# Can't see the wood from the trees... please help



## rboyddd (13 Mar 2019)

Hi,
I am new to this forum so sorry in advance if I need to adjust the amount of information I have provided below:

Age: 49
Annual Basic Income: PAYE €160K
Pension: DB Scheme with a notional value of €800K

Spouse Age: 47
Annual Income: €15K (Part time)
Pension: State contributory only but also qualifies for 50% of my DB scheme in the event of my death.

Children: 1 (Age 11)

Home PPR Value: €700K
Mortgage Outstanding: €175K (16 years remaining, interest rate 3.8%)
Cash Savings: €90K

Other Residential Rental Investments:
1. Value: €390K, Mortgage €200K @ 3.5%, 14 years remaining, rent = €1,300 per month
2. Value: €250K, Mortgage €10K @ 1%, 1.5 years remaining, rent = €900 per month
3. Value: €230K, Mortgage €85K @ 1%, 11 years remaining, rent = €900 per month
4. Value: €160K, Mortgage €44K @ 4.5% 16 years remaining, rent = €850 per month
5. Value: €170K, Mortgage = N/a as its a holiday home that was bought by refinancing our PPR, rent = 0

Savers/Spenders ? -
Bit of both to be honest. We pay down about €35K off the principal across all mortgages annually.
We spend a bit on the upkeep of the holiday home which is abroad, about €3K per year.
We take a number of holidays each year, and are probably a bit extravagant in terms of eating out etc.  A guestimate would be that we have a surplus of about €1K per month after all other expenses which just goes into a regular savings account that earns no interest.
We have school fees of €400 a month and will have similar costs for another 7 years followed by college costs (fingers crossed).

Lifestyle Loans:
We run two fairly decent cars with both car loans paid off.
No credit card debt.

Question:
I have worked long hours in pressurized jobs for the past 25 years and while I consider myself lucky to always have had a well paid job, this money is hard earned often with long hours and weekends.  I am getting to the point where I feel a little burned out, with energy levels not quite what they were.  I would like to think about easing back a bit and am wondering if I can financially get out of the 9-5 graft by 55 while retaining some degree of financial comfort. 
Planning to sell our holiday home within the next 2-3 years and will use that money to clear down the mortgage on our own home.
As like many other posters here, we have worked very hard for many years to build up our investments to where they are today.  However, while we want to cash-out, we want to do so in a financially prudent manner.  Maybe I'm too close to this and can't see the wood from the trees but I'm not sure about even the basic decision as to whether we completely cash out (taking a CGT hit of €100K) and live off the proceeds (est. €600K net)for a time, or partially cash out and keep 1 or 2 properties in order to supplement our income and have something to pass on to our child...

Your thoughts would be most welcome, but please be gentle !
Thanks


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## NoRegretsCoyote (13 Mar 2019)

What is the net profit on your property portfolio?


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## rboyddd (13 Mar 2019)

About €650K net of CGT if all investment properties were sold (main residence would be retained debt free).

From a rental perspective, total rental is €4K per month with total mortgage repayments €2,500 per month.  After tax, its about break even-ish.


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## Bronte (13 Mar 2019)

Weirdly you remind me of someone I know.

Bet anything you’re not getting enough proper exercise and fresh air.  Totally focused on work and letting that slide is easily done.

What you need to figure out is how much income you need annually for your lifestyle and then work out if your pension and rents will give it to you.

So how much do you spend annually on yourselves as a family. Start by working that out.

Are you wasting money anywhere just because you’re used to it. Just because you can.

Not sure why you want us to be gentle. Tough financial advice is surely why you’re here.

And I for one would like to know how you swung two mortgages on BTLs at 1%!
What are the mortgage repayments. Any other debts? Credit cards?


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## Sarenco (13 Mar 2019)

Hi @rboyddd 

I know you asked us to be gentle but I think you need to define your desired outcome before you can start working out a strategy to get there.

So, for example, what do you consider "some degree of financial comfort"?  Does it involve €400pm in school fees?  Multiple overseas holidays every year?  Nice meals out?

That's not a value judgment - you've obviously worked hard to achieve your current lifestyle.  But what's more important to you - retiring early or maintaining your current lifestyle?

Maybe turn it around, what do you think is the minimum you (and yours) would be happy to live on if and when you retire?  Could your family live on, say, €3,500 per month (assuming your mortgage is history)?  Or what figure would_ you _consider comfortable?


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## llgon (13 Mar 2019)

You could certainly retire on a reasonable income at 55 but as the previous posters have said you need to assess how comfortable you want to be.

To address your question on whether to sell the investment properties or not, it's a personal decision to make and you obviously have plenty of first hand experience of the hassles involved in being a landlord to help you decide if you are prepared to do it in retirement as well.

The yield on all your rentals is quite low. Is there potential to increase this in any or all of them? If not I would be inclined to sell up and invest elsewhere where you're likely to have less hassle.  On the other hand if yields were better I think I would hold on to 2 or 3 of them in the long term with mortgages paid off prior to retirement.


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## RedOnion (13 Mar 2019)

rboyddd said:


> After tax, its about break even-ish.


You're mixing up cashflow and profit.
You've a 4k rent income against 830 interest expense. That's profitable. However...

You've over 1m in property assets, excluding PPR and holiday home.

You're rental yield is very low on these. The first one is yielding 4% and deeply cashflow negative, although profitable. I'd maybe get rid of that, take your equity and repay against your PPR. Use cash to repay Balance of PPR completely.

When you sell holiday home replace your nest egg, and set aside a college fund for child.

By 55 your remaining BTL portfolio could be debt free, with a rent roll of 2600 (ish), and you should have significant savings.


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## PGF2016 (14 Mar 2019)

Small point. It would be worth your while switching your mortgage to a lower rate. 3.8% is too high.


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## rboyddd (14 Mar 2019)

Bronte said:


> Weirdly you remind me of someone I know.
> 
> Bet anything you’re not getting enough proper exercise and fresh air.  Totally focused on work and letting that slide is easily done.
> 
> ...



Thank you Bronte for your response.  With regard to the sedentary lifestyle elements, I started to address this about a year ago through sport and regularly fit in 4 hours of anaerobic exercise each week with the target to achieving 6 hours each week by this summer.  Equally I am trying to do a better job of switching off in the evenings and weekends, but working for a global company operating across multiple time zones can be challenging to limit email activity to Mon/Fri only.  However that is something I am going to have to figure out.

You point out something obvious, but a question I have struggled with.... if I calculate the annual figure I need for myself and family and decide to leave my job, I am concerned that this figure may turn out to be insufficient and it may be too late to return to the workforce, in any meaningful way.  

To answer your question regarding wasting money.... absolutely, yes.  Every luxury is effectively waste that could instead be channeled to paying down mortgage debt.  But we enjoy the "nice to haves"... that, I suppose is our choice and part of the question around balance between a good lifestyle in the immediate term versus deferred reward (which one may never see).

With respect to the BTL mortgages, this rate was obtained by consolidating several mortgages spread across multiple lending institutions and moving most of them (had more back in 2007) to a single lender and exiting a revolver credit facility I had previously negotiated.  Those two remaining BLTs are on trackers since 2007.

With regard to other debts, no credit card debt to speak of as its cleared each month.  I do financially support my elderly mother in maintaining her house and car etc.  Only to the tune of €2-3K a year.

Mortgage Costs Are:
1. Value: €390K, Mortgage €200K @ 3.5%, 14 years remaining, rent = €1,300 per month : Mortgage Cost = €1,500
2. Value: €250K, Mortgage €10K @ 1%, 1.5 years remaining, rent = €900 per month : Mortgage Cost = €600 (will be clearing this remaining balance in the next couple of weeks)
3. Value: €230K, Mortgage €85K @ 1%, 11 years remaining, rent = €900 per month : Mortgage Cost = €700
4. Value: €160K, Mortgage €44K @ 4.5% 16 years remaining, rent = €850 per month : Mortgage Cost = €300
5. Value: €170K, Mortgage = N/a as its a holiday home that was bought by refinancing our PPR, rent = 0 : Mortgage Cost = €0

Own home Mortgage Cost = €1,250


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## rboyddd (14 Mar 2019)

Sarenco said:


> Hi @rboyddd
> 
> I know you asked us to be gentle but I think you need to define your desired outcome before you can start working out a strategy to get there.
> 
> ...



This is the crux of the matter Sarenco... I am unsure of what strategy makes sense... 60/40 in favour or exiting the PAYE grind as early as possible as opposed to an "extravagant" lifestyle .... before 55 if at all possible, and yes, my wife is on board with this. 

I am worried that I will make a poor financial decision... short term gain but long term pain.  The figure I consider comfortable is €4K per month net of tax and before expense.   However, PPR mortgage must be clear and school/college and health costs all provided for (at a minimum).


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## rboyddd (14 Mar 2019)

llgon said:


> You could certainly retire on a reasonable income at 55 but as the previous posters have said you need to assess how comfortable you want to be.
> 
> To address your question on whether to sell the investment properties or not, it's a personal decision to make and you obviously have plenty of first hand experience of the hassles involved in being a landlord to help you decide if you are prepared to do it in retirement as well.
> 
> The yield on all your rentals is quite low. Is there potential to increase this in any or all of them? If not I would be inclined to sell up and invest elsewhere where you're likely to have less hassle.  On the other hand if yields were better I think I would hold on to 2 or 3 of them in the long term with mortgages paid off prior to retirement.



Thanks Ligon... you are absolutely on the money.  There is hassle, coupled with a lot of risk with being a landlord in this country.  I've seen other posts that suggest there is less risk but equivalent reward in other countries, so that is something I have begun investigating.  I am open to investing in one or two BTLs or commercial in another country where there is more stability.

Yes, I agree that the yield is low, too low for the risk.  The properties are not located in a RPZ and I have already notified one tenant that a rent review notice will be issued shortly upon the 2 year anniversary of the last review.  We have always been fair to tenants with respect to rent levels, but the rent levels on #2, and #3 are at 30% below market rate.  An adjustment to market rate for these two properties would bring the yield back to 5.5%.

Property #1 - The intention is to sell this, however as there is a significant CGT liability here, there is a loss I need to first crystalize to offset some of this CGT pain.  This loss is complex and will take 12-18 months to realise, so I need to hold that property for another 18 months... as a loss maker.  However, I expect that there will be a small uplift in the capital value of this property during this period which will negate the carrying cost. 

Thanks again Ligon, your opinion on perhaps holding 1 or 2 BTLs is appreciated.


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## rboyddd (14 Mar 2019)

RedOnion said:


> You're mixing up cashflow and profit.
> You've a 4k rent income against 830 interest expense. That's profitable. However...
> 
> You've over 1m in property assets, excluding PPR and holiday home.
> ...



I know its a simple exercise, but very beneficial to lay out the basic financials.  You are correct.  The current yield is poor for #1, #2 and #3.  It makes sense to sell #1.  The rental levels on the remaining BTLs need to be brought up to current market levels.

Thanks


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## Steven Barrett (14 Mar 2019)

With all the foreign investment in Ireland in recent years, you are in a similar position to lots of others. High pressured job, can't work at that pace until retirement age. As has been said, you need to assess how much you want to live off and where that money will come from. If you want to bow out early and don't have enough income from rental properties, you may have to sell one (or more) or take a transfer value from your DB scheme to avail of the ARF option. Your 11 yo will be a cost for many more years as well though.

To retire early will mean a change of mindset. Being income statement affluent, you have been able to afford the luxuries without having to worry about money. Retiring young is expensive and requires advance planning so you know where to cut back and what needs to be done before you call it a day. Don't forget that your child will have to adjust too. If there is going to be cutting back, it will have to be across the board. If your child continued to receive the luxuries, it can continue into later life and they can be a drain on your assets if they can't afford the lifestyle they have grown up with (I know your child is only 11, but it is a real issue, believe me!).


Steven
www.bluewaterfp.ie


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## moneymakeover (14 Mar 2019)

By keeping the properties you are more inflation protected. 

You're well on the way to paying them down. And if you're retired it's something to do?

And your PPR can be paid off by using the holiday home


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## Peanuts (14 Mar 2019)

rboyddd said:


> About €650K net of CGT if all investment properties were sold (main residence would be retained debt free).
> 
> From a rental perspective, total rental is €4K per month with total mortgage repayments €2,500 per month.  After tax, its about break even-ish.



What income will your DB pension provide if you retire at 55 but don't take up until 65? Will that provide you with sufficient income from that point on? If so, then if you liquidated everything at 55, had €650k clear and stuck it under your mattress it would give you a monthly income of €5,400 for those 10 years. Doesn't account for inflation obviously.


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## rboyddd (14 Mar 2019)

SBarrett said:


> With all the foreign investment in Ireland in recent years, you are in a similar position to lots of others. High pressured job, can't work at that pace until retirement age. As has been said, you need to assess how much you want to live off and where that money will come from. If you want to bow out early and don't have enough income from rental properties, you may have to sell one (or more) or take a transfer value from your DB scheme to avail of the ARF option. Your 11 yo will be a cost for many more years as well though.
> 
> To retire early will mean a change of mindset. Being income statement affluent, you have been able to afford the luxuries without having to worry about money. Retiring young is expensive and requires advance planning so you know where to cut back and what needs to be done before you call it a day. Don't forget that your child will have to adjust too. If there is going to be cutting back, it will have to be across the board. If your child continued to receive the luxuries, it can continue into later life and they can be a drain on your assets if they can't afford the lifestyle they have grown up with (I know your child is only 11, but it is a real issue, believe me!).
> 
> ...



Thank you Steven.  Taking a transfer value from a fully funded DB scheme is not for the faint of heart I would think as it removes a high degree of certainty with respect to future pension income... using a blunt rule of thumb, if one had a DB fund of €1m, that should provide a €40K annual income.  The benefit as you have helpfully pointed out is that one can access the fund ahead of turning 65, if I understand you correctly.

Again, thank you for the points you have raised, plenty to mull over.


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## rboyddd (14 Mar 2019)

moneymakeover said:


> By keeping the properties you are more inflation protected.
> 
> You're well on the way to paying them down. And if you're retired it's something to do?
> 
> And your PPR can be paid off by using the holiday home



Thanks moneymakeover, the point you make concerning inflation protected (NPV adjusted) is well made.  The approach to keep 2 or 3 of the better yielding rentals, pay them down (rather than spending recklessly) is the prudent approach without doubt.


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## WaterWater (14 Mar 2019)

llgon said:


> You could certainly retire on a reasonable income at 55 but as the previous posters have said you need to assess how comfortable you want to be.



I totally agree with this statement.

I was in Brown Thomas restaurant today having a coffee and cake. The only reason I was there was because I was given a gift card and wanted to use it up. They were selling Portugeuse custard cakes, Pasteis de Nata, for about €4.50 each. I buy these in Dunnes Stores at 4 for €3. 
I just couldn't bring myself to pay the price asked.

I have a house with no mortgage worth about €1.5m and circa €600k in savings and nil borrowings. I can well afford to pay the price asked.

I eat well. Travel lots but know the value of money.

The question I will ask you rboyddd is.....would you have spent €4.50 0n the custard cake without hesitation?


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## noproblem (14 Mar 2019)

Love it Water Water and somewhat agree. Did you bring your own bottle of water water?


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## rboyddd (14 Mar 2019)

WaterWater said:


> I totally agree with this statement.
> 
> I was in Brown Thomas restaurant today having a coffee and cake. The only reason I was there was because I was given a gift card and wanted to use it up. They were selling Portugeuse custard cakes, Pasteis de Nata, for about €4.50 each. I buy these in Dunnes Stores at 4 for €3.
> I just couldn't bring myself to pay the price asked.
> ...



If it was for my own consumption and I was on my own, then no.  However, if the ambience was good for the soul, then I would consider paying €4.50 just to sit there for 20 minutes.


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## cremeegg (14 Mar 2019)

noproblem said:


> Love it Water Water and somewhat agree. Did you bring your own bottle of water water?



water WaterWater, surely ?


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## Steven Barrett (14 Mar 2019)

WaterWater said:


> I totally agree with this statement.
> 
> I was in Brown Thomas restaurant today having a coffee and cake. The only reason I was there was because I was given a gift card and wanted to use it up. They were selling Portugeuse custard cakes, Pasteis de Nata, for about €4.50 each. I buy these in Dunnes Stores at 4 for €3.
> I just couldn't bring myself to pay the price asked.
> ...




Sorry, but that is nonsense. Paying €4.50 for a cake will not make any difference to whether you can live comfortably or not in retirement. It's the big purchases that make a difference. Does the OP want to live in a wealthy community with a big, expensive house. And have to fund the lifestyle of people in the area...€100k car, €30,000 for golf club joining fees. 

If he bought all his clothes in Brown Thomas, there would be questions to ask but not spending €4.50 on a slice of cake. 


Steven
www.bluewaterfp.ie


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## noproblem (14 Mar 2019)

SBarrett said:


> If he bought all his clothes in Brown Thomas, there would be questions to ask but not spending €4.50 on a slice of cake.



Ah come on, where's your sense of humour Steven? Anyway, "Let them eat bread"


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## RedOnion (14 Mar 2019)

rboyddd said:


> so I need to hold that property for another 18 months... as a loss maker.


Make sure you're doing things for the right reasons.

Property 1 is not making a loss. You have rental income of 15,600 Vs interest expense of 7,000. That's profitable in my book.
Its cashflow negative because you are repaying capital.

However, I would still get rid (obviously only when you crystallise the loss to offset).
After expenses and taxes, you're probably netting a little over 3k on it. But paying 6,600 interest in your PPR. So it doesn't make sense to keep in those circumstances.

I assume you've structured your income earning assets to fully utilise your wife's lower rate tax band?


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## Sarenco (14 Mar 2019)

rboyddd said:


> using a blunt rule of thumb, if one had a DB fund of €1m, that should provide a €40K annual income


I suspect a pension that pays €40kpa from the age of 55 would have actuarial value well in excess of €1m, particularly where a surviving spouse continues to receive benefits.

I would have thought that establishing the level of pension that you would receive if you retired early would be the first area to investigate.


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## moneymakeover (14 Mar 2019)

The investments look nicely balanced because they are paying for themselves

You're getting 48k per annum income

Outgoings 30k when second property paid off

Not sure what your tax bill is

You have 15k in interest to reduce your tax bill
Add repairs, management fees, insurance. All helps to reduce tax liability

Down the line, if you retire, your tax rate will reduce as your income drops


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## Steven Barrett (15 Mar 2019)

noproblem said:


> Ah come on, where's your sense of humour Steven? Anyway, "Let them eat bread"



Was it supposed to be a joke? If so, it went way over my head 

Got mixed up with all the other examples on here of people who walked out cafes because they didn't want to spend €4 on a scone. 

By way of disclosure, yesterday I went to my local coffee shop and got a big sausage roll (€4) and a coffee (€2.80) and finished off reading my book. I'd had a really busy morning and it was a great way to take a break. The €6.80 spent was totally worth it 


Steven
www.bluewaterfp.ie


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## RETIRED2017 (15 Mar 2019)

SBarrett said:


> Was it supposed to be a joke? If so, it went way over my head
> 
> Got mixed up with all the other examples on here of people who walked out cafes because they didn't want to spend €4 on a scone.
> 
> ...


Keep eating  big sausage rolls  you need to be retiring before 55 to get any value from your pension pot,
If you make it to 55,


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## rboyddd (15 Mar 2019)

RedOnion said:


> Make sure you're doing things for the right reasons.
> 
> Property 1 is not making a loss. You have rental income of 15,600 Vs interest expense of 7,000. That's profitable in my book.
> Its cashflow negative because you are repaying capital.
> ...



Thanks RedOnion.  I fully agree with your assessment.  #1 is going once we are in a position to reduce the CGT bill.  With respect to my wife's tax credits, I believe so, but will put this question to my accountant shortly.


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## rboyddd (15 Mar 2019)

Sarenco said:


> I suspect a pension that pays €40kpa from the age of 55 would have actuarial value well in excess of €1m, particularly where a surviving spouse continues to receive benefits.
> 
> I would have thought that establishing the level of pension that you would receive if you retired early would be the first area to investigate.



I should have clarified, €1m should provide a €40Kpa pension from the age of 65+.... the immediate question is, the best way to fund getting to 65 without necessarily disposing of all/most of the performing assets.


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## Steven Barrett (15 Mar 2019)

RETIRED2017 said:


> Keep eating  big sausage rolls  you need to be retiring before 55 to get any value from your pension pot,
> If you make it to 55,



A rare treat. Everything in moderation


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## huskerdu (15 Mar 2019)

SBarrett said:


> A rare treat. Everything in moderation



I'm a firm believer in being careful with money and saving for a pension, but not at the expense of living life a little. 

Don't listen to him. What would life be without an occasional sausage roll.


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## Steven Barrett (15 Mar 2019)

huskerdu said:


> I'm a firm believer in being careful with money and saving for a pension, but not at the expense of living life a little.
> 
> Don't listen to him. What would life be without an occasional sausage roll.


 
Worth every clogged artery. 

Usually eat fruit for a snack and work out 5 days a week, so I think I can afford a little treat here and there


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## NoRegretsCoyote (15 Mar 2019)

@rboyddd 

A few pieces of advice on the portfolio:

Get a better rate on your PPR. There are threads on this.
The tracker properties should be the last thing you sell, I would think not before the expiration of the trackers.
You seem a bit ambivalent about being a landlord, although it is an easy option for someone in semi-retirement. If you want to be a landlord you should look for yield. One- and two-bed apartments in unfashionable places carry nearly double the yield of your current portfolio.

Can't answer your bigger questions. I think you have a relatively expensive lifestyle (more power to you - you can afford it!) but you would need to think hard about what you would cut back on with less income.


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## noproblem (15 Mar 2019)

SBarrett said:


> Was it supposed to be a joke? If so, it went way over my head
> 
> Got mixed up with all the other examples on here of people who walked out cafes because they didn't want to spend €4 on a scone.
> 
> ...



The important thing is, you enjoyed it.


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## Saavy99 (2 Jun 2019)

I go to the Algarve regularly and there and only there do I indulge in those delicious custards tarts and only at 50 cents a pop


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## lledlledlled (2 Jun 2019)

OP, with such a high income job, I presume you have acquired some valuable skills. 
It might be worth exploring options to change career to something less stressful that would provide a reasonable salary up to retirement.  

With the economy in full employment and many industries experiencing labour shortages, now might be an ideal time for such a change.


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## rboyddd (7 Jun 2019)

lledlledlled said:


> OP, with such a high income job, I presume you have acquired some valuable skills.
> It might be worth exploring options to change career to something less stressful that would provide a reasonable salary up to retirement.
> 
> With the economy in full employment and many industries experiencing labour shortages, now might be an ideal time for such a change.


...interesting thought.  Maybe contract work.  I wonder would my age work against me (49 yo).   Probably a topic for a different thread.


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## lledlledlled (7 Jun 2019)

rboyddd said:


> ...interesting thought.  Maybe contract work.  I wonder would my age work against me (49 yo).   Probably a topic for a different thread.



With the snowflakes I see being interviewed lately,  a bit of grey hair can absolutely be an asset. 
I don't know enough about contract work to comment.


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