The Working Poor

Hi Scott,
 
I'm a single mum of two very active teenagers. I earn a decent full-time wage but I am overwhelmed by debt. Right now, I only have $50 left in my account until the next payday. Their father doesn’t contribute. There isn’t a facet of our lives which is not struggling and scary daily. I’m receiving defaults and letters of demand from debt collectors, and I’m behind on my rent. I’m committed to getting out of this situation and have even started selling items to raise the $2000 for a Mojo account. After escaping an abusive relationship and being homeless, I want more than anything to give my children a stable and worry-free existence. Can you recommend a financial advisor who can help me set up the investment accounts for the kids?
 
Jenny

Jenny
 
There are things your kids need:
 
A loving mum who isn’t totally stressed out and working round the clock. A warm house with food on the table. Eight hours of sleep. Part-time jobs so they can fund their active lifestyles.
 
A stock market trust fund is not one of them.
 
The way you give your kids a stable life is to get stability yourself. Research from Deakin University has found that the financial stress that you’re under feels the same to your brain as physical torture. In other words, you can’t operate like that for too long – it takes a toll on everyone.
 
So I want you to call the National Debt Helpline on 1800 007 007, and talk to a financial counsellor. They’ll sort out who you should pay, and who can bugger the hell off for the time being.
 
Jenny, I want you to know this:
 
 I think you’re doing a great job keeping it all together. All the sacrifices you’re making, and all the hard work you’re doing, isn’t going unnoticed. Your kids are watching and absorbing everything you’re doing for them, even if they don’t tell you today. You’re making a hell of a difference, you just wait and see.

Scott.

Should I Call Off My Wedding?

Hi Scott,
 
I’m blindsided but I am in love. I’ve just discovered my fiancé has $9,000 of debt he accrued overspending on Afterpay and Uber Eats over a two-year period. He consolidated this debt into a loan (at 17.5% interest!) and I only found out when I opened a piece of mail from a bank neither of us use (or so I thought). I’m not sure what to do. I’m not going ahead with the wedding now, so we’ve likely lost $10,000 in deposits, and we have $14,000 in savings. For context, we live in a three-bedroom townhouse that I own. I don’t know whether to try and make it work or cut my losses and run. Please help!

Renata
 
Hi Renata
 
I know your type.
 
You really value financial security.
 
That’s why you own your home. That’s why you’ve already calculated how much backing out of the wedding will cost you. And it’s also why you’re asking me – a finance dude with no shoes – if you should call off your wedding, rather than, say, a relationship counsellor.
 
However, I don’t know your fiancé’s type … but you love him, so I’m willing to cut him some slack. After all, maybe he racked up the Afterpay and Uber Eats debts wining and dining you?
 
Like you, perhaps he’s also blindsided by love, but he just so happens to be clueless about money (which would make him a card-carrying Aussie).
 
My view?
 
Let’s give love a chance.
 
If you haven’t done it already, I’d sit down and paint him a picture of what your ‘happily ever after’ looks like. Go into all the scary details: a paid-off home, a million-dollar super fund, private schools for the kids.
 
And then smash him with the following line:
 
“I do not want to marry you if we’re not on the same page financially.”
 
Of course, there’s every chance this poor shell-shocked bastard will agree to whatever you say.
 
So, it’s then that I’d bust out my book and ask him to read it. If he takes it on board, sets up the Barefoot Date Nights, and starts aggressively paying down his debts, you’ll know your financial values are aligned.

 But what if he doesn’t do the work? Well, he’s shown you what he values, and you can both move on and find people who are your types.

Scott.

Revenge of the Dollarmite?

Hi Scott
 
I recently found out that the bank signed up my 18-year-old son for an $8,000 credit card. He was so excited to be a grown-up, to have a job making enough to earn spending money, and to cross the line of being an adult by being given a credit card. I don’t for the life of me understand why the banks feel $8,000 is a good starting amount for someone who has never had to prove they can pay it back!
 
Sadly our story ends with me finding out about the credit card via the post when the default notice arrived. In six months my son had spent all the large balance and kept it secret – he is 18 after all – but has no skills to be able to understand the outcome he has created. We are working with him now to resolve his debt, but it’s clear the banks are setting up young adults for failure by allowing this amount of credit.
 
Kate
 
Hi Kate,
 
I agree with you – eight grand is a lot of credit to start him off with.
 
Now I’m showing my age, but back in my day the banks had a student package that came with a credit card with a $500 limit. Then they ramped up the limit from there (kind of like a meth dealer does).
 
The real danger of getting a credit card when you’re a kid (and, post the COVID lockdown, 18 is the new 13) is that they’re effectively teaching him to view his available credit balance as his money. It’s not, of course, but that’s how they can effectively impose a 20% tax on everything he spends, hopefully for the rest of his life.
 
Yet thankfully your son screwed up … and as a result he was booted out of the brainwashing.
 
This is a very good thing, Kate.
 
Please keep the parental helicopter on the helipad and do not bail him out under any circumstances.
 
This is a life-changing, teachable moment.
 
First, explain the seriousness of a default notice: the bank could take legal action against him, and he now has a black mark on his credit file.
 
Second, have him calculate how much the credit card has actually cost him in interest. That’ll make him feel sick. Then jump on ASIC MoneySmart’s website and show him the bank’s plan for that $8,000 credit card. Making the minimum payments would take 61 years to pay off and $44,168 in interest.
 
Finally, when you’ve scared the living bejeezus out of him, have him call the bank and negotiate a payment plan to pay off every last cent of the debt.
 
Play your cards right and this may just be the best financial thing that ever happens to him.

Scott

I’m so ashamed of my son

Hi Barefoot,
 
My 20-year-old son’s (ex) girlfriend signed up for a car finance loan so my son could buy a $21,000 car. The car was registered in his name, the finance contract in hers. He promised to pay her the monthly amount owing on the contract, but this was never put in writing. He made a couple of repayments, then crashed the car. It was only insured for third party fire and theft. They broke up. It’s now unregistered, uninsured and undrivable. He’s refusing to pay her anything at all and isn’t taking her calls. I’m incensed, angry and embarrassed about how he’s treated her. She’s obviously very upset – she’s only 20 herself, has been left with a five-year debt, and is just a student with a part-time job. My question is, can she get out of the contract? What are her options?

Edwina
 
Hi Edwina,
 
So this is the first question in 20 years that’s truly stumped me.
 
And no, it’s not because I don’t know the answer, which is actually quite simple:
 
Your son’s ex-girlfriend will not be able to get out of the contract with the lender. It’s now a civil matter, and if she wants to pursue it she’ll need to get independent legal advice (which she’s unlikely to do as a broke student).
 
What I’m finding difficult about your question is putting myself in your shoes, as the parent.
 
What would I do?
 
Well, I’d give him a kick up the backside. (I know that’s not politically correct … but I’m not a politician.)
 
I’d tell him how deeply ashamed I was and give him an ultimatum: if he doesn’t make things right, you’ll cut him off financially from that point on.
 
Then I’d make contact with the ex-girlfriend and offer to make the repayments on her behalf.
 
I’d also encourage her to book in and see a financial counsellor (1800 007 007). They will likely suggest that she surrender the car back to the lender, and will help her apply for a compassionate debt waiver.
 
Hang on, why would the lender even consider waiving the debt?
 
For a few reasons:
 
First, it could be that your son coerced her into signing for the loan.
 
Second, it could be argued that the lender was at fault for not requiring her to take out comprehensive car insurance … or for lending a substantial amount of dough to a student on a very low income (take your pick).
 
Finally, given she’s a broke student, they may decide she’s not worth chasing for the dough (she likely has no assets and not much income, so the lender may be thinking she’ll go bankrupt and stiff them).
 
At which point the financial counsellor could negotiate a ‘full and final’ settlement of a few thousand dollars – which your little kidult should definitely pay.
 
Get your boots on, Mama!

Scott.

I Got Carjacked!

Hi Scott,

Am I up a brown creek with no paddle? Years ago an ex-partner left me financially screwed. Fast-forward to now and my husband and I have started our Barefoot life and are loving it (even though we are low income earners). However, last year I needed a reasonably priced second-hand car, and with the trade-in we took out a loan with Money3 for $8,000. The interest rate is a hefty 24.95% and the cost of the loan is $6,200 over three years! I know I signed and am liable for the amount, but I feel like I’ve been financially exploited because of my previous situation.
 
Ursula
 
Hi Ursula,
 
Yes, you got exploited.
 
And that’s not just my opinion; it’s also the view of the corporate cop, ASIC, which is currently taking Money3 to court over their second-hand car lending practices.
 
It may be the case that your loan was unsuitable (and unconscionable), so I’d suggest you contact the National Debt Helpline on 1800 007 007 to help you make a complaint to Money3.
 
Here’s the truth: there’s an entire industry that benefits from people’s financial illiteracy. The business model is to trap their customers in a merry-go-round of financial misery that most people never get out of.
 
This is the reason I’m so passionate about financial education in schools: we simply expect kids to know this stuff, when in reality they don’t. And they’re going up against experienced, wealthy finance businesses that know – and use – every trick in the book.

Scott.

Making Your Credit Cards Disappear

Hi Scott,
 
In your recent column (“Thanks for NOTHING, Barefoot”), I was, like you, shocked when Lisa blatantly decided to stop paying her credit card debt, which somehow seemed to magically make her debt disappear into the ether. 
 
At the same time, curiosity got the better of me (for the record, I’m debt free thanks to your book). From a quick Google read, it seems possible to essentially make a debt disappear! Apparently there is this thing called a statute-barred debt which (if certain conditions are met) means you can walk away from having to pay old debts. However, I feel I do not fully understand if and when this may apply to someone. Could you please explain it to me in simpler terms so my smooth brain can understand it?
 
Tim
 
Hi Tim,
 
In the olden days, you’d be locked up in debtors’ prison, and only released when you coughed up.
 
Today the law is more civilised: you no longer get put in jail, and there are limits for how long a lender can chase you for the debt.
 
So here’s the spell to get your credit card wiped:
 
Lenders have six years to chase up an unsecured debt like a credit card. If at that time you haven’t made a repayment, or admitted that you owe the money, then it gets classified as statute-barred debt, and you legally no longer have to pay it.
 
Abracadabra!
 
Sounds like magic, right? Just wait out six years and you’re home free!
 
Yeah, nah.
 
In reality, lenders are very aware of the law, which is why they’ll generally take you to court to get a judgment against you, which both ups the ante and extends the period they can chase you for (to 15 years).
 
And if your lender still can’t get you to pay, they can sell your debt off to a debt collector, and then they will hassle your kneecaps off … for years.
 
Thankfully that will never apply to you, Tim.

Scott.

After Midnight We’re Going to Let it All Hang Out

Scott,

I have owned a small coffee shop for eight years, but since Covid started I just haven’t been able to catch up. I’ve been taking on credit cards to keep suppliers off my back, and also for wages. Now I’m desperate and so embarrassed and ashamed of my situation. Can you PLEASE answer my question as I can’t speak to anyone on the phone, as I don’t want my partner or my employees to hear what’s going on?

Helen

Hi Helen

So I went looking in my inbox to see if you’d given me more info, and I saw that you sent your email at 1:08am. I get a lot of questions coming through after midnight when people can’t sleep. I’d like to help you get some sleep again, so here’s what I want you to do.

The Small Business Debt Helpline (sbdh.org.au) has a web chat feature on its homepage where you can chat discreetly with a qualified financial counsellor – someone like me. They are experts in helping small business people in exactly your situation. They are government-funded and free from any conflicts (and they do amazing, life-changing work).

I often say that financial counselling is the best-kept secret of the finance industry. Well, both the Small Business Debt Helpline and the National Debt Helpline (ndh.org.au) have this chat feature. It’s a great first step to help you get the support you need.

Scott.

My Parents Have NO IDEA

Dear Scott,

All my life I was under the impression my parents were wealthy. My father was a partner in a law firm, and there were always extravagant annual overseas trips, fancy cars, beautiful houses, antique furniture, etc. They are now 70, retired, have no super left, are on the pension, and have $120,000 of debt ($80,000 credit card, $40,000 car loan). They used up almost every last bit of their savings, and all of their super, to buy their current home outright once my dad retired.

Yet they keep spending! They don’t seem to realise the severity of their situation. Mum still goes to the beauty salon to have all sorts of expensive procedures done, they still have two cars (one of them a Lexus SUV) despite only needing one, and now they’re going to get a reverse mortgage to release some equity from their home, just so that they can afford to live! I’m so shocked and frustrated, but I don’t know how to help them, because my dad is too proud to listen to me, and my mum is too embarrassed.

As I said, they’re only 70, and I’m afraid they’re going to end up homeless with nothing but debt that they have no way of paying off. I’m also concerned they will be coming to me for money if they have big medical bills down the track. While I love them and want them to be OK, I would resent throwing money at people who have always lived beyond their means while my husband and I are super-careful with our money. What should I do?

Worried Daughter

Hello Worried Daughter,

What should you do?

I think you should follow my lead: I see people doing stupid things with money all the time … it’s like I have a sixth sense for financial stupidity. Yet I have learned to resist the reflex action of going all Judge Judy on them.

Why?

Because they’re not asking for my advice, and it’s none of my goddamn business.

If people do ask for advice, I mostly tell them how great it feels to be in control, and how surprisingly easy it is to build momentum after you have a few dedicated Date Nights.

Just know this: deep-seated behavioural change is hard, especially since your parents have been doing dumb financial stuff their entire lives. Yet for some reason my approach has worked with hundreds of thousands of people, even people like your parents.

So that’s where I’d start: encourage them to read my book, or listen to it on a long car trip.

Will it work?

I don’t know.

Yet the one thing I know for sure is that finger-waving and shaming won’t work. Don’t let money jeopardise the most important relationships you have.

Scott.

My Kid has NO IDEA

Hi Scott,

In 2008 I purchased a photo shop, and my parents redrew their mortgage so I could do this. It was initially $65,000, but then over a few years it built up to $120,000. I ran it successfully for a few years but, as digital media grew and prints became less popular, the business slowly went down the gurgler, and closed in 2016. Since then I have been chipping away at the debt and it is down to $61,000, but the strain on my relationship with my dad is not great. He gets so upset if he sees me or my partner spending money on pleasure because he thinks we should just focus on the debt. I do want the debt gone but I also don’t want to miss out on precious time to make memories with my kids. How do I get it paid quickly but still enjoy life?

Kelly

Hi Kelly

Oh god.

So this was a terrible idea to start off with, and now it’s a festering sore.

If I were in your shoes I’d want to get rid of the loan from your father as soon as humanly possible.

Can you refinance it with a traditional lender?

In your situation I’d be willing to pay a higher interest rate if it meant I could save the relationship with my father.

Take this as a lesson (one your dad has probably learned by now): if you can afford it, give money away to your family with no strings attached, but don’t ever lend to (or go guarantor for) people you love.

Scott.

So My Husband Revealed His Debts

Scott,

After I finished your book I asked my husband to come clean on our finances, as we had had separate accounts. And O.M.G. his credit card debts were out of control! I told him “we are a team or it’s over”. Then I got him to read your book. Then I got the kids to read the book (I was honest with them about our finance mistakes). Then we slowly turned our situation around together. We no longer have any murky undertow in our relationship, and we are happily married again. Thank you!

Belinda

Hey Belinda,

That’s epic.

You not only saved your finances, you likely saved something much more valuable: your family. And while I’m handing out the high-fives, good on you for being honest with your kids about your financial mistakes. That’s a teachable moment. I often get parents to blend up their credit cards in front of their kids while they tell them “from now on our family doesn’t do debt”. That’s a powerful visual lesson that helps kids not repeat your money mistakes.

Scott.

Multimillion-dollar Mortgage

Scott,

I’ve wanted to write to you for years, but have been too shy. I just wanted to say thank you. A few years ago we were on a wage of less than $80k a year — with a couple of million dollars in mortgage debt, and credit cards and personal loans up to our eyeballs. I was following advice from property investment books, so I thought we were setting ourselves up for success. How wrong I was. After reading your book, now we have no debt, one property and over $100k in Mojo. I literally never thought we would be in this position and feeling this secure. Thank you.

Ben

Hey Ben,

You were in debt of a couple million dollars on a salary of less than $80,000? In the world of financial influencers on Instagram, you’d be a success story … who was stressed out of his eyeballs and couldn’t sleep at night. Well done for treading your own path!

Scott.

My Boyfriend Owes me $85,000

Hi Scott,

I got into debt a few years back, but read your book and was debt-free by October 2019 at the age of 26. I felt amazing! Fast-forward to today and I’ve borrowed $85,000 via personal loans and dipping into my super … to give to my boyfriend. He had a rough couple years — lost his job and had custody battles with his ex — and I wanted to support him. But now I’m desperate. I have nothing in my savings and I live week to week. He’s trying to get a loan to put the debt into his name but his chances aren’t looking good as he has a bad credit rating and unexpected bills keep popping up. The bank says the loan will probably need to be secured. My friends have given me a hard time about it but I just wanted to help my boyfriend like he would have done for me. Is there anything we can do to get the debt out of my name?

Linda

Hey Linda,

I’m not going to judge you ... as I’m sure you’re already being pretty hard on yourself.

Okay, I can’t stop myself: I’m really dirty that you took money out of your super, Linda. That was for your retirement!

All right, I’ve got that off my chest so let me answer your question. If he’s got no assets, no income, and a bad credit rating, he’s going to struggle to get a loan. You could request to have his name added to the loans, but you’ll still both be jointly and severally liable: so if he doesn’t pay they’ll still chase you.

Here’s the deal: it’s up to him to pay it back. If he wants to prove his love and commitment to you, he’ll work two jobs (plus deliver pizzas at night) to pay it off. I’d sit him down and explain that you helped him out of love and because you knew that he’d do the same thing for you. Well, now it’s time for him to prove it.

Scott.

How to help out a mate

“It’s over ... it has to be.”

I just can’t do this anymore. I’ve carried the stress for far too long.”

On the other end of the line was Steve, the owner of a struggling retail shop.

Steve had finally cracked.

And from experience I can say it often takes a small business owner years to reach this point.

Yet in truth I was the wrong person to call: financial counsellors generally don’t advise on business-related debts.

Well, until recently.

In the wake of last year’s tragic bushfires, the Government set up the Small Business Debt Helpline, which is run by Financial Counselling Australia.

It’s long overdue.

After all, Treasurer Josh Frydenberg has said that “small businesses are the backbone of our economy, and they’re going to be a key part of the recovery”.

He’s right:

When you think of businesses, you probably think of the big boys: Woolies, Coles, Telstra, BHP.

Yet only 3% of Aussie businesses employ more than 20 people.

The other 97% are small family operations, and they collectively employ 4.7 million people.

That makes them Australia’s largest employer.

And yet when things get tough they don’t have access to the same funding options that big businesses do.

The truth is that our banks would rather lend money to buy an (inflated) property than chance it on a small business owner. All too often the banks look for reasons not to lend.

So business owners end up getting hit with complex personal guarantees and convoluted legal contracts they don’t understand … or worse, getting bitten by a loan shark.

And that’s where the trouble really begins.

As Steve will tell you, owning a struggling small business can be a lonely, isolating experience.

You wrap up your very identity in the business … and often your family home, and your family’s future.

Could the stakes be any higher?

So I need you to do me a favour:

If you know someone who’s struggling in their own small business — and there are plenty of them right now — let them know they’re not alone.

Get them to call the Small Business Debt Helpline on 1800 413 828.

It could be the lifeline they need.

Tread Your Own Path!

“I Don’t Need Your Help but Wish to Criticise You …”

I don’t need your help but wish to criticise your answer to “Should I Pay My HELP Debt?” Your first response should have been “of course”, but you treated the subject as most recipients do, with a dismissive attitude on how to avoid it. As an older Australian, I need to tell you: it’s a loan and recipients have a responsibility to pay it back. Emphasising that it dies with you also indicates your attitude. Poor form for a self-proclaimed responsible purveyor of advice.

Gordon

Hi Gordon,

Thank you for your criticism.

So your basic premise is this: ‘If you owe a debt, it’s your duty to pay it off as soon as possible.’

However, that is not the premise of the Government.

They have set HECS-HELP up without a commercial interest rate, and with repayments based on your income.

And they’ve discontinued the discount for repaying early.

It’s almost as if they don’t want you to repay early!

These bloody kids get a good deal, right?

Maybe. But, Gordon, remember that as an older Australian you had free university. And you also had affordable housing.

Young people today have neither.

Scott

Demolition Debt

Hi Scott

My husband and I run a demolition business with seven full-time employees. Unfortunately, one of them got into financial difficulty and some sharks called Panthera Finance bought his debt. They now have a garnishee order on his wages and harass me (as office manager) to pay the instalments — or they ‘reserve the right’ to order me to pay the entire $25,000. The employee has had a rough trot the last few years, and I have taken less per week from his pay than they are asking for, to keep them at bay without pushing him to breaking point. Is there any advice you can give me regarding garnishee orders or this delightful Panthera Finance crew?

Jane

Hi Jane,

Tell them to bugger off with their bully-boy tactics.

There is no way they can “reserve their right” to order you to “pay the entire $25,000”.

That is total bollocks!

Now, you are required to pay the amount set by the court. However, each state sets limits on how much a debtor can take from someone’s salary, which is known as the ‘protected earnings rate’. In Victoria it’s 20% after taxes.

Why?

Because, while people need to repay their debts, they also need to eat.

Panthera Finance has a reputation of being super-aggressive: in March this year the Federal Court whacked them with a $500,000 fine for undue harassment.

And if they’re getting under your skin, can you imagine what sort of pressure they’re putting on your employee?

The bottom line is this: it’s time to hit them with a wrecking ball. Make a complaint to the Australian Financial Complaints Authority (ACFA) on 1800 931 678. And I suggest your employee call the National Debt Helpline on 1800 007 007 so he has a professional in his corner to help sort out his mess.

Scott

cough, cough, cough

“Cough, cough, cough.”

My wife rolled over in bed and shot me a dagger: “What was THAT?”

For the next few minutes I successfully stopped myself from coughing, but it felt like my head was going to explode.

Then it burst out again: “Cough, cough, cough.”

“First thing tomorrow, you’re getting TESTED”, huffed my six-month-pregnant wife.

And the next morning I dutifully did.

The lady came out to my car sporting full HAZMAT get-up, two oversized earbuds, and a rough curbside manner:

“This is probably going to hurt”, she said from beneath her facemask and protective visor.“You really shouldn’t say that, because …”At that point she stuck the swab deep into the back of my throat. Then, as I was dry-retching, she poked the other stick so far up my nostril it felt like it hit my eyeball. Then the other. And a few seconds later it was all over.  “It hurt, right?” she said.When I arrived home I was a little shaken up, so I stretched out my arms for a reassuring cuddle from my three-year-old daughter. She took a step back, folded her arms, scrunched up her little face, and grumbled: “Daddy is sick.”I was officially the leper of the family.  As my cough intensified, it slowly dawned on me that, despite doing all the right things (self-isolating on the farm, wearing a facemask in public), I had contracted the ‘Rona’.

My next 36 hours were full of anxiety. I sat up in bed ‘doom scrolling’ — reading  depressing reports about the virus. Soon I’d have the shame of adding to the Premier’s daily ‘COVID count’ (AKA ‘Dan’s Daily Disease ’n’ Death Diatribe’). I felt totally out of control. 

And that’s when it hit me: people stay up at night with the same worries about their debts. In fact, Beyond Blue came out with research this week finding that financial stress and mental health are intimately linked.  It’s well known that when you’re struggling mentally the first step is to call Lifeline on 13 11 14. It’s less well known that when you’re struggling financially the first step is to call the National Debt Helpline on 1800 007 007. (My hope is that one of the things that comes out of this pandemic is that the National Debt Helpline will be just as well known as Lifeline or Beyond Blue.)

Yet just as I started to peak out, my phone buzzed.

It was a text message: “COVID-19 virus was NOT DETECTED.”Phew!I threw down my phone and fell into a deep sleep. Well, until I was woken by my wife in the middle of the night:“Cough, cough, cough.”Tread Your Own Path!

Beyond Blue and Financial Counselling Australia have launched a public awareness campaign to encourage people in financial stress to seek support. Learn more at www.beyondblue.org.au/financialwellbeing

Indigenous Woman, Hear Me Roar!

Hi Scott,

I am a young professional Aboriginal woman from Cape York. In the past I made some foolish investments, but a few years ago I picked up your book. I loved it, though I struggled to get my hubby to read it. So I played him your audio-book in the car. He was so excited, given how easy it is to follow. 

Long story short — we are now on our way to financial freedom! We no longer have credit cards or a car loan, we have refinanced our mortgage, and our renters are paying our mortgage off for us. We also have a joint account and have started our little guy on the jam jars. I would love you to do a ‘Barefoot Walkabout Tour’ once COVID is out of the way. 

Tania

Hi Tania,

This makes me so happy. Well done!

We have a shameful history of finance companies ripping off Indigenous communities (especially when it comes to funeral insurance). One not-for-profit group that is making a huge difference in this area is MoneyMob Talkabout, who employ Aboriginal elders to teach financial education in remote communities. Check them out at moneymob.org.au.

NAB CEO says ‘get out now’

“Get out now.”

That’s the advice the CEO of NAB has given to homeowners who are struggling to make their repayments.

Yes, in his quarterly trading update last week, NAB’s new-ish chief, Ross McEwan, warned:

“There will be some circumstances where people are better off selling out early and taking some equity out of their homes, or keeping some equity, before it disappears.”

While most of the media didn’t give his words much attention, there are two good reasons that you and I should:

First, because in all the years I’ve been doing this column I’ve never heard a bank boss speak so candidly. 

Bank bosses are basically politicians: they get parachuted into the top job, stay there for five years, and rocket out with $40 million. Their main job is to stick to the script: “keep lending”. (And we’ve all witnessed how bad things go when bank bosses go off script, like getting into wealth management.)

So why is NAB’s CEO sticking his neck out?

Well, that brings me to my second point: he obviously doesn’t like what he sees on the horizon.

And know this: McEwan isn’t peering into a cloudy crystal ball. Over the years NAB has invested billions into tracking its customers’ every financial move. In fact, all the banks have incredibly detailed customer analytics that tell them what people are doing — or not doing — with their money, in real time.

Now, according to the banking regulator, APRA, roughly 1 in 10 mortgages in Australia are paused.

Which gets me thinking ...On one side, how long can the banks cop 10% of their customers not paying?

On the other, when will customers who are really struggling finally bite the bullet?

It’s a grim situation.

My hunch is that the banks are betting that the overwhelming majority of their customers will get through this. Yet they also know a small number of their customers won’t, and so they (well at least Ross McEwan) are turning up the heat on them.

My advice?

Please don’t misquote me: I am not saying you should sell your home.

What I am saying is don’t be a frog … if you were in hot water before COVID hit, don’t just sit there bubbling away.

We’re still early on in this crisis, and you have more options than you think. And if you want someone independent (and free!) to walk beside you and carefully lay out your options, call the National Debt Helpline on 1800 007 007 and speak to a financial counsellor (like me) immediately.

The last word goes to McEwan:

“We’ve seen in other crises around the world, when people try to hold on they end up walking away with nothing.”

Don’t say you haven’t been warned.

Tread Your Own Path!

The Broke Accountant

Hi Scott,

I am a single parent of two kids and, financially, I am hemorrhaging. I have been trying to domino my debts for three years, often paying off too much and leaving myself struggling (then ending up in more debt). I have multiple family debts and multiple payday loans that end up costing me a fortune to repay. I have accessed my super twice in the last five years, and have only $9,000 left in super. But here’s the kicker: I am a qualified CPA accountant — I should know better.

Jane

Hi Jane,

That must have felt good to get off your chest, right?

Well, I’ll let you in on a dirty little secret: I know a couple of financial pros who are broke. I also know a doctor who smokes, and a manic-depressive motivational speaker.

Look, let’s be honest, going to school and learning how to read a balance sheet doesn’t stop you from ordering $50 worth of UberEats instead of cooking a $5 spag bol. Managing your money is about your behaviour and the story you tell about yourself. Which for you currently is, “I’m a fraud, and I’m ashamed of myself, and things won’t get better.”

It sounds like your life is out of control.

And you know what?

As long as you believe it, you’re right. Your life will continue to spin out of control, and you’ll end up bankrupt.

So you need to find a new story. For example, you could say to yourself, “I’m an educated single mum raising two beautiful kids. I’ll do anything for them. No one messes with my family.”

You Got This. 

Scott

Nor Way! My Mother-in-Law is a Thief!

Hi Scott

We have had a bit of a shocker the past few days. My mother-in-law, who was visiting us from Norway, was arrested for shoplifting. We thought it was all a misunderstanding over a jar of manuka honey but, shockingly, she later admitted it was deliberate as she “didn’t feel like she’s worth much”. She also shared that she had incurred a huge debt (AU$1.7 million) on a bad business deal. She is 54 and is super-fit and organised, but she has not worked full time in a while and her main source of income is renting out rooms in her home, plus government handouts.

With my daughter-in-law hat on, I tried to encourage my husband to get her to see a counsellor. And, with my Barefoot hat on, I suggested she could sell an apartment she has that is worth $1 million. (She refuses to downsize from her main home as she is very attached to it.) Most importantly, I suggested she should get a job — any job! — because, aside from the financial upside, it would give her some purpose and a social life. But my husband tells me “she won’t get her government handouts” if she does. ARGH! What would be your 2 cents’ worth on all this?

Lexie

Hi Lexie,

Oh, I would be staying the hell away from this.

It sounds like your mother-in-law needs to sit down with a counsellor to help with her mental health.

If I were in your shoes, I’d encourage her to make an appointment with her GP, or call Beyond Blue (1300 224 636).

They’re qualified to deal with her situation, and they can refer her to a free financial counsellor.

Just understand that if she doesn’t want to get help then there’s nothing you can do. So, after encouraging her to see a professional, that’s exactly what I’d do: stay out of it, not lend her any money, and support your husband. That’s my 2 cents!

Scott