When I started interviewing people in the FIRE community as a tool to enable and help you as the reader get to Financial Independence and Early Retirement quicker, I asked everyone the same 3 questions as a benchmark!
What actually happened is my interviewees started adding more context, more tips, more background and additional information (well we are FIRE enthusiasts after all and it is all about adding value, sharing together and walking that winding path to Financial Freedom together, right?!).
Naturally, this has generated a lot of interest from within the Financial community and you, my readers want to check in with the guests and find out how they are getting on since!
Derek also co-hosts the podcast Dividend Talk so do check it out.
I had the opportunity to ask a few of your follow up questions to Derek from Engineer My Freedom and grab an up to date photo as requested,
In the first interview I published 1st December 2020 Derek said:
“For me Pensions are out of the equation. I was left scarred from what happened to workers in an old famous factory in Waterford. I also wanted to be in control of my own destiny and not wait until I’m in my late 60s.”
Personally, I actually removed my own safety net by cancelling the monthly payment into my private pension a few years ago. My individual goal was to truly determine my own Financial Independence date through up front cash flowing property. This investment strategy I understood, that I could control and directly influence as I was in the driving seat and therefore move my FI date forward as much as I wanted through my own choosing.
Derek similarly focusses on income through Dividend based Investing that pays him today – not at a date that is open to change, which sparks my interest. I am not against pensions quite the contrary I see the value, but this is about exploring different strategies and ways of thinking and everyone is different.
It is of my own opinion that using strategies like this can be a fantastic way to achieve pure financial freedom or bridge the years to a pensionable drawdown date and it always made more sense to me!
I hope the kettle has boiled, the glass of wine is chilled or you have selected your FIRE interview binge beverage.
So, kick back relax and look for the little golden nuggets in here! Thank you Derek..
Derek, how are you getting on with your FIRE journey to date?
Since the interview, My strategy has pretty much remained the same. I continue to invest monthly into the stock market whist overpaying on my mortgage.
The last time we spoke, I mentioned that it would take ten years for my Dividend income (after tax) to match my current expenses and eight years to clear my mortgage.
A question I hear regularly is.. “Why do I choose dividend growth investing?”
We all know that tax in Ireland is not always kind to Investors considering the risk we take. As a full disclaimer, I am fully aware that this is not the most tax-efficient system.
However, I always feel that investors should have a clear goal on what they are looking to achieve and pick investments that suit their objectives and risk tolerance.
How is your Dividend Income Investment Strategy doing since the first interview, and has anything changed since?
My goals are simple – I want to generate enough Income monthly to cover my current Income without working the number of hours I am currently working. I am purely investing for Income.
Investing in growth stocks with a buy a hold methodology is more tax efficient as I would only pay CGT when I sell. However, I struggle with the psychology of when I should buy or sell a growth stock. The Markets have seen a great Bull market over the last decade; valuations are high, and honestly, I feel like I would be checking my brokerage account every day. I still own a couple of growth stocks, but they make up a small part of my portfolio.
Dividend growth Investing gives me peace of mind but also clear buy and sell points. I rarely check my account, and I have control over what I do with those dividends. Reinvest them or spend them.
A more tax-efficient method would be to overpay my mortgage even more by using the cash I invest each month in dividend stocks. It is something that has been on my mind. I mentioned earlier that I was in negative equity (thankfully, this is no longer true); however, I overpaid as much as possible on the mortgage at the very beginning.
The total amount overpaid would have been enough for at least six months of payments if we had kept it in the bank. We hit hard times and could no longer afford the repayments while I was looking for a job. If the bank gave us a six-month payment break or if we would have saved this cash instead of paying off extra, and chances are we would never have needed a split mortgage.
While we still overpay, I like to have access to some funds as we don’t know what else can come around the corner.
Have you picked up any new ideas or tips that you could share with us all?
Dividend Investing is boring! Investors are attracted to blue-chip companies that have paid a reliable dividend in the past, like Johnson and Johnson, 3M, and Abbot. These companies will not excite you like the Tesla or NIO’s of this world, but they are dependable and increase their dividends like clockwork.
From a personal perspective, I have shifted to have a more European focus and tend to favour companies like Ahold Delhaize over 3M. As a European consumer staple, it has enormous exposure in the US. I get to invest in euros and avoid any FX transaction costs while still having exposure to the United States.
Another strategy that I have employed involves options trading. It is not something I recommend for beginners as it is risky and requires some margin. However, I sell cash-secured-put on companies I want to hold. Cash secured means that I always have enough money to pay for the 100 shares if I am assigned.
The nice thing about this strategy is that I am paid a premium for selling the put and waiting for a company to drop to my preferred price. Whatever happens to a companies share price, I get to keep this premium.
If the companies price is above the strike price I set, I still keep the premium; I’m not obligated to buy any shares.
If the company drops below the strike price, I am obligated to buy 100 shares of the company at the strike price I set earlier. For example, if the share price is €40, but I had a strike price of €50, I am obligated t buy 100 shares at €50
As I only use this on companies that I want to have in my portfolio.
I am more than happy to collect the premium while waiting for a company to drop to a valuation that I prefer!
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