your employer or share platform.

Capital gains taxes (CGT) are filed on your Form 11 or Form 12, depending on which applies to you. Whenever you have ANY income outside of your employment income (non-PAYE) you need to file additional tax forms each year to file and pay any additional taxes or record any losses incurred throughout the year which can be used against future gains.

When and how do you pay and file CGT?

The dates you pay and file CGT are based on the date you sold the shares

Your payment for CGT is due before you file your return.

If you sell your shares between January and November, payment is due by December 15th of the year you sold the shares.

If you sell your shares in December, payment is due by January 31st of the next year to the year you sold the shares.

BUT you only need to file the details of this payment by October 31st of the next year to the year you sold the shares.

How to calculate

What you need to calculate your CGT due will be:

• Purchase price (if you are selling shares that were bought at different dates and rates see the next section)
• Total fees (allowable expenses) incurred in the purchase and sale
• Exchange rate on date of purchase
• Value of shares sold
• Exchange rate on sale date (if applicable)
• Current capital gains tax rate
• Current capital gains tax annual credit rate
• Information on any allowable losses from previous years

The high level calculation will be:

• Total sale costs converted to Euro
• minus
• total paid for purchase including any allowable expenses like purchase or sale costs converted to Euro
• minus
• any individual capital gains annual tax credits and any allowable losses from previous years or other reliefs, other reliefs MAY include withholding taxes that were applied by different governments so check with your employer if you have any credits here to apply against your taxes due
• x
• 33% (current capital gains tax rate for shares)

To get this you need to do the following:

Total sale costs =

• Total sale value
• x
• Exchange rate on sale date (if applicable)
• =
• Total sale value in Euro

Total purchase including expenses =

• Purchase price (I believe this is the fair market value NOT the discounted value you paid as you already paid tax on those gains on the RTSO1 form)
• +
• Total fees incurred in the purchase and/or sale (such as brokerage fees)
• x
• Exchange rate on date of purchase
• =
• Total purchase costs and expenses in Euro

Taxes due =

• Sales
• minus
• Purchase and expenses
• minus
• individual capital gains annual tax credit and any allowable losses from previous years or other reliefs
• x
• 33%

Example

Building on the above example, let’s say that by June 2021 John wants to sell all of his 11 shares that he bought 1 year earlier.

• John bought his original 11 shares for 1,100$USD as per the example above BUT as he has already paid the taxes due on the discount he can include the fair market value of the stock at time of purchase which for this example let’s say was 200$USD (*previous example used 150$USD FMV but upped to 200 for this example to simplfy calculations). So his fair market value purchase price for the purposes of calculating the gain is 200$x 11 shares = 2,200$USD (purchase price) x0.84 exchange rate from date of purchase = 1,848€
• The shares are now worth a market value of 230$USD/share.
• John sells his 11 shares for 2,530$USD.
• The exchange rate on date of sale is 0.87 coming to 2,201.10€
• The current annual CGT tax credit for individuals is at 1,270€
• The current capital gains tax rate is 33%

As John has no taxes due, no payments need to be made, however, John still needs to FILE his CGT by October 31, 2022. If John had taxes to due he would have needed to PAY his taxes due by December 15, 2021. If John’s chargeable gain was less than 0, this would constitute a loss that could be applied against other gains for John or his spouse in the same year or carried forward to another tax year. If John did not FILE his form 11 or form 12 on time, he could be liable for penalties for late filing but no interest as no taxes were due.

Selling shares bought on different dates

If you have shares bought on different dates, this calculation gets a bit more complicated.

When you sell off some of the shares, the oldest shares are treated as being sold first. This is known as the First-in First-out (FIFO) rule.

As I mentioned above, I have built a calculator to help with this which will be made available on my paid member’s area which you can access here.

When you sell shares your broker MAY calculate your purchase price for you based on this methodology but I’m not 100% sure.

Using the purchase example above, we saw that in June 2020, John bought 11 shares for 100$USD each, the fair market value at that time was 200$USD each. This is the figure to use for CGT. By Jan 2021, John had built up another pot and bought another 10 shares for 120$USD each with a fair market value of 220$USD each.

In June 2021, John wants to sell off 14 shares (some of which were bought in June 2020 for 200$ and some were bought in Jan 2021 for 220$).

To calculate the purchase price to calculate his CGT due, using the FIFO method, John takes the first 11 shares at 200$ and 3 from the second pot at 220$.

This means his purchase price for calculating CGT is:

• 11 shares from Jun 2020 purchase x 200$ FMV = 2,200$ x .84 exchange rate = 1,848€
• 3 shares from the Jan 2021 purchase x 220$ FMV = 660$ x 0.87 exchange rate = 574.20€
• 1,848€ + 574.20€ = 2,422.20€

This is simple enough to calculate for the first sale, but as John continues to buy more shares on different dates and sell off shares on different dates, you’d really need to maintain an ongoing spreadsheet to help with this. Unless of course your broker does this for you.

How to pay CGT

If you are:

• registered for CGT, you must pay your CGT online using Revenue Online Service (ROS) or myAccount
• not registered for CGT, you must register for CGT and then make a payment using ROS or myAccount

Revenue have some other details on this while topic if you need to read more here.

What are Investment Trusts

Investment trusts are closed-end funds, typically in the UK and Japan. They are publicly listed companies that invest in financial assets or the shares of other companies on behalf of their investors. You can read more about these here.

Diversification

Investment trusts are a great way to get diversification by buying one “stock”.

Looking at some info on F&C Investment Trust as an example: The first-ever investment trust, launched in 1868. A diversified portfolio gives exposure to most of the world markets. Invests in more than 400 companies in 35 countries. Among the largest investment trusts in its sector.

F&C is invested in a mix of stocks and bonds of companies listed publicly on the stock market, a max of 5% in unlisted securities (not traded on an exchange) and a max of 20% in private equity (direct investments into companies rather than via stock holdings).

Derivatives (investment contracts between the Company and counterparties, the values of which are derived from one or more underlying assets) may be used for income enhancement and efficient portfolio management. Borrowings, which may be short or long-term, in sterling or foreign currencies, would normally fall within a range of 0% to 20% of net assets.

Of the publicly listed companies, it’s invested in companies like: Amazon, Microsoft, Google, Facebook, Apple, Paypal, Mastercard, Visa, Alibaba, Netflix and SAP.

This is actively managed fund and results in higher fees. F&C for example charges 1.18%

Performance

The average annual return for the last 5 years of the F&C has been 14.46%. I believe this is before annual management or purchase fees, inflation and taxes.

The FTSE World Index‘s performance for the same period was 12.8%.

If we take 1.18% fees and 1.9% inflation brings it down to 11.38%. This still does not include stamp duty, currency exchange fees and brokerage purchase costs.

The S&P 500s last 5 years average return was 13.88%. No stamp duty applies. Minus 0.07% fees and 1.9% inflation = 11.91%. If you bought this as an accumulating ETF on Degiro the fees would be 2€/transaction plus 0.03% of the total purchase.

Taxation

The main draw to IT’s in Ireland is the taxation. As you are investing in a company, who in turn invests on your behalf, these are treated as individual stocks and NOT as ETFs.

This means you will be charged 33% tax on capital gains and your marginal income tax rate on dividends instead of 41% exit tax on gains and dividends along with the 8 year deemed disposal rule that comes with ETFs outside of a pension.

Investment trusts are also eligible for 1,270€/year in CGT allowance per person. Not the case for ETFs.

You can also carry forward capital losses from current for previous years to be applied against any future capital gains taxes. Also NOT the case for ETFs.

When you die, if your portfolio exceeds £325k (which a retirement pot typically would be) your beneficiaries may be liable double-taxation on inheritance tax.

Comparison

Assumptions:

Accumulating ETF

Performance: 11.91% after fees and inflation.

Dividend yield: 1.6%

Taxes: 41% exit tax on gains and dividends, exit taxes applied to both gains and dividends from year 8 due to deemed disposal rule. Dividends are automatically reinvested in the fund and no exit taxes applied for the first 8 years due to accumulating ETF.

Purchase costs on Degiro: 2€/transaction + 0.03% of purchase

Investment: 3,000€/month, bought monthly for 20 years (2,997.10€/month after fees)

Value after 20 years: 2.242 Million – Assuming all taxes incurred for like for like comparison.

Investment Trust

Performance: 11.38% after fees and inflation.

Dividend yield: 1.6%

Taxes: 33% on gains, 52% on dividends (assuming higher income tax bracket and all tax credits applied to employment income)

Purchase costs on Degiro: 0.5% stamp duty, 4¢/transaction + 0.05% of purchase + 0.1% currency conversion (Degiro’s AutoFX rate) on purchase and the manual rate of 0.02% on sale.

Investment: 3,000/month, bought monthly for 20 years (2,976.50€/month after fees)

Value after 20 years: 2.248 Million (+0.3% more than the ETF portfolio) – Assuming all taxes incurred for like for like comparison.

Other Considerations

General risk

Personally, I don’t fully understand the risks with investment trusts, in that I don’t understand who actually owns the underlying assets. My understanding is that you are buying a stock in a company and that company is investing on your behalf. So if that investment company goes under, your “stock” in that company at risk.

Based on the KID document for the F&C Investment Trust – this seems to be the case:

“The Company’s shares are listed on the London Stock Exchange. Should the Company be liquidated, the amount you receive for your holding will be based on the value of assets available for distribution after all other liabilities, but before shareholders, have been paid. Shareholders in this company do not have the right to make a claim to the Financial Services Compensation Scheme in the event that the Company is unable to pay out.”

If this is the case, a good investment rule of thumb is to only have 5% of your portfolio in any one company’s stock. As I plan to build a sizeable portfolio which will passively cover my living costs, I do not think that a portfolio made entirely of investment trusts is sustainable if even spread across multiple ITs.

Complexity

If you read through the various fact sheets for ITs, you will see mention of discount rates and NAV (Net Asset Value) performance. From what I can make out, you can buy ITs at a discount to the NAV on some days or more than the NAV on other days. The same applies to when you sell.

So if you buy at more than the NAV and sell at less than the NAV, you will realise less value than if you bought at a discount and sold at a higher value.

I’m not going to pretend I know any more about it than that. I haven’t factored any of this into my analysis as I wouldn’t even know where to begin.

Suffice to say, this adds complexity to both accumulation and withdrawal strategies. Something you may know I like to avoid.

Currency exchange risk

Investment trusts are traded in GBX (British pence) which means you are subjecting yourself to currency exchange risk. But what does this actually mean?

If you look at the historical currency exchange between EUR and GBP here are the highs and low:

• In the last 12 months: 0.94 and 0.83 = 11% fluctuation
• In the last 5 years: 0.92 and 0.72 = 16% fluctuation
• Between 1999 and today: 0.96 and 0.59 = 37% fluctuation

So if the bulk of my portfolio is in GBP which I plan to live off of in retirement (converted to EUR) in say 15 years time, I could have marginally more in growth compared to an ETF portfolio but anywhere from 11%-37% less in value at ay given time due to the difference in currency value.

Even within a given year, if I wanted to withdraw my full years expenses at the beginning of the year to reduce risk, I could lose 11% off the bat to currency difference.

As far as I know, currency exchange “losses” cannot be carried forward as capital gains losses can.

Tax changes

While the tax on investment trusts is currently more favourable to ETF exit tax and deemed disposals every 8 years, as far as I know, Revenue haven’t actually confirmed the taxation of investment trusts and therefore is more likely to change.

If you had built your portfolio around taxation benefits, any changes in this area could drastically devalue your portfolio overnight.

Also exit taxes were once 23% and fund managers are lobbying to have this reduced in line with at least DIRT and CGT. If this should change, ETFs would quickly become an even stronger winner (though I’m not holding my breath).

Final thoughts

As with all of my analysis to date, I keep coming back to the keep it simple approach.

ETFs still tick a lot of boxes for me:

• easy diversification (hundreds or even thousands of company’s stocks in one ETF)
• less maintenance (no studying individual company reports, valuations etc)
• less effort to rebalance (compared to a larger pool of individual stocks/ITs)
• less currency exchange risk and fees (though still some as underlying assets are in other currencies)
• low fees to purchase, hold and sell
• liquid (I can sell off at any time and access at any age, unlike a pension)

I may sound crazy but my goal for financial independence is the freedom of time and peace of mind. If my the cash flow from my passive assets cover my expenses and I have financial security and peace of mind, I don’t really care if my portfolio is worth 1 million or 10 million. Enough is enough for me.

This is why I keep coming back to the simplicity of ETFs.

Detailed calculations

And for those who want to dig into the numbers:

ETF growth

(*) assumes all remaining exit taxes for the 20 years is applied in the final year for like for like after tax comparison

Investment Trust Growth

(*) assumes all capital gains taxes for the 20 years is applied in the final year for like for like after tax comparison

In the meantime, I was on the Superb Diamond Range podcast today talking all things financial independence, pensions, and investing in Ireland in general.

It’s a LONG one (surprise, surprise), so skip to the points you’re interested in.

Full range of topics and quick links below:

Background 2:30

Why I started the blog 5:02

What first got me investing 6:50

What got me working towards financial independence 9:41

How easy it is to invest in Ireland 13:48

What ETFs I’m investing in and why 15:40

Why I’m not investing in bonds 20:50

What investment incentives are available in Ireland 23:44

My beef with pensions 26:24

On being non-conformist and a bit more about our move back to Ireland from Canada 33:08

Why I like Ireland 36:51

Tips if you do invest in a pension 42:07

Why we bought a house instead of renting 47:08

Why paying down your mortgage instead of investing can be a quicker path to financial independence 48:50

Thoughts on investing in property in Ireland 53:06

On the best way to invest a lump sum 57:03

On what my friends/family/colleagues thinks about personal finance 1:01:12

My views on consumer debt and should you invest while you have other debts 1:04:52

On refinancing your mortgage or releasing equity 1:07:57

Book recommendation: 1:12:12

Favourite video games: 1:17:16

Top tips for a 20-something thinking of investing 1:20:05

Actual costs for Jan-Feb in Portugal and Mar-Apr in Ireland: 13,984€. This was over what we had budgeted by 2,684€ or 19%.

Portugal costs

The total cost of our time in Portugal came to 4,357€ for almost 7 weeks. This comes out to 622€/week or what would be an average of 2,488€/month.

This included:

• 1,874€ accommodation
• 877€ Groceries
• 355€ restaurants
• 838€ travel (flights, bus, train, airport snacks etc)
• 419€ misc (cash withdrawals we didn’t track, unexpected child related costs)

Overall we spent 750€ more than we budgeted even though we came back a week and a half earlier than planned.

Accommodation

Accommodation was 233€ less than what we had planned mostly because we came home 1.5 weeks earlier than planned so had less accommodation to pay for.

Food

Food was a lot more expensive than we had read, we think partly because we were in Portimao for 5 of the 7 weeks which is more touristy, and we thought that Lidl would be as cheap as Ireland. We also ate out at restaurants more than we would have at home so while we had budgeted 750€ for food for the 8 weeks, we actually spent 880€ on groceries and 355€ on restaurants which brought us to 483€ over budget.

Half of the restaurant cost was an unplanned day date when my sister was over and graciously minded baby MH for the afternoon. We went to a fancy french restaurant and had the tasting menu for 165€, an unusual splurge but oh so worth it.

In Mar and April once we were back in Ireland we spent an average of 152€ and 160€/week on food. If we look at the 880€ plus 190€ on dinners out excluding the pricey day date that comes to an average of 152€ on food per week as well. According to numbeo, we were expecting groceries to be 40% lower than Cork. Even if we exclude restaurants in Portugal (new average of 125€/week) and take-away in Ireland (new average of 146€/week), the difference still only comes to 14% less in Portugal.

Travel

Travel was over by 337€ as we had originally budgeted the flights we had booked at 250€ plus 250€ additional misc travel for bus trips, uber etc. We went over on this item as Mr. MH sadly had to come home for a funeral and to visit a sick family member, we also decided to come home early and booked additional flights, though this was offset by the savings we made by not needing to pay accommodation for the last 2 weeks in Portugal.

Misc

We had budgeted 250€ for misc items, things like outings and sightseeing or unexpected expenses. This came to 410€ (160€ over budget), the biggest portion of this was cash withdrawals that we didn’t track where it was spent.

Basic comparison

Overall we spent an average of 622€/week (or an average of 2,488€ for 4 weeks) for our time in Portugal. In Mar and Apr in Ireland we spent what would be an average of 2,474€ for 4 weeks (more or less the same).

This isn’t a fair comparison though as the Portugal costs include air travel and other costs we wouldn’t have in Ireland.

For a more fair comparison, if we look at accommodation and food costs alone (accounting for 35% of the typical Irish household budget) and compare to our costs in Ireland, in Portugal we spent 2,945€ for 7 weeks (or an average of 1,682€/4 weeks). In Ireland for Mar and Apr we spent 2,337€ (or an average of 1,168€/4 weeks). This shows that our current cost of living in Ireland is 514€ less per month for these 2 items. The Irish accommodation costs I included was mortgage, electricity, gas, internet and refuse bins which would have been covered by the accommodation we paid for in Portugal.

Ireland costs

So the Portugal portion was 750€ over budget leaving the remaining 1,934€ overage to the 2 additional weeks in Ireland in Feb which were unplanned and other unplanned costs in Mar and Apr.

For Jan and Feb, I originally only estimated mortgage, electricity, gas and internet as fixed costs we would have while in Portugal. As mentioned, Mr. MH came back for a week during our stay and we all came back mid-Feb when we had planned to come back at the end of Feb. This added most of the additional costs in terms of food and transport etc.

We also found that our mattress was making us itchy and decided to get a new one which was almost 600€ we hadn’t planned for. I also splashed out a bit and got a new mirror for our bedroom and some other decorations for the house.

March and April were pretty much what we had planned.

Take aways

If you’re planning a mini-retirement yourself and will only have a set amount of money to cover your expenses be sure to add in a 20% contingency. You will always have unexpected expenses which cannot be planned for. I should have known this from all my time working on projects! Life is no different. If you under spend, great! But if the unexpected happens at least you’ll be prepared and not be looking to sell off other assets (which also happened to take a 35% hit at the same time due to COVID-19) or go into debt to cover them.

Nitty Gritty

And for those who love tables. Here is our full expense listing for the last 4 months. A total of 13,984€ and a monthly average of 3,496€.

A while back I did a post on all I’d learned to date on investing in Canada. This post will summarise how to invest in Ireland.

Investing your hard earned money can be scary! I read up on investing extensively for 2 years before I took the plunge.

I suffered from something called analysis paralysis. The more I read the more I was unsure how and where to start.

By hesitating I lost out on 2 years of having my money work for me. Instead I lost money to inflation in my account.

My hopes for this guide will be to help people get off the fence and start investing.

Warning: This is a LONG post but I wanted it to be a one stop shop. You can check back and re-read all in one place, as you need to, instead of keeping track of multiple links.

To help you skip around, here is a table of contents

Preamble

This post covers a high level summary of investing concepts. A lot of the concepts could have full blog posts of their own. If you want to know more about any of them, you can research further. However, this post should give you the overall concept at a high level.

There are tons of resources out there for US folk but very few in Ireland. This guide will focus what I’ve learned on investing in Ireland to date. That said, aside from the tax specifics and investing platforms, a lot of what I talk about here is applicable anywhere.

This guide includes references to reaching financial independence. This is where your portfolio is large enough (25 times your annual expenses) to cover your annual expenses by withdrawing only 4% per year. While this may not be your goal, this guide applies to everyone who wants to start investing.

Start by paying off existing debt

If you have existing debts, it’s best to focus on those first as they typically have higher interest rates than you will achieve in an investment account. For example: If you have 100€ and you pay down your credit card you will save 21€ of interest (at 21%). If you invest that 100€ instead you may only make 7€ (at 7% real rate of return after inflation). So that same 100€ is making you 14% more by paying down your credit card.

Focus on the debt with the highest interest rate first – typically in this order

• credit cards
• car loans
• student loans

Mortgages are usually lower than what you can get in an investment account. This means that mortgages can be an exception to this rule. A good rule of thumb is if your mortgage rate is over 4% you would be better paying it down before investing.

See if you can consolidate your debt into products with lower rates. There are a lot of credit cards that offer 0% interest for the first 6 months. Or get a line of credit with a lower rate (say 5%) to pay off credit cards with a higher rate (say 21%).

Remember the power of compounding is working against you when you have existing debt. Using the rule of 72 (a calculation used to figure out how many years it will take for your money (or debt in this case) to double), a typical credit card of 21% left unpaid will double every 3.4 years or quadruple every 6.8 years!

What to invest in and why

Why traditional investments aren’t great

A lot of people (including me before I found a better way) think of their home as their retirement plan or invest in products sold to them by the bank or their employer. There are major downsides to this approach.

Your home can certainly go up in value over time but it can also go down. There are also plenty of costs associated with owning a home that you wouldn’t have while renting. I’m not going to go into the rent vs. own debate here as that warrants a post in itself but banking on your home as an investment puts all your eggs into one basket which is very risky. It’s also very illiquid and doesn’t give you many options should you need to free up equity.

Your home also doesn’t generate passive income. Unless you avail of the rent-a-room scheme which allows you to generate 14,000€/year tax free. By far the most tax efficient “investment” option in Ireland at the moment.

Bank and employer investment products are usually products that work out best for the bank or employer rather than for you. They typically have much higher fees or lower returns than you could get on your own using something called index investing.

Fees are often brushed over but they become very important when compounding over time. For every 0.25% of a fee you lose out on 5% of your overall portfolio’s value. So if you pay the average 2.18% for an Irish pension fund (as per a 2012 report which has since been archived), your portfolio will be worth almost 43.6% less than it would be if you had invested in a fund with lower fees! This means the fund manager is taking almost half of your profits regardless if they have made you any money.

A common misconception is that management fees are charged as a percentage of your profits. This is not the case. They are charged as a percentage on your total portfolio whether you make any money or not. So in a year where the markets are down and you lose 5%, the fund manager still takes their 2.18%. This means that you are down 7.18% that year instead of 5%.

What is index investing and why is is better?

Index investing is a way for you to essentially bet on the whole stock market.

An example of an index fund is the S&P500. This is an active index where the value of the 500 largest US publicly traded companies is calculated and tracked. Over 15 year time periods, the S&P500 has never lost money, and has had a median return of 12.2%.

There are many passive funds with lower management fees which try to mimic and track these underlying active funds. There are also many other funds which track other sections of the market. You can pick and choose a diversification you are comfortable with.

Since the inception of the stock market, it has always recovered from every downturn given enough time. If you have time to leave your investments grow, you don’t need to overly worry about market downturns. You do need to have the confidence to leave your money invested, especially in a downturn. That said, there are ways to mitigate losses which I will cover below.

Main selling points of index funds are:

• lower fees
• they outperform actively managed funds by 85%
• they allow for passive investing, in that you can invest and forget. Aside from re-investing dividends and rebalancing once a year
• you can access them as needed without penalty

Figuring out your comfort with risk

The two main elements of a balanced portfolio are stocks (equities) and bonds (fixed income).

• Stocks are shares in a specific company usually with higher risk and higher gains
• Bonds are essentially loans where the investor (you), loans governments or corporations money and they agree to pay you back in fixed income by a certain date. These are lower risk but also lower return. Bonds are used to balance out the risk of a stock heavy portfolio. They are one of the ways to mitigate against stock market crashes.

A typical investment rule of thumb is to keep bonds in the percentage of your age. So if you are 30 years old you should have a portfolio with 70% stocks and 30% bonds. This reduces your risk as you near retirement but keeps your portfolio growing with higher percentages in higher performing stocks.

I have read mixed reviews of this for early retirees with some maintaining 100% stock portfolios to achieve maximum gains. Even in early retirement they maintain higher risk knowing they will keep working and therefore do not need a mitigation strategy.

Others are more risk averse and even though they are retired in their 30s, maintain a 60% stock/40% bond split for the first 5 years of retirement. Even after 5 years they will only go as high as an 80% stock/20% split even though they are continuing to make money from passion projects.

At the end of the day you need to figure out which split works for your own risk tolerance.

You can see my portfolio, which indexes I have invested in and why here. Summary below (though stay tune in coming months as I plan to start shifting this to more accumulating funds):

I currently have no bonds but think I will up this percentage to at least 10% after reading how useful it is to weather any stock market crashes. More on that below.

Words of warning against 100% stock portfolio

It’s not all a sure thing and like any investments you need to be ok living without the money you’ve invested. As quoted from Your Money or Your Life here are some stats and recovery times on historical market crashes:

• Great Depression: Down 86 percent, 27 years to recover
• Mid 1970s: Down 46 percent, almost a decade to recover
• Late 1987: Down 32 percent in just 3 months, 4 years to recover
• Great Recession, 2007–09: Down 50 percent, 6 years to recover (or 14 years if you count from the matching dot-com peak in 1999, which had just been regained in 2007)

The two events within the lifetime of young investors, the dot-com crash and the 2007–09 crisis, were exceptions in that they took less than a decade to recover—but that doesn’t mean the cyclical nature of the market has been suspended. By contrast, bond funds are far less volatile, losing only a few percentage points when they falter.

How to Invest

Setup a brokerage account

In order to invest yourself you need to setup an online brokerage account. I use Degiro. There is also Interactive Brokers which you can check out.

Degiro offer free commission trades on some ETFs. Vanguard S&P 500 is one and Vanguard All World is another.

The Vanguard All World differs from the high yield world fund I am in so I must weigh up the fees and performance of these and may switch.

Here is the full list of commission free ETFs. You get one free trade per free ETF listed per calendar month (meaning you can make more than one free trade per month as long as it’s one per listed ETF).

If you are trying to copy my portfolio you don’t have to worry about timing it as you could buy the S&P and all world ETFs for free and the rest in my portfolio have commission so they could be bought at any time.

As per the usual disclaimer, do not invest any money you can’t live without. All investments can incur loss of some or all of your money.

I buy the Amsterdam market ETFs as they are in Euro and not subject to currency exchange fluctuations. That said, all of my dividends except VEUR are paid out in USD and converted to EUR. This means you will still have some currency exchange exposure if you want to consideration this for your own portfolio.

Degiro have an app as well which is quite good.

I went with a basic account vs custody. The main difference is that basic has lower fees and the shares in a basic account can be lent out by Degiro to 3rd parties. This can’t happen in a custody account.

Fund your account

You can transfer money to your Degiro account by adding them as a direct debit payee on your online banking, this should avoid any banking fees. Test with a small amount first just to make sure it’s setup correctly.

Buy your ETFs

Once you figure out the ETFs you want to buy and the allocation you want, you’ll need to figure out how many of each you can buy with the money you have to invest. Say you have 1,000€ to start with, I did up a spreadsheet with some basic formulas where I entered the current unit price of each ETF and figured out how many shares of each I would need to buy to make up my desired allocation split. This way each time I have money to invest I just update the unit price and it calculates what I need to buy.

For example: For the All-World ETF I wanted that to be 33% of my portfolio so 33% of 1,000€ = 330€. If the unit price is currently 48.43€ then I can buy 10 shares (330€/48.27$ = 6.81 shares). As you cannot buy portions of shares you need to round down all of your numbers in the last column.

This actually only buys you 889€ worth of shares leaving you with 111€ to buy say 2 more of the All-World.

To test the waters you can choose to buy 1 or 2 shares and watch it grow for a while to help ease your concerns. In my case, in both my portfolios (Canadian and Irish), I saw a drop in value more or less straight away but over time the market has recovered. You need to be comfortable with your portfolio losing money from time to time and rest assured that the market goes up twice as frequently as it goes down over long periods of time.

Investment options in Ireland

I did a whole post on investment options in Ireland including pros, cons, tax rates, and estimated real rates of return if you want to check that out and see what you think you’d be interested in.

Personally my investment portfolio currently consists of a property in Canada, retirement funds in Canada (invested in self directed ETFs), and self-directed ETFs in Ireland. A good chunk of money is also in our home in Ireland but I’m not counting that as an investment as we plan on staying in the home after retirement and it will not generate passive income.

I am now looking at simplifying our portfolio and selling our Canadian property at some stage in the near future. We think that we will use those funds to pay down our mortgage in Ireland. Even though mathematically it makes more sense to invest it and use the passive income to pay down the mortgage we want to reduce our cost of living so that we have more flexibility and options around staying home with our son should we wish to. It will also hedge against a recession if one of us should lose our jobs, we will be more comfortable having lower expenses.

In the coming years we plan on investing more into ETFs in Ireland.

Taxes on investments

I’ve done a number of posts on taxes on investments in Ireland.

• Investment options in Ireland
• Why taxes in Ireland get too much flack
• Tax loopholes for Irish investors

Unlike Canada and the US, there are very few ways to legally avoid taxes on investments in Ireland. Believe me I’ve scoured the internet trying to find similar withdrawal options.

I’ve now come to terms with the fact that if I want to retire in Ireland, I need to accept the limitations of where I am and suck it up. I will pay higher taxes on my investments in order to retire where I love to live. My investments will still generate enough income to cover my expenses. I will just need to work a few extra years to get there.

The other benefit of this approach is that if, later in life, we choose to move somewhere cheaper with better tax options, we will already have the most tax inefficient portfolio and larger portfolio and will have more freedom to move around.

Tax efficient options in Ireland

Rent-a-room scheme

The most tax efficient option is the rent-a-room scheme as mentioned above.

Pensions

Next to that, pensions are currently the most tax efficient, though like anything, depends on a number of factors.

Tax deferral

Pensions are a tax deferral tool which means you pay reduced taxes now in your (typically) higher earning years and pay lower taxes on the withdrawals later in your lower earning years (in retirement).

Limited tax savings

If you are already in the lower tax band and will continue to be on the same band when you retire then pensions, while savings you taxes now, only kicks the can down the road as you will pay that same tax amount back when you withdraw.

Similarly if you are already in a higher tax band say earning 50,000€ and will continue to be in a higher tax band in retirement and withdrawing 50,000€ then same concept applies. You save now but pay later.

For example:

If you earn 50,000€ and don’t contribute to a pension you effectively pay 26.4% in income tax (13,213€).

If you contribute the max 20% for someone aged 35 (10,000€) to your pension that brings your tax rate down to 18.4% (9.213€).

A savings of 8% now.

Then when you retire you withdraw 50,000€/year, and you pay 26.4% then.

Which shows that your 8% savings has just been deferred to when you retire. Albeit after age 66 you no longer pay PRSI which would reduce your taxes so it depends when you plan to retire.

In both cases though, your investments do still grow tax free until you withdraw so that is a bonus.

Some tax savings

If you are earning the higher tax band, you do save in taxes now, but Revenue have rules that ensure you are paying higher taxes on pensions withdrawals after a certain age and when your pension goes above a certain amount whether you need the income or not.

Even if you only need to withdraw an inflation adjusted 40,000€/year for a couple you will still end up paying an average of 15% or so over 40 years. This is still a savings of 25% but worth keeping in mind. If you plan on living off more than 40,000€/year and plan on using your 200,000 tax free lump sum for anything other than more investments, the savings are even less.

My case against pensions

Even though pensions are the most tax efficient, I’m still not convinced for a number of reasons.

Lack of control

Depending on your pension type, you typically don’t get a say in what it’s invested in nor can you negotiate fees or government levies.

This can have a major impact on your end portfolio.

Looking at Irish pension trends from 2007-2017, the average pension growth was -4.82% after fees and inflation based on historical average, though the report only has data from 2007 (-7.3%), 2008 (-35.7%), 2015 (4.5%), 2016 (8.1%) and 2017 (6.3%).

Even if you take out the crash in ’08 it’s still only 2.9% (or 6.98% if you add back in the 2.18% in fees/levies and 1.9% in inflation instead of 10% in the stock market).

In which case investing in an ETF portfolio, even with 41% exit taxes and deemed disposals every 8 years would have fared far better.

Your pension needs to be earning a real rate of return of 5.95% or more in order to outweigh the higher taxes of a self directed ETF portfolio. This is based on a number of assumptions fully detailed in this post.

A real rate of return is the difference between your annual return (performance) minus your management fees and inflation.

The last 30 year average inflation for Ireland has been 1.9%.

In the last recession the government also implemented a levy on pensions to get access to some of that money themselves which further reduces your growth potential. This has since been removed but would worry about it being added back again if/when the next recession hits.

Limited contributions

Depending on your pension type, you are also limited to the contributions you can make per year. The limitations are as per below:

Early retirement issues

If early retirement is your goal, pensions present 2 problems:

• You likely need to be investing more than your limited amount per year in order to reach your goal
• You can only access a pension at age 50 at the earliest (again depending on the pension type)

If you are self-employed you have quite a few more pension options in that you can contribute much more but still limited to access at age 50.

Complicated withdrawal options

There are also a number of options to consider when you’re ready to withdraw from your pension. You can convert it to an approved retirement fund, purchase an annuity and so on. Each has their own sets of conditions. Some require minimum guaranteed income from other sources. Some “die when you die” meaning that the money remaining in the pot does not go onto your family. And so on. These conditions can change over time.

With ETFs you take out the money when you want, how you want and leave it to who you want. Albeit you may need to look into estate planning either way as there are ways to reduce the capital gains taxes your children will pay.

There is a great podcast on some of your inheritance consideration options here.

Transfer pension to another country

There are options to transfer your pension to another country if you have a bonfide reason to do so (ie: you are from that country and are returning home), though it has to be transferred into that country’s approved retirement fund.

So for example I could contribute to a self-employed pension here and transfer it to Canada when I’m ready to retire. In Canada, you can access your retirement fund (RRSP) at any age as long as you pay the taxes. You will be charged withholding taxes immediately on withdrawal but you get back any overages when you file your annual return. You also lose your contribution room.

But in order to do that I’d need to move back to Canada which is not in my plans. I also haven’t looked into the full ins and outs of it and what fees may apply, but an option to keep in mind should our plans change. It’s also possible the approved fund wouldn’t be an RRSP (which I wouldn’t have enough contribution room to take my full portfolio anyway), it may need to be an annuity or some other form or retirement fund which I really haven’t looked into.

All that said, I’m personally looking at implementing the KISS method and to keep it simple silly. All of these potential loopholes are overly complex and my preference is to go with a simplified portfolio that will have predictable taxes and returns which I have more control over.

How to maintain your investments

Don’t worry about timing the market

When it comes to investing, hindsight is a wonderful thing, if only you could know when the market was going to rise or fall. There are people who spend their days trying to predict this but save yourself some trouble and follow either one of two approaches depending on your comfort with seeing your portfolio drop in value from time to time.

Emotional option: dollar/euro cost averaging

If you are really emotional about seeing your portfolio decrease in value, you can rely on something called dollar cost averaging. The idea is that instead of investing large lump sums on any given day you average it out over time so that you can reduce some of the risk of buying high only for stocks to crash the next day. Instead you buy little and often and you will naturally end up buying some stocks at a high but some at a low and it will average out over time.

Rational option: time IN the market is better than TIMING the market.

If you have gotten to the point where you are comfortable with seeing dips in your portfolio then rely on the fact that time IN the market is better than TIMING the market.

Other interesting stats about the market – based on the Toronto stock exchange: (courtesy of www.retirehappy.ca)

I couldn’t find any Europe specific stats but if you’re investing in world funds then these stats won’t be too far off.

1. Markets go up more often than they go down
2. Not only do markets rise more frequently, but they tend to increase in higher magnitude than the drops.

Over the last 90 years:

• Markets have gone up 73.9% of the time
• Markets have gone down 26.1% of the time
• The market gained more than 20% in 33% of the time
• The market lost more than 20% in 4.5% of the time
• The gains in positive years produce more than double the losses in the negative years

(This data is based on calendar year returns of the TSX from 1920 to 2010).

In addition (courtesy of Rob Carrick of the Globe and Mail),

• In 34 of the 37 corrections of 10%+ since 1950, the stock market was up 12 months later by 26.8% on average.
• Average decline for the 37 market plunges of 10%+ since 1950 is 19.7% or almost one every 20 months.

Either way your money will be working for you so pick the approach that works best for where you are at in your investment journey.

Keep adding to your investments

Buy as much as you can, as often as you can and watch your investments grow.

Try not to look at your portfolio too often as it can be off putting to see market dips.

Reinvest your dividends every quarter

There are some funds and accounts you can get with robo-advisors that will automatically re-invest your dividends but I have yet to delve into those options. For now I’m keeping it simple and manually re-investing my dividends. All of my ETFs pay out quarterly (you can see this on the fact sheet of each ETF), so I check back once a quarter and buy more with the dividends that are paid out.

For an Irish ETF portfolio you need to pay the 41% exit tax on your dividends on the year you receive them.

You can also get accumulating funds which means your dividends are automatically re-invested and do not incur the 41% exit tax until the 8th year. See this post for more information on what deemed disposals are.

Rebalance once a year

Throughout the year your stocks will likely outperform your bonds or certain ETFs will outperform others and your asset allocation will shift.

Say you started out with a 70% stock 30% bond split. Through the year your stocks performed really well and now they make up 80% of your portfolios value and bonds have fallen to 20%.

In order to maintain the asset allocation you are comfortable with you will need to sell some of your high performing stocks and buy some of the low performing bonds to rebalance your portfolio back to the original allocation.

This can be done once a year (I read a really good article on why any more than that actually increased your volatility while reducing your return but can’t for the life of me find it again). Keep an eye on trade commissions and creating tax events from sales.

File taxes once a year

In Ireland most people do not file taxes if you are a PAYE earner.

If you start investing, you will need to file taxes each year whether you make money or not.

If you are purchasing shares through a company share scheme you also need to be filing each year as well as every time you purchase the shares.

I am due to file my own taxes this year on my investments from last year so once I figure it out I will do a future post on both of these scenarios.

Although I’m not including details on how to file in this post, it is something to keep in mind for your own circumstances.

Revenue are extremely helpful if you need a hand you can give them a call. I think you can even book an appointment and they will walk through things with you in person as well.

Weathering a crash

When the market is crashing, it is very hard to leave your money invested but based on the facts, the stock market always recovers so the best thing for you to do is wait, alternatively there are two things you can do to lessen the blow:

Sell bonds at a high and buy stocks “on sale”

If you hold bonds as well as stocks, a crash may be a good time to rebalance as during a crash, money flows out of stocks (risky) and into bonds (safer), this devalues stocks and increases the value of bonds. So if you hold bonds now would be a good time to sell (high) and buy stocks (low) and rebalance your portfolio to your desired split. This means that once the market recovers you will own more stocks which you got “on sale” and will benefit more from the upswing in the market. If you don’t own any bonds you will simply need to wait for the market to recover (usually 2 years) as per recent trends.

This is why it’s important to hold at least some bonds as you will be in a stronger position to benefit from market recovery than if you only held stocks.

Sell at a loss to offset future gains

This is something called capital loss harvesting (or tax loss selling).

This concept is only applicable to certain investments like individual stocks including company shares purchased through benefit schemes and UK investment trusts. Unfortunately you cannot do this with EU domiciled ETFs.

The idea is that you take advantage of the downturn by selling some of your assets which have lost value compared to when you bought them. At the same time you should buy back a similar asset/stock at the lower value so that you maintain your original market exposure to ensure you can take advantage of the future gains when the market does recover. The reason you wouldn’t buy back the same stock is because there is a stipulation where you have to wait 30 days before buying the exact same thing again, or it is dismissed as a “superficial loss (or gain)”.

Capital losses can be applied to your current tax year, 3 years in the past and indefinitely in the future. This means you can basically “buy tax credits” in the down years which you can use to lower your taxable income in future years when your income may be higher.

Capital gains credit

In Ireland you also get a credit of 1,290€/year of capital gains on which you do not need to pay capital gains tax.

Mr. MH gets discounts company shares for the company he works for, we considered selling just enough each year to avail of this credit as if you don’t use it you lose it. However, the potential gains we would be losing out on on these particular stocks would far outweigh the tax savings we would make from the credit.

Again it’s trying to keep your emotions in check around tax avoidance. For me I feel obsessed with trying to get money in or out of things in a way that I pay as little tax as possible but in the bigger picture, if that investment vehicle allows you to make large gains over the long term, even though you are paying taxes on those gains, they are still gains which you would not have made otherwise.

How long to financial independence?

For those of you interested in achieving financial independence, you may be wondering how long it will take using the above investment model of ETFs in Ireland. The chart below shows how many years it will take for you to reach financial independence depending on your current assets and different monthly savings amounts. Financial independence (FI) means your portfolio is large enough to withdraw a safe withdrawal rate of 4% to cover your annual living expenses, in this case we are looking at a portfolio of 412,500€ for an annual cost of living of 16,500€ for 1 person. To apply this chart to a couple simply double the monthly savings amount in the first column to reach FI in the same number of years.

Assumptions:

• Amount of time to grow portfolio to 412,500€
• Safe withdrawal rate of 4%
• Annual living expenses on withdrawal of 16,500€ for one person
• Deemed disposals/exit tax of 41% starting in year 8
• Real rate of return used is 7.91% (average stock market performance over its lifetime has been 9-11% so I took the 10% average minus the average inflation for Ireland over the last 30 years of 1.9% minus MER fees of my sample portfolio of 0.19% = 7.91%)

So for a single person starting from 0€ in assets and saving 500€/month it will take 29 years to reach financial independence compared to 12 years if you save 2,000€/month.

If you already have 100,000€ in assets and you save 2,000€/month it will take you 8 years to reach financial independence.

This just goes to show how much of an impact your savings rate can have. It can shave years off your journey to FI. Not fast enough? There are a few more options on how to reach FI sooner.

Ways to reach financial independence sooner

There are a few other options if your time to FI is too far away. This is a quick list but you can google more on each bullet point to find many resources on each topic.

You could:

• Make more money with a passion project in order to increase your savings rate and decrease your time to FI. Google side hustles for ideas. Or check out the book Financial Freedom for a great guide on figuring out profitable side hustles. One exercise in the book is to make a list of your hobbies and a list of your skills. Take a step back and see if any side projects appear that make use of a cross between your skills and hobbies.
• Cut expenses to increase your savings rate.
• Do partial FI where you increase your withdrawal rate beyond the safe rate of withdrawal with the caveat that you would need to earn a certain amount through the year. This would no longer require a full time job, offering you and your partner more flexibility. For example: say you and your partner want to live off 40,000€/year. For a safe withdrawal rate of 4% you’d need a portfolio of 1 million. If you decide to take out 6% per year you’d only need a portfolio worth 640,000€. BUT you’d also need to top up your portfolio/investments with another 15,000€ per year to ensure it wouldn’t run out. So you or your partner could work part-time or take on contract work for a few months rather then wait your full time to FI. This approach practically cuts your time to financial independence in half while still achieving the flexibility you may want.
• Take mini-retirements once you’ve reached some degree of passive income/savings and can afford to take prolonged time away from work to pursue other things. Be it travel, time with family, going back to school etc. This is a great option if you want a change sooner than later. It also gives you a chance to try early retirement to see if it’s something you’d like to do full-time.
• If your job allows you to work remotely 100% of the time, consider moving to a place where cost of living is much cheaper. I know someone who contracts for a company in London, earns GBP and lives in Malta where there is no corporate tax. Other stories I have come across are where a couple moved from San Fransisco to Mexico while still earning US dollar from their silicone valley companies and significantly reduced their time to FI that way.

You can also check out my post here where I explored many other options to quicken my path to FI.

There are probably lots of other ways but these are the main ones I’ve come across.

How to withdraw

Once you’ve reached your version of financial independence and you’re ready to start withdrawing from your portfolio there are a few things to consider in order to protect your portfolio from something called sequence of return risk.

Protect your portfolio in the first 5 years of retirement

Your retirement portfolio is at most risk of failing in the first five years of retirement. Even if you only withdraw at the safe withdrawal rate of 4% (which has a success rate of 95%) there is a 5% chance it will fail in the long-term and your portfolio will run out of money in 30 years time. This can happen if you retire right when the market crashes and you are forced to withdraw/sell at a loss and even in the upcoming “up” years your portfolio cannot recover and eventually over 30 years you will run out of money (unless you go back to work and top it back up again). This is something called the sequence of return risk. Never fear – there are ways to mitigate this.

1: Least ideal: Go back to work to top up your portfolio

2: Slightly more appealing: Cut expenses or move somewhere cheaper so that you don’t need to withdraw as much to live off of

3: Least impact: Hold a cash cushion of 1-3 years of living expenses that is invested in something outside of the stock market (like a “high” interest savings account). Using this cash cushion for your living expenses in the down years means you do not HAVE to sell at a loss and you can wait for the market to recover keeping in mind that stock market crashes tend not to last more than 2 years of continuous declines.

1-3 years of living expenses can be a lot (say 40,000€ – 120,000€), which would further add to the time to financial independence but there is a way you can reduce the amount needed with something called a yield shield.

The idea is that you temporarily pivot your investments to high yielding (though lower performing) assets for the short term. Things like preferred shares, real estate investment trusts (REITs), corporate bonds and dividend stocks. This can mean that your portfolio goes from returning dividends of something like 2.3% to closer to 3%, which if you have 1 million in your portfolio means the difference between 23,000€ to 30,000€. So if you need 40,000€ to live on you can use the 30,000€ from your dividends and only withdraw 10,000€ from your cash cushion meaning you only need 30,000€ extra as a cash cushion to weather 3 years of a market downturn.

Holding a yield shield means your portfolio is slightly more complicated to maintain as you are invested in a larger number of asset classes but once you have passed your first 5 years in retirement you can pivot your assets back to a simpler spread of ETFs.

Taxes on withdrawal

In an ETF portfolio, as mentioned above, you will need to pay exit tax on dividends every year as well as exit tax on gains every 8 years (whether you have sold or not). Once you do actually sell/withdraw you will get a credit for the deemed disposal rate you paid on the 8th anniversary.

To clarify some terminology:

A dividend is an amount of money a company pays out to its share/stock holders at a set schedule (usually quarterly or annually). Dividends are paid at the set schedule identified in the fact sheet of the fund.

A gain is an increase in value of shares you own compared to when you bought. So if you bought something for 10€ and when you sell it it’s worth 25€ you have a gain of 15€ which you need to pay exit tax on. Typically you only realize a gain or a loss once you sell the share/stock . However in an ETF in Ireland you need to pay the tax on gains as a deemed disposal on the 8th anniversary of owning the stock/ETF.

Deemed disposals

I have not filed deemed disposals yet as I just started investing in ETFs in Ireland less than a year ago.

What I have gathered to date is that Degiro should provide an annual report showing your portfolio holdings, purchases and any gains or losses.

Keep this report until your 8th year of holding the investment. Using this report you could work out your gains for the year on those investments.

You then calculate your 41% on those gains and file and remit it to Revenue.

Repeat this process every year after the 8th year.

I believe it is a laddered approach where in year 8 you pay the exit tax on gains from year 1, in year 9 you pay the exit tax on gains from year 2 and so on.

You can pay the exit tax from your investments if you don’t have the cash to hand outside of the investments, though this will reduce your compounding effect over time.

I am not 100% on this so please correct me if I’m wrong.

Sense checking for the long haul

At the beginning of each year of retirement, it’s a good idea to re-check the chances of success of your current portfolio. There is a handy calculator called FIREcalc which cycles through 119 different scenarios based on criteria you enter and tells you the current rate of success where your portfolio will not run out of money in the next 30 years.

If the rate of success is lower than you’d like, you can always carry out some of the back up plans mentioned above in the “how to withdraw” section.

ANNNDDD that’s a wrap!

Hopefully this will be a post that you read and re-read through your investing journey. I actually learned more myself by writing it so I got something out of it too 

I’d love your feedback. If you found this helpful or if there is something you’d like me to elaborate on, please leave a comment below.

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Our early retirement plan

We were leaning towards the option of reaching FI, selling our Irish home, and becoming tax residents in Portugal, after looking at all the shortcuts to FI which I outlined in a previous post. We would then live part-time in Ireland, part-time in Portugal and possibly part-time in Canada. The reasons for this were:

• Portugal had a tax regime where foreign income would be tax free for 10 years. This meant that my ETF portfolio would not incur the 41% exit tax on gains or dividends. We would also need 115,000€ less in our portfolio to reach FI if all our investments were Irish ETFs. This is due to needing 28 times our annual expenses vs 25 times. Or a withdrawal rate of 3% instead of 4% due to the higher tax
• Portugal’s cost of living is lower than Ireland’s according to Numbeo. It shows that our current cost of living of 38,500€/year would only cost 27,504€ in Lisbon. Meaning we would need 275,000€ less in investments to reach FI (in addition to the 115,000€ above)
• The weather is preferable in winter
• It is accessible via direct flights to both Dublin, Cork and Montreal. Making it easy for friends and family to visit

What changed our minds?

So what changed our minds in the span of one month?

Adaptability

This might be down to lack of sleep but as we’ve gotten older, we are less adaptable than we once were.

Initially the idea of living in Portugal for 2 months was exciting. We thought we’d like experiencing new places and nicer weather. And we are, but at what cost?

In terms of energy, the effort required to: get the house ready, get packed up for Christmas, travel up and down the country (twice, including a 2nd trip to bring up the cat), get packed for Portugal, fly over, unpack, get familiar with new surroundings, accommodation and appliances, one of us fly home for a funeral (catching a cold in the process and getting us all sick upon return) while the other stayed alone with the baby, pack up, get settled in a another new location, figure out how to use new appliances and where everything is stored, pack up again and fly home again left us a lot more tired than if we had just stayed home (or so we think).

The idea of having to live between two homes on a continual basis in order to retire early and avail of tax breaks seems less and less appealing.

I also don’t like the idea of HAVING to live in a certain place for a minimum amount of days per year in order to be considered tax resident there.

Plus, if we wanted to own only one home and rent in the other location we would have to live half of the year without certain comforts like a full spice drawer, nice cook ware, potentially a comfortable bed, nice shower and so on.

Cost of Living

It may be hard to judge but so far, we have not found the cost of living to be much less than Ireland.

Food

We’ve tried doing groceries at Lidl/Aldi as well as local shops. We still seem to be spending more on food here than at home.

Part of this may be because we have no staples. We are spending more to get things like spices and condiments which add to our shopping. We’ve been eating more meat since veggie meals usually need a variety of spices which we don’t want to buy and waste as we won’t get through them in time.

Another reason may be because gluten free foods are more expensive. Mr. MH is coeliac. We were also buying more than usual as we were excluding gluten from Baby MH’s diet in an attempt to clear up an eczema outbreak so that may also be a contributing factor.

Dinner’s at restaurants are cheaper but we don’t eat out that much. Though we have been eating out more since we’ve been here. It’s hard to pass up 10€ 3 course meals.

Accommodation

Though we’ve been staying in holiday rentals, I’ve been looking up apartments to rent and you’d be hard pressed to find a similar standard of housing in the city as we currently have in Ireland.

Our current housing costs are 940€/month for a 3 bed house within walking distance to the city centre. We have the house finished the way we like it. We have a yard and off street parking.

I haven’t been able to find similar standard of accommodation at that price point in the Algarve or Lisbon. There are definitely rentals for that price point but not with the same finish and features we’d have in Ireland.

Transport

Since I’ve been in Portugal, I’ve been getting Quora (an online discussion forum) updates on Portuguese based questions. Gotta love big data and location tracking. Anyway, one of the questions was why second hand cars are so expensive in Portugal. Mainly because new cars are taxed twice resulting in older cars costing more too. Cars last longer too due to the weather I’d imagine so a 6 year old car here would cost almost 10,000€ more than elsewhere. And they’ve clamped down on any imports with high import taxes and ongoing annual registration taxes so that’s not an option either.

All that to say, owning a car might cost more than in Ireland, even for a really old one.

Public transport may be better so if you live in a major city you might be able to do away with having a car all together, but we don’t think we want to live in a city in Portugal anyway.

Isolation

Even though we had family come to visit us for almost a third of the trip we still felt isolated. We missed being able to pop over to visit family and friends on weekends. We missed our community.

If we lived here longer term I’m sure we’d settle in and make friends here too but we struggle to keep up with our already vastly dispersed family and friends so not overly looking to make new ones.

Also in the one month we were here, a close friend of the family passed away and there was an illness in the family resulting in a last minute trip home, highlighting the fact that even though flights are accessible, it’s more of a struggle to be there for family in times of need.

Tax changes

The government passed a change to the foreign income tax exemption in the month while we were in Portugal. I will do a more detailed post on what the changes mean for Irish investors but ultimately it makes the tax benefit far less favourable.

Child benefit

Becoming tax resident in another country for tax purposes would mean giving up the child benefit we get in Ireland. For one child this is 1,680€/year meaning we’d need 47,000€ more invested to make up that loss.

If you have 2 kids, you’d need almost 95,000€ invested to make up that loss.

Long term illness cover

Mr. MH is diabetic and in Ireland there is a long term illness scheme which covers all costs related to diabetes. If we were tax residents somewhere else we would no longer have access to this benefit. We haven’t figured out what that would mean in terms of insulin and other costs but I’m sure it would be prohibitive and negate any tax benefits we may make elsewhere. He also has an excellent team of specialists in Ireland which is not something we’d like to give up.

Stability

The idea of living in two places would also cause issues for our son and schooling. I’ve looked into the option of worldschooling/homeschooling in order to facilitate this lifestyle but being part of a worldschooling Facebook group, I see a lot of posts where families have had to settle for longer periods of time as their kids crave stability.

Even if we managed to get our son enrolled in school in Ireland for part of the year and homeschooled the rest of the year, it doesn’t feel fair to impose that on him and seems like a more complicated option when the whole point of retiring early is to live a simpler life.

Pets

We love having pets. Moving between two places would make this hard to manage. Our cat has had two homes in the this last year between Cork and Mayo due to all of our travel. This isn’t fair to our pet and we miss him when we’re gone. I know people travel with their pets but getting pets into Ireland is quite expensive. When we moved to Ireland back in 2014 we figured it would have cost us almost 5,000$ to bring in our two cats due to all the anti-rabies precautions and protocols.

Food

An unexpected find is that we miss the food in Ireland. When we moved over from Canada I remember finding that the food in Ireland was more fresh and flavourful, perhaps as it has less distance to travel or is closer to in season foods year round? In fact I find the food better in Ireland than most places we have lived and visited.

Obviously beef and dairy are unrivalled in Ireland but even fruit and veg were fresher, despite them being imported.

Things like pastries, breads and local citrus fruits in Portugal are on par but so far that’s all we have found.

Even though the food in restaurants is cheaper, the quality is nowhere near what you’d get in a restaurant in Ireland. I’m sure there are exceptions but has not been our experience so far.

In terms of groceries it seems Lidl is similar to what Lidl was in Ireland 6 years ago. The food isn’t as fresh, the displays are disheveled, and you can’t get a full shop there. It seems the grocery shops go as below in terms of price and selection from most expensive to least:

• Corner stores
• Lidl
• Continente
• Pingo dolce

One tip we got was that foods are marked down at the end of the day if you can go in then.

Respect of Women

This was not even on my radar until I was reminded with an unfortunate incident.

I was walking to the grocery store with my 16 month old son during the week that Mr. MH was back in Ireland and I was on my own.

In Portugal all drugs are legal and there are many dealers trying to sell drugs as you walk about. There seems to be an unwritten rule that they do not offer to young mothers out with their babies but that night one guy didn’t seem to get that memo. First I was offered smokes, then hash and when I refused that I was offered sex. I laughed it off and continued walking but as the night went on I got more and more upset.

I felt like I should have spoken up, but was alone and didn’t want to put myself or my son at risk of retribution. If my son was any older I would have wanted to set an example and stand up for myself to say that was not acceptable especially in the presence of my son.

And while this was just one comment in the whole month, I struggled to think of the last time something like that happened to me in Ireland.

I even thought back to when I lived in Canada. In my college days when sexual harassment was a normal part of going out in public. Being grabbed, groped and grinded against in night clubs was the norm. I would be cat called and called names when the cat calls didn’t result in a response. We would go to gay bars just so we could dance in peace. I thought that was normal.

Then I moved to Ireland and all of that was gone. At first I struggled with the lack of response, thinking that the men of Ireland did not find me attractive, when actually they were just respectful.

Anyway, all that to say, that is the culture I’d like to raise my son in. Where women are respected far more often than not.

Not all bad

I don’t want you to think I had a horrible time in Portugal. I’m very grateful that we were able to have this experience. It’s not wasted on me that most other people returned to work after Christmas as usual and struggled through sick houses and the usual daily struggle of rushing kids to and from creche or school and working full time.

Our first days in Portimao were relaxed with two leisurely walks a day including stunning views of the ocean and time at the beach with our son.

The people are extremely friendly, especially to people with babies.

We then went onto Lisbon and had a nice time catching up with my sister and brother in law. Our walks were a little laboured with a buggy but a really cool city.

What does this mean for FI?

So what does this all mean for our financial independence plans?

Basically, taking a mini-retirement helped us confirm that we love where we live. We’re happy to work a few more years in order to fund a retirement there.

We will live a simpler life as we will have one set home base.

And we can still travel to new places in winter for a few weeks at a time if we wish. Or to my family in Canada without having to worry about tax residency limitations.

It also means I will spend more money on our home as we now know we want to be there longer. This may slow our savings rate but life is for living and you have to enjoy the journey.

All of these realisations would not have happened if we hadn’t done a mini-retirement. We have confirmed the grass in in fact not greener (at least for us).

Although it was costly to take the time off work, it would have been far more costly to reach a certain FI number, sell our home, quit jobs and move to Portugal only to realise then that we would have preferred to work a few more years and kept our home.

I feel like, although our FI date has been pushed out, I’m actually far happier with the approach. I’m not striving to get to FI as soon as possible. I’m less obsessed with tax breaks. Instead I am focusing on making sure our lives are as simple and happy as possible along the journey.

When

How long to save up

First, you will need to figure out how much your mini retirement will cost and how long it will take you to save up. If you are tracking your expenses or know roughly how much you spend a year then this will be a big help in your planning.

Say you will be off for 3 months and without income for 4 months (keeping in mind you will need to work for a full month before you get paid again if you are paid monthly) and you spend 40,000€/year (the average for a family in Ireland) then you will need 13,333€ to fund your cost of living if you are staying home.

If you are taking the time off to travel or start a business etc then you will also need to factor in the additional cost of living of those activities. I go into some of my tips for figuring out cost of living abroad below.

If you will be travelling and you will still have fixed expenses at home, be sure to include those. If you will be renting out your home while you are away, have a look at why we didn’t do this here.

Once you’ve figured the cost out, then figure out how much you can save per month and how many months it will take to save up that amount.

Getting work off

Once you have an idea how long it will take you to save up for your mini-retirement then you should start laying the ground work for asking for time off. There are some great tips in this post on how to make it very hard for your boss to say no to your time off.

Basically it suggests, in the months coming up to requesting your time off, work extra hard, be super helpful to your coworkers (especially if they will cover for you while you are away), mention your dream/goals for your time off in passing so they are not surprised and lay as much of the ground work for your cover while you are away so there is very little for your boss to consider. How you frame your ask for time off will make all the difference.

If you are asking for parental leave in Ireland, then this is already hard for managers to say no to since it’s a statutory leave.

Your employer can only refuse parental leave if you are not entitled to take it.

Your employer can also postpone your parental leave for up to 6 months. They must do this before the confirmation document is signed. After that, the leave cannot be postponed without further written agreement. Grounds for such a postponement include lack of cover or the fact that other employees are already on parental leave.

Normally only one postponement is allowed, but your leave may be postponed twice if the reason is seasonal variations in the volume of work.

Where

If travel is in your plans then here are some of the criteria we considered.

Flights, Weather and Distance

For us, we would be travelling in Jan/Feb and wanted to go somewhere warmer than Ireland, but also somewhere that wasn’t too far from home. As we were travelling with a smallie, we didn’t want to take a flight that was more than 4 hours total. We also wanted the cost of living to be cheaper than staying home.

From Ireland, we checked out:

We googled average temperatures in each for the months we would be there (equally important for hotter months if the weather would be unbearable).

We used google flights to check out direct flights from a specific airport and to find the best rates and dates to fly.

Cost of living

In terms of figuring out cost of living in each location we looked at a number of areas.

Accommodation

For accommodation we used sites like booking.com and Air b’n’b.

Our accommodation checklist included:

• a balcony with sunlight so that we could sit out while baby was napping and not having the hassle of leaving the house (Michael McIntyre’s skit comes to mind)
• washing machine so we could pack as little as possible (plus we use cloth nappies so definitely needed one for that)
• walking distance to Lidl or large supermarket (to help keep our costs down)
• and obviously cost, the lower the better

Keeping all that in mind I searched for the cheapest range first and then ticked off all the other boxes to get a sense of accommodation costs in each location.

Millennial Revolution also have a good travel series where they report their cost of living in each location so I also cross checked my findings with their specific location pages. You can search for a location in their search bar to see if they have a post on that location or scroll through the list here. They live quite frugally so I know their spending would be in line with ours.

Food

In terms of food costs, we had been to Tenerife so we looked at what we spent when we were there. While we felt the shopping was cheap, we actually spent quite a bit more than we thought (260€ for a week) which would be over 1,000€/month if every week was the same as that one.

For Malta and Portugal we looked at sites like Numbeo (where you compare cost of living between two cities, it gives you a percentage difference which you could apply to your typical food expenditure at home) and other blogs/vlogs.

The Our Rich Journey vlog details their living expenses in Lisbon each month since Sep 2019, so that was a good recent indicator of costs to expect.

Getting around

I mentioned how we found our flights above but in addition to Google flights you can also use skyscanner. Both have notifications you can setup to get pinged when a certain flight price has increased or decreased. If you are planning on something far in advance this feature might be of use to you.

We also took into consideration the cost of getting around once we got to where we were going. We tried to find cities or places which wouldn’t require a car rental to keep costs low.

In terms of getting from the airport, often vacation areas will offer shuttle services but usually at triple the price of public transport (though potentially half the time). We scoffed at the 60€ quoted for airport shuttle to our location but may have been short-sighted (read on below).

Google maps and Rome2Rio are other useful sites when trying to figure out routes to get places.

I also googled how to get from and to certain places and read local forums or travel sites detailing typical costs and options.

In the end, as our flight was getting in past our son’s bedtime, we decided to book a cheap airport hotel which had a place for breakfast, when we got up the next day, we popped down for breakfast and then got an uber to the train station where we got a train for the 3 of us to Portimao for 12€ (babies go free). It was about 40 minutes longer but was nice as baby got to nap on me while I read my book.

In the end it may have been much of a muchness to pay for the more expensive shuttle. For example:

• Cost of airport hotel: 50€
• Cost for breakfast for 2: 15€
• Cost for Uber to and from train station: 13€
• Cost for train: 12€

Total: 90€ minus 30€ for extra night in other location = 60€ minus say 12€ for breakfast = 48€ vs 60€ for the shuttle in half the time.

That said, maybe the train was a safer route for a baby without a car seat (although probably cancelled out by the two uber’s we got to get to the train station).

In Portugal, Uber and Kapten are cheaper and more convenient ways of getting around.

All that to say, you’ll need to take into account your added transport costs whether you use public transport, airport shuttles, taxis/ubers, or rent a car be sure to include a line item for this in your budget.

Travel insurance

If you live in the EU and have a tax number where you live, you should be eligible to apply for an EU health card. This allows you to have possibly free health cover in any EU country. We found out about this last minute and went into the office just before Christmas, we were given temporary cards straight away which last for a month and were posted the full versions once available. This doesn’t replace travel insurance and only covers necessary health care but is nice to have as a back up. Even I got one, even though I am not yet a citizen. Your partner can apply on your behalf as well so you don’t need to lug your baby in as long as they have the necessary documentation. You can read more about it here.

In terms of travel insurance, check your employer health insurance plan to see if they have an add-on where you can select travel insurance instead of additional cover for other health cover you may not use.

Visas

If you’re planning on going somewhere for longer than 3 months, make sure you can stay there for that long. Most places have a 3 month limit before you need to leave and come back again. I nearly forgot this as I have been in Ireland so long, I just assumed I could travel to Portugal for 3 or 4 months. Obviously as an EU citizen you can travel to any EU country without a visa.

Getting there

Packing

If you’re keeping costs low by traveling on budget airlines, you will need to pack light. 1 20kg checked bag costs about 50€ for the return trip, which can be hard to swallow when you’re only paying 70€ for the flight.

As we were going for 2 months with a baby, we decided to “splurge” and pay for 1 checked bag between the three of us.

Here is what we ended up bringing:

• 1 20kg checked bag
• 1 5kg small carry-on bag for baby supplies (allowed by Ryanair for free – other airlines allow 10kg though I can’t remember them weighing it)
• 1 handbag
• 1 rucksack
• 1 travel buggy

The first place we were staying had an additional baby package where we got a travel cot, high chair and baby bath for 25€ for the 32 nights so that saved us bringing any of that over.

In terms of clothes we brought 1 week’s worth for each of us and packed a variety of warm and cold clothes.

We also managed to fit all the baby nappies, wipes, creams, travel potty, nappy bags etc into the 5kg carry on bag.

House prep

Insurance

In terms of getting your house ready if you’ll be away for a longer period of time, make sure you check your home insurance for their unoccupied clause. Ours states that after 45 days your home is no longer covered for vandalism, or burst pipes. Having a family member stay for a weekend doesn’t re-start the clock either. Their definition of occupancy is 4 nights in any one week. In order to reduce this risk we gave a key to a friend who will check in every few days. We also let our neighbour know and gave them our numbers in case anything needed urgent attention. As we were leaving in winter, we also left the heating on low and turned the water off at the mains in order to significantly reduce the risk of a burst pipe.

If you’re planning to rent it out, have a look at some of the reasons we didn’t do this before making your decision.

Car

If you’ll be away for more than a few weeks, it’s also a good idea to disconnect your car battery before you go. We forgot to do this last time we went for 6 weeks and came home to a dead battery which needed to be replaced.

And that’s all the tips I can think of. Hopefully it was of some use and gives some food for thought on your next adventure should you be planning one.

I’ve been doing a little reading on more sustainable ETF options and things are looking promising. We may not have to compromise ethics for fund performance.

I do think that eventually the stock market will naturally evolve to be made up of more environmentally friendly companies, as more of these companies emerge to battle climate change, but in the mean time I’m trying to figure out where to put my money to align with my ethics.

There is an organisation called US SIF, a forum for sustainable and responsible investment (SRI) whose mission is to “rapidly shift investment practices towards sustainability, focusing on long-term investment and the generation of positive social and environmental impacts”.

Since 1995 the organisation has been preparing a trend report every 2 years based on survey data on the numbers of institutional asset owners, money management firms and investment vehicles using sustainable investment strategies. It also distills the range of significant ESG issues, including climate change, human rights, weapons avoidance and corporate governance, that investors consider.

The trends

The 2018 report shows that out of the 46.6 trillion invested in US professionally managed assets, 26% (12 trillion) are now falling under the environmental, social and governance (ESG) criteria.

This has grown exponentially year on year including 38% growth since 2016 alone!

25% of that 12 trillion is by individual investors.

Current make-up of funds under management

Of the funds still invested in non-ESG areas here is a breakdown of how much money is behind issue areas:

And of the 46.6 trillion in US assets here is the make up in terms of what the funds support. 26% in sustainable funds, 27% in known listed issues and the remaining 47% isn’t specified in the report (at least in as much as I read).

What is driving more sustainable options?

Client demand is the highest reasons why money managers are considering ESG factors, followed by mission, social benefits, returns, risk, fiduciary duty, UN sustainable goals and regulatory compliance.

You can thank millennials for driving this on as they are the main investors demanding these criteria. With millennials set to inherit a £1.2 trillion windfall from baby boomers in the next 30 years, according to a recent study by Sanlam UK, there’s a clear need for the impact investment industry to develop products and services in order to attract and retain next generation wealth.

What are ESG criteria?

Here are the main criteria which make money managers decide if a fund falls under ESG criteria or not along with how much of the funds under management currently fall within those areas.

And in pie chart form

What funds are available to invest in?

There are likely a lot more but here are a few from my initial research. I have not invested in any of these myself yet but once I am earning again I will likely start to funnel more and more of my portfolio into these types of funds.

In Ireland:

Both ESGV and VSGX follow the below criteria

• Specifically excludes stocks of companies in the following industries: adult entertainment, alcohol and tobacco, weapons, fossil fuels, gambling, and nuclear power
• Excludes stocks of companies that do not meet certain standards of U.N. global compact principles and companies that do not meet diversity criteria

In terms of fund make-up, risk, fees and performance here is a snapshot (click the links for the full fact sheet)

ESGV – Vanguard ESG U.S. Stock ETF

• All US companies
• Fees: 0.12%
• Performance: last 1 year 33%, since inception in 2018: 11.5%
• Risk: 4 out of 5
• ESG Morningstar rating: 4 out of 5

VSGX – Vanguard ESG International Stock ETF

• Tracks the performance of the FTSE Global All Cap ex US Choice Index
• Fees: 0.17%
• Performance: last 1 year 23.48%, since inception in 2018: 7.65%
• Risk: 5 out of 5
• ESG Morningstar rating: 3 out of 5

In Canada:

iShares MSCI KLD 400 Social ETF (DSI)

• DSI tracks a market-cap-weighted index of 400 (US only) companies deemed to have positive environmental, social and governance characteristics by MSCI
• Fees: 0.25%
• Performance: last 1 year 30.38%, last 10 years: 12.47%
• Risk: 5 out of 5
• ESG Morningstar rating: 5 out of 5

Vanguard FTSE Social Index Fund (VFTSX) was another one but seems to now be closed to new investors.

If you have funds in the US or Canada, you may be able to make use of this tool which shows how heavily invested in fossil fuels various mutual funds may be.

How does my current portfolio fare?

According to the Morningstar sustainability ratings, my current Irish portfolio isn’t great with only 1-3s out of 5 (5 being the best)

• Vanguard FTSE All-World High Dividend Yield UCITS ETF (VHYL) = 1
• Vanguard FTSE Developed Europe UCITS ETF (VEUR) = 2
• Vanguard S&P 500 UCITS ETF (VUSA) = 3
• Vanguard FTSE Emerging Markets UCITS ETF (VFEM) = 3

You can read more about Morningstar’s ESG investment ratings here.

What about you? Are you considering shifting your portfolio to more sustainable funds? Have you found any you’d like to share? Please let me and other readers know below!