The anti-budget

Today, for the first time in over 20 years … I’m breaking with tradition.
 
I’ve decided I’m not going to next Tuesday’s Budget lockup in Canberra.
 
(My editor is not amused.)
 
Tuesday is Daddy-day with my three-year-old, and we have a very busy day planned on the tractor, digging random holes around the farm that I will invariably forget about and end up driving my ute into.
 
Besides, the Budget has always been poor man’s prime-time political theatre.
 
The Government’s spin doctors spend months in focus groups conjuring up a catchy name for their signature splurge – which they hope will get them re-elected.
 
(This year it’s ‘Made in Australia’, apparently.)
 
Then they get turfed out, and the next mob dismantles it.
 
 Plus, all the rosy economic forecasts they make in the Budget can’t hide the fact that many people feel like they’re living in a recession right now.
 
Bottom line?
 
Don’t look to Canberra for help – they’ve got enough problems of their own.
 
Instead, focus on what you can directly control, and I guarantee you’ll move mountains. That’s why this year I want to start a brand new Budget tradition. On Tuesday night I want you to dust off an old copy of my book and have a Barefoot Budget Date Night.
 
Yes, I know it’s probably been a while since you’ve looked at Betty the sheepdog and me, but there’s a special type of compound interest that comes from getting together to plot, plan and dream … as a team (and if you’re single, bring along a friend).
 
Specifically, on Tuesday night I want you to write down which Barefoot Step you’re currently on, and then pick just one thing you can do in 30 minutes or less that will help you move to the next step.
 
It could be sacking your scheissenhausen super fund, dominoing your debts, getting a cheaper deal on your insurance (they can do better, trust me) or, most importantly, rebalancing your bucket percentages after all the rate rises and rental increases.
 
Best of all, you can do it with a nice bottle of wine or a fancy meal (or both), with no Elbow or Mr Potato Head in sight. Now I haven’t passed this by a focus group, but I’m calling it … the Barefoot anti-Budget.
 
Tread Your Own Path!
 
P.S. Send a Barefoot Budget Date Night selfie to scott@barefootinvestor.com!

Jim Chalmers goes Barefoot for a day

Today I’m doing something that I’ve never done before in nearly 20 years of writing this column …
 
I’m letting someone else answer my readers’ questions:
 
And that someone else is Treasurer Jim Chalmers.
 
I caught up with the Treasurer this week ahead of his Grand Final (the federal budget) and added an even harder task to his plate: the job of being Barefoot for a week.
 
To ease him into the job, here’s the advice I gave him.
 
First, don’t be boring.
 
Second, really, please don’t be boring.
 
Finally, don’t give us the party line. Instead, give us the ‘Jim at a party, three bourbons down, telling it straight’.
 
Over to you, Jimbo.

Your Questions & Answers

• First Homebuyer Hell

• From a Sleep-deprived Mother of Two   

• The Pineapple Project
  

First Homebuyer Hell

Hi Barefoot (Jim)
 
My husband and I are in our late 20s and have been desperately saving for a first home. I’m a nurse and he’s a teacher, and we earn just under $160,000 a year combined. We’ve tried so hard to save up a 20% deposit but with house prices, and rents, going up so fast it feels impossible. We want to have kids soon and be close to our family (who all live in Sydney), but I can’t see that we’re ever going to make it. The system is just broken beyond repair. How can we plan our lives when we don’t even have the stability of the roof over our heads?
 
Bec and Steve
 
The Treasurer responds:
 
Thanks for the work you do teaching and nursing.  I get it – when you’re under the pump it’s hard to save for a house.  We’ve got two ways to help – one that’s up and running and one that’s on the way, but both of them are about helping you buy a house without needing the full 20 per cent.  
 
One’s called the First Home Guarantee (up and running) which can help you buy a home with as little as a five per cent deposit; the other’s called the Help to Buy scheme (coming). In the rental market there are tax breaks coming this Budget to encourage people to build more rental properties as well.  Big challenge, not uncommon, doing what we can.
 
 
From a Sleep-deprived Mother of Two   
 
Hi Scott (Jim),
 
I'm a single mum with two kids (and two cats and a dog), and I’m really struggling. My landlord just let me know he’ll be increasing the rent by $150 a week, due to the “changes in the housing market”. How will I survive? I’ve just moved into a permanent job, but my increase from four to five days means I will lose my Family Tax Benefit. I’ll probably also have to pay more after-school-care fees because I’ll soon be earning $100,000 a year. But it’s just ME on my single income paying for everything. What should I do?
 
Emma
 
The Treasurer responds:
 
Thanks for this and congrats on the new job. $150 a week is ridiculous. It’s worth talking to your local tenants union to find out what your options are. The options will differ depending on what state you’re in but could include reporting excessive increases to a relevant state body. Apart from that, we recognise rent’s a big part of the pressure people are feeling right now.  We are trying to get the parliament to agree to building more properties, we’ve got some tax breaks coming so that investors build more as well, and besides that we are making your after school care cheaper from 1 July, by increasing the subsidy – hope that helps you make ends meet.
 

The Pineapple Project
 
G’day Jim,

I thought I’d add in a question of my own …
 
If the RBA gets its way, in the next few years there will be plenty of businesses that go bust, and lots of people who will lose their jobs. That is, after all, how to slow the economy.
 
Now here’s the jam, Jim: there is really only one place that Aussies who get the wrong end of the economic pineapple can turn to for free, unbiased, confidential financial help: a community-based financial counsellor.
 
There are 750 financial counsellors across Australia. Yet they are already overrun. People are being turned away. However, if your government put up the dough to double the number of financial counsellors, it would mean an additional 50,000 families would get the help they need to get back on their feet this year. Will you commit to that funding?
 
Scott Pape
 
The Treasurer responds:
 
There’s no doubt financial counsellors do a fantastic job. They help people who are in real financial strife to make the case to get a debt waived or get a better rate and that makes a massive difference in people’s lives. As a Government, we recognised how critical these services are, particularly during natural disasters and we’ve delivered extra funding over the last year to employ more financial counsellors in flood-impacted communities. We’ve also been working with industry on a way to make funding of these services sustainable over time which is something that my colleague Amanda Rishworth has been leading.

The Wrap-up
 
It’s a bit of a cliche to say “thanks for taking time out of your busy week” … but the dude’s got his first federal budget to deliver next week! So, Jim, thank you for taking the time to answer people’s questions.

However, I don’t agree with encouraging people to put down a 5% deposit (I’ll have more to say on that next week). And as far as your answer to my question … that was one hell of a word salad, mate. Should I just take that as a ‘no’?
 
Good luck with the budget and, as my old man says, “Just look after the battlers, son”.

Thanks for reading.

Scott

Budget Warning

Hi Scott,

I’ve just watched the Budget, and I reckon people need to be warned about these 5% deposit government schemes. I am old enough to remember the 1960s and early 70s when I was working in conveyancing. The state government had ‘vendor’s contract’ setps where people purchased homes under a contract of sale, with the title not transferred into their names until it was paid off. These were an absolute disaster as most people could never have paid off the contract, with interest rates too high and repayments too low. Many of them had to walk away as they owed more than the original purchase price of the property. Beware of governments bearing gifts!

Nancy

Hi Nancy,

You’re right, it’s potentially a taxpayer-funded trap for 50,000 families.

Let me explain:

In the Budget, the Government increased the Home Guarantee Scheme to 50,000 places.

The scheme allows first home buyers on low incomes to buy a home with just a 5% deposit. And for single parents it’s even less … all they need to scrounge up is a piddly 2% deposit.

Yet hang on a minute … isn’t this entire Budget about the rising cost of living?

So why is the Government encouraging low-income earners to load up on debt at a time when interest rates are rising?

Answer: for the very same reason that Labor has made this dud policy part of its election pitch:

They want your vote.

Strike me handsome! Giving people extra money to buy a home just filters through the market and makes all houses more expensive. When interest rates rise and house prices fall, many of these people will be underwater. And it’s you and me – taxpayers – who’ll be on the hook for the losses.

Luckily, I don’t need your vote, so I’ll tell it to you straight: avoid this scheme.

Scott.

Barefoot Budget Will Send Us Broke?

Hi Scott,

I was reading about this week’s budget and there was an article saying that you thought the Treasurer was going to send us all broke. I assume it was referring to all the spending and government debt, but thought I’d go straight to the horse’s mouth and check.

Jim

Hey Jim,

Yes, it was clickbait.

While much of the budget commentary was the predictable ‘yay for a tax cut!’, yet my thinking is that if you’re struggling right now (as many are), then you should squirrel away the (on average) $40/week saving and use it to pay down debt or build up your Mojo, rather than spend it. 

Some headline writers suggested that meant I was sticking it to the government. Not true. All I was saying is that if you follow my lead, and follow a plan that has a bedrock of savings, rather than spending, over the long-term you’ll build up both your resilience, and your financial confidence.

That’s good for you, and good for the economy.