The Diamond Heist!

Barefoot,
 
I’m a jeweller, and I much prefer the authenticity of a real diamond. Yes, natural diamonds cost more (though only a small percentage are ‘blood diamonds’). However, they will also ultimately gain in value, whereas lab grown diamonds have no value once they become second hand.
 
Linda

Hey Linda,
 
I’d like you to put down your cute little magnifying glass, because I’m about to hit you with the bleeding obvious:
 
Literally no one buys a diamond ring with the thought that it will be rejected and then re-sold.
 
Didn’t you read the script? It clearly states “till death do us part”.
 
Nor is it seen as a financial investment that can easily be hocked off in a few years’ time when the Ford Territory needs a new set of tyres.
 
As any divorcee knows, the resale value of a mined diamond ring is roughly the same as that of a three-year-old laptop.  
 
Having said that, I grant it will have a higher resale value than a lab-grown diamond.
 
And if a potential suitor is stressed about pulling a hammy as they get down on one knee, I’d argue that they’d be more likely to hedge their bets with an ‘ethical’ diamond ring that’s 90% cheaper. (Although I must admit quite a few readers this week pointed out that the lab-grown diamond process uses all sorts of environmentally dodgy gases – not so ethical after all, apparently.)
 
Finally, mined diamonds are valuable only because De Beers has rigged the price for decades. As I said last week, there are said to be 39 billion stones in existence – more than five for every person on Earth 

Now that is a lot of supply!

Scott.

The email came through with the subject line ‘REGRET’

The email came through with the subject line ‘REGRET’.

Scott,

My partner and I are both professionals in our early thirties. We bought a house last year and we hate it. We are struggling to adapt to a slower pace of life in the suburbs and have learnt we don’t need as much space as we thought we did. We feel stupid for spending a ton of money on something we can’t stand.

What are our options?”

Erica

Strewth!

There’s more emotion in Erica’s email than a midnight meltdown from my 18-month old:

They hate their new home … they feel stupid … they can’t stand it.

Well, the dream of owning your first home is a lot like parenting a newborn … the thrill rubs off disturbingly quickly … and then the reality of the responsibility sets in:

I’ve signed up for a lifetime of this?!

It’s not hard to understand why Erica is spitting the dummy.

This time last year everyone was FOMO-ing off their face. Interest rates were at all-time lows. The Reserve Bank had committed to no rate rises till 2024. Property prices had risen 30% since COVID. And that’s when Erica and her partner got property-pregnant. And that’s also when everything changed.

Today, the value of her property is going down, and the cost of her mortgage is going up. Way up. In the last three months her repayments have shot up by an extra $565 a month (based on a $600,000 loan).

And some experts are warning that house prices could drop by as much as 25%, leaving people like Erica who bought at the top in a ‘Mortgage Prison’ and unable to refinance their loan in a few years.

So what should Erica do?

Well, my advice would be to stop listening to experts about the economy. As a new property-parent you have zero fluffs to give. All it will do is freak you out and psyche you out.

I know you think you’ll never make it. But you will. You’ll grind it out, meet your mortgage repayments, and eventually get ahead. And then, in a few years, you’ll have forgotten about all the pain you went through, and you’ll trade up your family and do it all over again!

Tread your own path!

Timeshare Tragedy

Dear Scott,

My husband and I are in our sixties and on the pension. In 2007 we went to an Accor timeshare seminar and signed up to their deal. We paid $22,000 upfront, plus an annual maintenance fee. We’ve only used the hotel three times (it’s always booked out). Yet we’ve been paying these annual fees ever since. Our bill this year was $990, and it goes up every year. We’ve been told we can’t get out of these annual payments unless we declare bankruptcy, or die. We’ve had to sell a lot of our assets to live. Help!

Julie and David

Hi guys

This is outrageous.

You were robbed — with a pen — by a $12 billion-dollar publicly listed company!

At least with an old-fashioned hold-up it’s done and dusted in a few minutes. These robbers are holding a gun to your head till the day you die!

(Consumer group CHOICE found that timeshares can “lock you into contracts that run from 60 to 99 years, and can cost you as much as $450,000 over the long run”).

If I were in your shoes — pensioners on a low income — I wouldn’t pay them another cent.

After all, they’ve already made their money twenty-fold from you.

Fair cop!

However, if you do this they may play hardball and sic their debt collectors onto you, and even try and bankrupt you.

So it seems to me you have two choices:

You can keep paying them till the day you die.

Or you can call the (financial) cops on these robbers. Give me a call during the week (when I have my financial counsellor hat on) and I’ll help you lodge a complaint with AFCA, the Australian Financial Complaints Authority.

Scott.

Are We Insane?

Hi Scott,

My partner and I have $30,000 saved up. I have come across a promising opportunity to buy a juice and coffee trailer with an exclusive trade permit in a popular hiking and tourist spot. Is it insane to relocate and spend the majority of our savings on a business instead of a home? I always wanted to work for myself, and it would be a great opportunity for my unemployed partner to run it. And I would still keep my current part-time job for financial security at the start.

Tab

Hi Tab,

Is it insane to spend the majority of your savings on a business instead of a home?

Well, I don’t think I’d do it, even though I do officially make ‘the world’s best smoothie’.

(Seriously, you can ask my kids. Every dad needs to be the world’s best at something, so I claimed it early on.)

Okay, so what’s your worst-case scenario?

Well, that you end up buying yourself a hospitality job with no access to super or guaranteed minimum wage.
And the best-case scenario?

That you’ve stumbled on a gold mine where hungry and thirsty hikers line up all day, and you earn a good return on the money you put into it.

So, is it a good deal?

Well, I can’t imagine that a coffee trailer would be very expensive, so it’s likely you’re paying a premium for the ‘exclusive trade permit’.
So the first question I’d ask the seller would be: “How did you come up with your selling price?”

Then zip it, and listen to what they say.

Unless they can provide a track record of audited figures, they’re probably delivering you a sales spiel.

And if that’s the case, it’s time to wake up and smell the coffee.

I Used My Mojo to Buy a $10,800 Handbag

Hi Scott,

I am a long-time Barefooter and, overall, have made money decisions I think you would be happy with: I have a good job ($110,000 a year), have paid off my bad debts, have started maxing out my super, own my car, pay extra on my mortgage, and have started a share portfolio. Most importantly, I have three months of Mojo — until yesterday, that is, when I walked into a Chanel store and bought a flap bag for $10,800 (my 38th birthday present to myself). I’m giddy with happiness and anxiety all at once. This is a classic bag I will have for life. Chanel raises their prices each year (it cost $6,000 five years ago), so I will never lose money on resale. Yet I also feel sick as it is an enormous amount of money — am I insane?

Elisha

Hi Elisha

So I learned something this week: handbags are an investment.
In fact, research from Knight Frank found that, over the last decade, handbags have more than doubled in value.

Well, not every handbag. (Liz’s is like a lucky dip to another world: you can pull out half-eaten crumbly cruskits, a hairy hairclip, a Wiggles concert ticket from 2018, but never the ringing mobile phone that she’s desperately searching for.)

Elisha, you seem to have worked hard to get your financial life in good shape. And if the bag makes you “giddy with happiness”, well, that sounds like a good purchase to me. You may as well enjoy it!

The only thing I’d say is that you raided the wrong bucket: it should have come from your ‘Smile’ bucket (the savings account for longer term purchases that will put a smile on your dial). 

Having a well-stocked Mojo bucket is not nearly as flashy as a Chanel bag, but it will give you the inner confidence to face any financial fires coming your way.

Scott

Man Overboard

Hi Barefoot,

Last August my husband bought a boat without telling me, and put it all on finance. After wanting to throw him to the sharks, I have come to terms with this liability (B.O.A.T. — Bring On Another Thousand). We are both 47 and earn $150,000 combined. I bought him your book for Christmas and finally we are on the same page as far as money goes. It is a five-year loan at 8.97 per cent (total cost $37,000). My question is, would it be worth it rolling it into the home loan and pay extra on the mortgage? Our mortgage rate is 3.99 per cent, and the penalty to pay the boat out early is $400. 

Mary

Hi Mary

That’s really … strange.

“Hi honey, I’m home! On the way back from the fish ’n’ chip shop I picked up a $30k boat!”

Anyway, the answer to your question is yes, you should roll the boat debt over to your mortgage. However, you need to understand that you’re taking a fixed-term five-year loan and spreading it over a 30-year mortgage, which means you’ll pay less per month but will end up paying a lot more in the end!

So, a word of advice: if your husband comes back from the shops with a jetski, you need to grab him by the fishing tackle and lure him in quick. Keep him on the hook, Mary.

Scott

Forget iPhone X, I'm Getting This Instead ...

My iPhone is basically my office — it’s where I do business.

In contrast, we got a ‘burner’ phone for my 60-something farmhand Archie … this is not where he does business.

He often shoots me blank text messages, and when he does work out how to reply it’s often IN. FULL. CAPS:

Now unless you’ve been labouring away in a paddock in Romsey, you’d know why I’m telling you this.

Last week, Apple had a big event, where they announced a few of their newest gadgets.

I dutifully got up early and watched it, and in the process saw why Apple is the most valuable company in the world (and on track to becoming the first trillion-dollar company — for reference the entire ASX 200 is valued at $1.3 trillion).`

It droned on for two bloody hours … though you wouldn’t know it by looking at the nerds in the crowd, who were absolutely losing their Samsungs at all the new — and insanely expensive — kit!

Enough!

How many more pixels do you need till your life is complete?

Does the slither of extra screen around the edges justify an $1,829 price tag for the top-of-the-line iPhone X?

Or maybe it’s that you can use Apple’s (slightly creepy) face-scanning feature to turn yourself into a poop emoji?

Why am I ending every line with a question mark?

However, there was one product that I think could be the next big thing: the latest Apple Watch.

The new version has its own SIM card, which means you won’t even need to lug your iPhone around.

Hell, I’m thinking of buying one.

I’m a big user of Apple Pay, via my ING account, and I like the idea of using my watch for purchases, without my wallet or phone (or shoes). Even better, the watch takes calls, right on your wrist, just like Dick Tracy (ask your parents).

I’m even thinking about getting one for Archie … it’s even waterproof, which will help when it’s calving season.

Can I Buy a Corvette?

Hi Scott,

I am 31 and earn $120,000; my wife earns $90,000. We have a $750,000 mortgage on a house worth $1 million, $10,000 in index shares, and $20,000 in Mojo. Can I buy a $40,000 1970 Corvette Stingray? Or is that totally irresponsible? I would save up and pay cash for it, I promise!

Rob

Hi Rob,

Years ago my wife got a bloke in to measure up some curtains.

As he was up on his ladder, she asked him, “Will this fabric give full block-out?”

He looked at her, then turned to me -- the man -- and gave the answer. (“Well, mate, you have to understand that total block-out is not …”)

This little game played out for the next five minutes -- my wife getting increasingly testy, me trying to play sexist charades with the curtains guy (raising my eyebrows and nodding to my wife) ... and the curtains guy being totally oblivious as to who really wore the pants (and the curtains) in our household.

Bottom line?

The curtains bloke didn’t get the job … and it looks like it’s curtains for your Corvette. Now that’s got nothing to do with whether you can afford it, and everything to do with the fact that you’re writing to me about it, rather than discussing it with your wife on a Barefoot Date Night.

Scott

IVF Has Left Me $15,000 in Debt

Hi Scott,

I believe my situation is unique. I am 42, single, earning $85,000 (including super), and about to embark on IVF cycle number seven, as I have not yet met Mr Right and at my age have no time to wait for him. IVF has left me with a debt of $15,000, and after my next cycle I will (if I am careful) have $10,000 left in savings, which will pay the rent for six months if I fall pregnant. I will then need to save more and pay off the debt throughout my pregnancy. Would love your advice as I really need to get ahead and it is tough.

Mandy

Mandy,

Your situation reminds me of the young people that write to me who desperately want to buy a house they can’t afford. They scrape and borrow too much and eventually get over the line … only to realise just how expensive the ongoing costs are. The only advice I have is to think beyond the pregnancy: you’ll get 18 weeks maternity leave at $695 a week before tax. You’ll need to work out your maternity leave entitlements with your employer. After that you should receive Family Tax Benefit A and B, plus some rent assistance. Financially, you’re setting yourself up for a very hard road. But you obviously know that. If you’re going to do this, make a vow to do it without debt. No credit cards. No personal loans. Debt makes everything more stressful, and more expensive. You’re obviously a very determined person. Good luck.

Scott

The Tony Robbins Tax

Hi Barefoot,

I’m 26 and work in advertising and I earn $82,000 a year so I pay a lot of tax! Last year I went to a Tony Robbins seminar called Date With Destiny. It cost me $8,995 (and it was worth every cent!). Am I able to claim part of this expense as self education against my tax this year? It’s really helped me with my job …

Desi

Hi Desi,

You may have survived a fire walk over hot coals, but the ATO will not allow you to claim a motivational seminar as a work related expense -- no matter how much positive vibes you throw out into the universe. In order for you to claim a self education expense it has to relate specifically to your job at hand.

Scott

Am I Going to Lose Everything?

Hi Scott,

About 18 months ago I put a $15,000 deposit on an off-the-plan apartment. The idea was to sell my home for the same amount as the apartment and move in. But I have not sold my home and it is now worth less than the apartment. I have been caught by the development finishing six months early, combined with a flat housing market in Perth.

I asked for an extension and got 30 days from settlement, but after that I get penalised. So can I legally get out of this deal, or can they just bankrupt me? I only have my house, my car and a very little super, as I had a stroke in 2002 and used my super then. I also get easily bamboozled due to the stroke.

I work two days a week and am on a disability pension, earning approximately $44,000 per annum. I am 71 (and single), so my ability to get a loan or pay one off are minimal. Please help me -- I cannot see any way out except one, and that would leave a big mess for my children. I would not do that.

Jenny

Hi Jenny

You’re definitely in the dung ... I just don’t know how deep you are.Now, some people believe they can walk away from an off-the-plan development and only lose their deposit.

Yet that’s not always the case.

Ultimately it depends on what’s in the contract you signed, and how desperate the developer is … and given Perth apartment prices are cratering at the moment, I’d wager they’re as desperate as I was at my high-school formal.

The worst-case scenario is that your developer swallows your deposit, hits you with financial penalties for not settling, and then sues you for the losses of on-selling your apartment (when they eventually find a buyer).

But that’s all in the future, maybe.

Let’s you and I just deal with the next 30 days.

It’s highly unlikely you’ll be able to settle in the next month, and it’s also highly unlikely you’ll get bridging finance. So here’s my advice: see a lawyer immediately.

Let me be crystal clear, Jenny. Put down the newspaper. Pick up the telephone. Call a lawyer.

Have them review your contract, then ask their advice on mounting a case for being released from the contract due to your impaired judgement.

What are you doing still reading, Jenny?

Get on the phone. Now!

Scott