I recently had the pleasure of been interviewed by Michael from Playingwithfire.ie. Michael reached out to me when he came across my meetup group and asked me if I would be interested in a podcast interview. Michael, who is originally from New Zealand and living in Ireland now, has been on the path to Financial Independence (F.I.) for a few years now. He took the plunge and left his full-time job to freelance. Since then he has also set up three businesses. He is an avid entrepreneur, investor, podcaster, and blogger.
Listen to the podcast here
Some talking points that I would like to delve in further to were:
I am a strong believer in tracking my expenses, I actually enjoy filling out the Excel sheet each month to see if any categories increased or decreased. At the very least this gives me a perspective on how much of my expense are necessary each month and how much are discretionary. I don’t focus too much on decreasing my expenses, I know I should but I tend to focus more on earning extra income from investing or P2P. It would make sense to focus more on expenses though because for every €100 per month that I can save, that is €30,000 less that I would need in my total pot when I do retire (€100/month = €1,200 per year times that by 25, see the rule of 25).
Also, I am trying to move as far away as possible from the blind consumerism path that I was on – you know, that life path of – get a job, earn money, buy lots of stuff and get monthly expenses and debt, must continuously have job to pay for those expenses – now I’m stuck in a trap. I don’t want to get stuck in that rut again where I am not making any financial progress and I have to rely on a job just to cover my expenses.
Michael is correct, upon retirement you can take out a lump sum of 25% of your pension fund up to €200,000 tax-free. Michael mentioned that €800,000 was the golden number. What he meant by that is if you have a pension fund of €800,000 then you could take out the maximum amount allowed which is €200,000. But, if your retirement fund is €400,000 then the maximum tax-free lump sum that you can take out on retirement is €100,000 ( 400,000 x 25% ).
I think we can all safely say now that none of us was ever thought the basic financial principles in school. Nobody thought me about budgeting, taxes, the wonders of compound interest, how expensive debt can be, or pensions. This really should be a class in school. It is our job now to ensure that we teach our children the importance of controlling income and expenses. Teach them about tracking expenses, paying yourself first, passive investing, and how important it is to work on a lifestyle fund; I prefer to call it a lifestyle fund than a retirement fund. Retirement fund sounds so final. I don’t plan on stopping work and sitting on the couch all day when I retire. Retirement is going to give me more time to do the things that I want to do; like working on a business, travelling, maybe some charitable work, or seeing more of my family.
We had discussed the Meetup group that I started – like I said in the podcast, I started this to meet other people who are also interested in F.I. The members are from all walks of life and are at different stages of F.I. Some are just finding out about it while others are already on their path. It was great to see that so many people here in Ireland already knew about this and I was able to talk to people who understood things like emergency funds, or Index ETFs. We meet once per month in Dublin and Michael runs a similar meetup in Limerick.