The 87 year investment

When I first began the Barefoot Investor, I wasn’t married. I didn’t even have a girlfriend.

Today, I have three kids … and in a couple of weeks we’ll be welcoming our fourth.
So, on this my final column for the year, let me tell you how I’m planning for their* future.

(*While we haven’t found out the sex, I’m totally convinced it’s a boy.)

There are three steps:

First, on the day my son is born I’ll buy a newspaper.

While I’m sitting at the hospital, I’ll get a red pen and circle all the terrible, and scary things that are happening in the world right now. And there’s a lot of them: the second (or third?) wave of the pandemic is sweeping the planet, governments are going deep in debt, and we have a fragile global economy. Then there’s the Donald Trump reality show, which is yet to be cancelled.

Second, I’ll invest $1,000 into an international shares index fund, which holds the largest companies in the world (think Apple, Amazon, Berkshire Hathaway, Nestle … and 1,540 large businesses from around the world), and another $1,000 in an Aussie index fund.

Finally, in 21 years’ time, when newspapers are a relic, I’ll pull it out and let him leaf through it.

He’ll be struck at how insanely cheap the prices of things in the ads are.

(‘Hey Dad! Here’s an ad for an iPhone. I haven’t seen one of those things in years!’)

He’ll marvel at how young his old man looks in his column photo.

Yet most of all he’ll understand that all the scary headlines were a sideshow to the real story of human progress.
I encourage anyone who has kids or grandkids to do the same:

It’s a real life lesson on the power of compound interest.

Tread Your Own Path!

Here’s what could happen in 2021

Let’s discuss what could go wrong in 2021, and what you can do about it.

Of course newspapers are chock-full of experts making predictions about “what’s in store for the next year”, so, before I throw my hat in the ring, let me shake the sauce bottle:

How many smart sausages this time last year wrote, “We predict that a pandemic will sweep the planet and lock many of us down in our homes. Our recommendation: stockpile toilet paper in February.”

That’s the err, rub, right?

Well, for what it’s worth, my view is that the next few years could be financially brutal for many businesses, for those workers who are laid off or underemployed, and for retirees who have had their investment income slashed.

However, it’s because of all this misery that things in 2021 could actually get a little … loose.

Here’s the two-hander:

The Reserve Bank has set rates at (effectively) zero to stop you from saving and encourage you to borrow up BIG.

The Government is even attempting to scrap responsible lending laws to get the party in full swing.

Heck, the RBA has given us a timeframe, having all but promised donut rates for the next three years.

What could possibly go wrong?!

Well, lots actually.

Like it or not, we’re living through a giant financial experiment: never has the world had so much debt. Never have interest rates been this low (they’re at thousand-year lows, according to Merrill Lynch).

And so the lesson I’m taking out of 2020, our annus horribilis, is this:

Life is unpredictable.

The truth is we spend most of our lives stressing about things that never happen. And then one day a bat flies the wrong way, and the next day people are going the biff over bog roll.

Think about it: the riskiest things — the ones that knock you on your backside — are often a bolt out of the blue.

For my family it was a fire that burned basically everything we owned.

For others it could be a relationship breakdown. Or an illness. Or an economic meltdown. Or a global pandemic.

So how can you and I prepare for them?

By asking yourself the following questions, today.

Barefoot’s Top Five Questions For 2021

1) “Is my money safe?”

Here’s the bolt out of the blue: you need to access your money quickly, but all your investments have tanked.

If you have money that you need to draw on in the next five years invested in anything other than a bank savings account or term deposit,you may well lose a chunk of it.

Like what?

Like property funds that offer a high rate of interest, or the share market, or cryptocurrency, or any other type of managed investment.

(The share market is not a safe place to hold your money in the next five years. However, it’s arguably the safest place to invest your money over decades, as it will outrun inflation.)

Here’s what you can do about it:

Keep any money you’ll need to spend in the next few years in a bank account (or term deposit) that is covered by the government deposit guarantee (up to $250,000).

Yes, that may sound like overkill, especially with interest rates this low. However, it’s not about the interest you earn (which is pitiful), it’s the sleep-easy factor of knowing you’ve got a backstop. That’s worth more to me and my mental health than any gain I could make in the market.

2) “How long could I last if I lost my job?”

Here’s the bolt out of the blue: your boss calls you into his (virtual Zoom) office on Friday … you’re being laid off.

It’ll never happen to you, right?

Well, I believe the lasting legacy of COVID is to radically change the concept of what we call work.

Think about it: employers have been thrown in the deep-end of the productivity pool this year. Many have had to deal with a reduced workforce who are working from home.

And, now things are getting back to normal, I wonder how many will look at last year and think to themselves:

“Maybe I don’t need all the staff I once had. And, even if I do, if they’re all working remotely … maybe I can hire cheaper workers somewhere else in the world?”

And yet one in five of us Aussies has less than $1,000, according to ME Bank’s latest biannual Household Comfort Report.

Here’s what you can do about it:

Follow the Barefoot Steps; after you’ve set up your buckets, domino-ed your debts and bought your first home (but not yet paid it off), the next Barefoot Step is to boost your Mojo savings to three months of living expenses.

I had a woman write to me in September telling me she thought having three months of Mojo was a total overkill. Yet, when they both lost their jobs, she said, “It was the most important thing in our world. It allowed us to breathe.”

3) “Am I covered?”

Here’s the bolt out of the blue: your house burns down, and you’re not fully covered.

Statistically, if you’re a normal little vegemite you will be underinsured. And the moment you’ll find out is after the fire, or the car accident, or the illness, or … the rats.

(Yes, one of the downsides to living on a farm is rodents. They somehow managed to get into both our cars and eat through $35,000 of interior and electrical work).

Here’s what you can do about it:

Dig out your insurance policies and check what you’re covered for you may need to increase it. If you’re unsure, call your insurer and ask them to review your policy. Life is full of dirty rats, so just make sure you’re fully covered for anything.

4) “Is my partner on the same financial page?”

Here’s the bolt out of the blue: your partner walks out on you.

Relationships Australia tells us the number one reason for relationship breakdowns is fights about money.

Here’s what you can do about it:

The monthly Barefoot Date Night is the cornerstone of my entire plan.

Making a monthly ritual of getting on the same financial page as your partner — and working through the Barefoot Steps — is the most powerful thing you can do to ensure you don’t end up losing half your assets.

If you don’t schedule it, you won’t do it. (We have ours on the first Tuesday of every month, which coincides with the monthly Reserve Bank meeting: how hot is that?)

And remember, money talk goes better with a wine (or taco) in your hand.

5) “If I got hit by a bus, would my family be able to put everything together?”

Here’s the bolt out of the blue: you leave your loved ones with a financial Rubik’s cube of frustration.

Picture your partner (or parents) sitting alone, distraught and grieving, trying to piece together your financial life.

They have no idea how to access your bank accounts, the password to your email and social media, your funeral wishes or even where your will is.

Here’s what you can do about it:

Spend an afternoon getting everything in one place.

At Barefoot we call it the Fearless Folder, and once it’s done you lock it away in a secure safe.

The feedback I get from people who have done it is that it’s Marie Kondo-cathartic to have it all sorted.

What’s more, it’s the final way you’ll say “I love you” to your loved ones.

And there you have it.

Each and every week, I show up and answer your questions.

Yet to really prepare for 2021 you need to ask yourself the right questions, and get the right answers for you.

Tread Your Own Path!

Safe as Houses

Hi Scott,

I followed your advice and bought the Bunnings portable safe that you wrote about in your column a couple of weeks ago. However, when we were faced with our fire I was so panicked I forgot to grab it… however it was the only thing that survived in that room! And because it survived I now have everything I have been asked to produce for insurance, quotes, and house plans. Thankyou for your old-fashioned good advice to this generation.

Jenny

Hi Jenny,

Goodness gracious, great balls of fire!

Still, having all your docs will make the often painful insurance process that much easier (and if you have ‘before’ pics on your phone of your house, that’ll help too).

And, while you’re the perfect case study for the importance of having a safe, I view our safe just as much as a communication device: if something should happen to me, my wife knows that the keys to our financial life (or at least the copies of our keys) are all set out in one place.

Truth be told, I got a huge reaction to my column (especially from the mysterious safe-cracker, who didn’t like me joking that he could come back and open my safe). In fact, many parents wrote to me saying that they plan to buy a cheap, fireproof safe for a Christmas present for their adult kids (though it appears Bunnings has now sold out of the $69 version!). Now that is a practical present … you could even put some gold chocolate coins in them … and a copy of my books.

Scott

Cheap Pressies for Kids this Christmas

So this year I’m playing the role of Santa and the elves.

Reason being, Mrs Claus is heavily pregnant, with an official due date of … Christmas Eve.

“What a wonderful Christmas present!” gush people who clearly don’t already have three kids under the age of seven.

(My crew are understandably a little suspicious of the ‘present’ Mummy has been carrying around in her sack.)

Ho! Ho! D’oh!

So here are three stocking-fillers I’m getting my kids which may provide some inspiration for the kids in your life.

The Famous Five

Every night I tuck the boys into bed and read them two chapters of Enid Blyton’s The Famous Five.

Honestly, it’s the best 30 minutes of my day, and easily the best thing I’ve done this year.

Now Enid Blighton may have typed these tales nearly 80 years ago, but her stories of adventure still nail it.

Better yet, there’s plenty of ’em: 21 Famous Five books, plus another 17 in the sister series The Secret Seven.

Soup and Baked Beans

My kids know that I made a major life change this year and now work in the community helping people who are stressed and broke. They also know that many of my clients have kids ... who often don’t have enough food to eat.

And so the festive season throws up plenty of opportunities to expose your kids to the gift of giving — to charities like Foodbank, or even serving up Christmas lunch at a shelter.

Okay, so technically this isn’t a stocking-filler. (Can you imagine? Santa got me … a can of minestrone soup?)

Still, setting an example for your kids, showing them how to be humble and kind, is important … and never more so than on what for many is the loneliest day of the year.

Trees

Yes, trees.

Over the past few years I’ve literally become a ‘tree hugger’.

My kids and I plant a tree together and take a photo: it’s done and planted in 10 minutes flat.

My grandfather did it for me when I was a little kid; I vividly remember the fun of planting it with him and then quickly racing off to play with my toys (which are now buried in landfill).

My grandfather is long gone, but when I’m back home I make a point of visiting that tree. Every. Single. Time.

Okay, so let me level with you: Santa will also be bringing pink bicycles, nerf guns and spy sets.

Yet the truth is that these three stocking-fillers are as much for me as for the kids.

They’re what memories are made of.

Tread Your Own Path!

Don’t get a snag from Bunnings — buy this instead

Today I’m going to tell you about a $69 purchase from Bunnings that’ll keep your family’s finances safe.

Given we’re at the start of fire season, it’s important to have all your essential documents in one place.

Like what?

Well, I have a system I write about in The Barefoot Investor for Families called the Fearless Folder. The book lays it all out, but at a base level you want to get copies of your will, powers of attorney, bank accounts, investments, insurance policies and login details.

And then you stick them all in a First Alert Fire Safe and Waterproof Protection Chest, which costs $69 at Bunnings.

What I like about these chests (other than the fact that they’re fireproof and waterproof) is that they’re small enough for you to pick up by the handle if you have to evacuate your house.

Here’s the thing: we lost everything when our house burned to the ground … except our important documents. Having all those docs made the process of rebuilding our financial lives that much easier.

Yet this year I decided to go bigger.

I was scrolling through Gumtree and I saw an old heavy-duty safe with a spinning combination lock and brass keys.

A few days later it arrived at the farm, and it was so big we had to use the tractor to move it.

I parked it at the shearing shed until I’d decided what to do with it.

Yet the next day my five-year-old son (who’s going through a ‘super spy’ phase) started … playing with it.

Later, he provided this statement of events to Senior Sergeant Dad:

“Look, I was just playing and spinning around the lock, and then I closed the door ... and then it wouldn’t open up.”

It turns out he’d actually managed to reset the code. And then locked the door.

With the only set of keys inside.

And so, with my tail between my legs, I begged my local locksmith to fix it.

He took one look and announced: “It’s locked for good.”

“Oh, there must be something you can do”, I protested.

He shook his head.

“Mate, it’s a 95-year-old safe. Once it’s shut, it’s shut. The only thing we could do is oxy a hole in the back, but that would destroy it. It’s now a nice piece of furniture. Haw! haw! haw!”

The locksmith got in his car, still chuckling at his gag, and started his engine.

Yet just as he was about to leave he wound down his window.

“You know, there is this one bloke I’ve heard about who gets round the traps. He’s a … safecracker.”

Bewdy!

The next day the safecracker arrived.

“Will you be able to crack it?” I asked.

“Yes”, he said with an unsettling amount of conviction.

It’s a rather unusual trade, so I didn’t ask many questions, and just pointed him to the shearing shed.

And after a couple of hours — and $300 — he’d cracked the safe.

Learned my lesson: it’s better (and cheaper) to stick with the $69 portable safe!

Tread Your Own Path!

The hero (living in a rented apartment)

“In America, anyone can become president … and that’s the problem!”, quipped comedian George Carlin.

I don’t know about you, but I’m a little over the Punch and Judy show — watching two cranky old blokes beat each other up, with the last man standing becoming … the leader of the free world.

Are these two really the best the ‘greatest nation on earth’ has got?

Well, let me introduce you to another old bloke who might just restore your faith in the US of A.

His name is Chuck Feeney.

Chuck is 89 years old, and lives with his wife in a small rented apartment in San Francisco.

He will die flat broke.

And yet Warren Buffett, Bill Gates and Oprah Winfrey call him their ‘hero’.

Chuck was born in the Depression, and as a young man answered his call of duty. Yet it was during the war that he started a little side hustle, selling duty-free booze to fellow US soldiers stationed in Europe.

When Chuck got back from the war he continued bootstrapping his little business, working night and day. And a few decades later he’d built it into the largest duty free shop empire in the world.

Here’s where the hero part comes in.

Chuck is the exact opposite of Donald Trump: he’s a real billionaire who is both humble and kind.

Question: What does a down-to-earth bloke who wears a $10 Casio watch, owns one pair of shoes and flies economy do with his wealth?

Answer: He decided to give it all away.

Even better, he did it anonymously.

Yes, for decades Chuck secretly gave away his billions. And he’d have continued along that way, except that when he sold his business in 1996 a dispute with a business partner exposed him as one of the biggest philanthropists in history.

Yet his story gets even better.

After the news broke, he was invited to a secret billionaires dinner in New York City.

Oprah was there. So were Bill Gates, Warren Buffett, and several other billionaires around the table.

Chuck spent the night telling his story and encouraging his fellow billionaires to follow his lead and “give away your money while you’re living … I’m sure you’ll like it”.

Over the course of that dinner, Chuck inspired Bill Gates and Warren Buffett to kick off their Giving Pledge, which so far has convinced 210 billionaires to commit to giving away at least half their net worth.

“He is my hero. He is Bill Gates’s hero. He should be everybody’s hero”, says Buffett.

Back to comedian George Carlin, who said: “When you’re born you get a ticket to the freak show. When you’re born in America, you get a front row seat.”

Well, right now Uncle Sam is putting on a helluva freak show.

Yet, for all its faults, the US has an amazingly entrepreneurial culture. No tall poppy syndrome. And when they make it big, they give big.

Tread Your Own Path!

The Trouble Began When My Sister and Her Husband Were Murdered …

Hi Scott,

My sister and brother-in-law were murdered in 2013. I have spent seven years and a lot of money fighting for their orphaned kids — my nephews and niece. I bought your book and am slowly getting myself out of debt. I have also been fighting the federal government and will be hopefully getting $750,000 for the kids. I want them to make the most out of the money in 10 years. So should I buy them a property? Shares? What should I do?

Renata

Hi Renata,

What an absolute tragedy.

My heart goes out to your entire family.

I don’t have enough details to give you a considered opinion, but I’d caution you not to jump to the final step of ‘where to invest the money’ too soon.

First things first. I’d have a lawyer set up a trust structure that specifies what the money can be spent on (like short-term needs or education) and the age the children will gain access to the money.

That will dictate what you invest the money in, though I’d suggest you focus on easy-to-manage, diversified investments that can be sold quickly and cheaply. In other words, I personally wouldn’t buy an investment property.

Generally, I’m a fan of limiting access to lump sums until children are in their late twenties, when they’re a bit more settled in life. Inheriting large amounts of money when you’re immature, or not mentally prepared, will often do more harm than good.

Finally, I’d work on educating the kids about money so they know that, when the funds are eventually released, they’ll be able to use them to honour the legacy of their parents.

A Magical Mystery Tour

Ben, 

I’m a Kids Superhero Magician - taxable income about $80K a year … or I WAS until Covid GRRR. After reading your last column about that smart single mum with cancer who set her life insurance in place, I followed your advice and have been looking at raising my life and TPD through my living super insurance - but  the premium was $5600 a MONTH!  Is there a good life insurance place that you would recommend? Any advice around this topic?

Steph

P.S - I went into Woolies last month and your book was half price - I went to the counter and the price on the tills was wrong so I told them AND GOT YOUR BOOK FOR FREE (Woolworths weird policies). 
P.P.S - I love you! But don't tell my partner snoring next to me.

Hi Steph,

First, I have no idea who Ben is, but I’ve been called worse (like Magoo), so let’s go with that.

Second, it’s common to get ‘bill shock’ when you attempt to increase your insurance.  You should call your super fund and see what options they have where they can offer financial advice and wholesale rates (without the hefty commissions). This is one area where you really want to pay to get expert advice that is specifically tailored to your situation.

Finally, let’s talk about that ‘smart single mum with cancer’ who inspired you to boost your insurance: Emma.

As a recap: Emma wrote to me a few weeks ago, thanking me for reminding her to boost her TPD insurance. She explained that just last year she was ‘a fit and healthy 42 year old single mum with two boys aged 10 and 7’ … yet she’d been diagnosed with cancer, and her insurance really helped her out.
I found out last week that Emma died.

The greatest respect I can give Emma is to put her story in front of my community of Barefooters. And I’ll say it again this week. Check your insurance. Make sure you have enough. Do it for Emma. Do it for your kids. Do it TODAY.
 

Dad Ditches Wife for Kids?

Hi Scott,
 
My lovely husband and I (both in our forties) are doing our wills. Unfortunately, this is a pressing matter as he has terminal cancer. When it comes to dealing with his illness he is a legend, but with finances he is a freaking nightmare. Luckily, his life insurance will pay out $2 million. But this is where the problem lies — he wants to divide it equally between me and our three teenage kids, which they’ll each get when they’re 25. This leaves me with just $500,000 to support myself and the kids until then. My husband is the main breadwinner and my income does not even cover our rent. What should I do?

Belinda

Hi Belinda,
 
I’m so sorry for your situation; my heart goes out to your family. 
 
The simplest option — and the way I have my own will set up with my wife — is to have everything go to the surviving spouse. That allows them to make the decisions for the children going forward.
 
Yet it may not be the best option.
 
That would be the both of you sitting down and planning it out together, ahead of time.  
 
And that’s exactly what you can do. You may not know this, but a terminal diagnosis should mean that your husband will have access to his payout 12 months before his death (or 24 months — check your insurance policy). That should be enough time for you to work things out together.
 
Now this is his legacy that he’s writing, and it’s understandable he wants to ensure that no-one misses out. 
 
So here’s how I’d frame the discussion with him:
 
If he wasn’t sick, and you won $2 million in the lotto tomorrow, what would you do with the money as a family?
 
Here are some ideas that spring to my mind: 
 
First, you’d likely buy a nice, secure home for the family to live in. No more renting, and no mortgage either.
 
Second, you’d make sure the entire family had reliable, safe cars (when the kids get their licences).
 
Third, with no mortgage, you’d probably reprioritise your work and spend more time with the kids. 
 
Finally, you’d put some money aside for your kids’ education or to help them with a home deposit, or both.
 
Yet leaving kids with a large inheritance may not be the best way to achieve these things. It might be a better idea to match them dollar for dollar as they save for their first home. That way you’re helping them but also encouraging them to work hard and save — qualities that will serve them well, long after you’re both gone.
 
Ultimately, my hope is that your husband finds some comfort watching his legacy take shape.
 
My thoughts are with your family.

Scott

The multi millionaire and the $20 book

I’ve got a friend who is super successful, and very, very rich.

He sold his business for $300 million, owns a resort, and hangs out with dignitaries.

I was talking to him one day and he told me something that shocked me:

“Looking back on it all, my most cherished memory has been reading Harry Potter to my kids each night.”

Not the mega deals. Not the mega mansions. Not the pointy end of the plane. Reading a $20 book to his kids.

And you know what I thought?

I wondered if he’d ever told his kids that.

See, dads don’t always open up. We’re all too often busy being the breadwinners, the hunters, the gatherers, the planners, the fixers. Yet what we really want is to spend time with our kids, and let them know we care about them.

That’s all that really matters in the end.

So this Father’s Day I want you to give your dad the ultimate Father’s Day present: a chance to open up to you.

If you’re lucky enough to have your father still with you, whip out your phone, hit ‘record’, and ask your dad the following questions:

• How did you meet Mum?

• What advice can you share with me about money, life and happiness?

• What does being a dad mean to you?

• What are you most proud of?

• How would you like to be remembered?

Each year people write to me telling me (often in tears) how it really was the ultimate Father’s Day present.

And then, throughout the year, people who have lost their father tell me they cherish the video they made.

So, as you thumb through Instagram or Twitter for the millionth time today, stop and do this.

One day, it’s all you’ll have left of him. And you’ll treasure it.

Happy Father’s Day!

The Horses

Dear Scott,

My mother-in-law took out funeral insurance way back in 2004. Since then she has paid approximately $29,000 ($72 per fortnight), but if she were to die the payout would be $17,700. I cannot find a legal way to get them to stop taking more of her money. They will stop when she is 90, but sadly she is 70 and has Parkinson’s. Any ideas?

Sarah

Hi Sarah,

You know what I dislike more than those mindless morning television shows?

The ads that pay for them.

A big infomercial flogger is funeral insurance, and they really press on your emotions to ‘not be a burden to your family’. The Royal Commission showed that the companies that sell this type of insurance are the WORST.

Let me count the ways:

First, you often end up paying more in premiums than the value of the cover.

Second, the premiums often rise as you get older, when you can least afford them.

Third, if you stop paying, in most cases, you won’t get your money back.

Fourth, if your mother-in-law had invested $72 a fortnight into a low-cost index fund for the last 16 years, she’d have $63,000 by now. That could afford a helluva funeral (she could even have Daryl Braithwaite tow her coffin out on a horse while singing The Horses).

So what can she do?

Well, these products are often sold by slick salespeople with predatory practices. If that happened to her, she may be entitled to a resolution.

You’re thinking “but my mother-in-law is a pensioner with Parkinson’s, she won’t stand a chance”. And that’s why I want you to put me in contact with her this week, and I’ll take this on personally.

It’s time to whip these nags!

Should I Bail Out My Bro from a Million-Dollar Mess?

Hi Barefoot,

My dad died three years ago and left his house ($1 million) and super ($200,000) to my brother, and made me the executor. I was self-sufficient, so Dad told me I would not receive anything. Fair enough — I respect his wishes. Now my brother and his adult kids have almost run out of cash and are looking to me to bail them out, the way Dad always did. But I have my own family! How can I help my brother manage his affairs without preaching to him?

Hassan

Hi Hassan,

Plenty of people in your situation would’ve been bitter about not getting any inheritance, but not you. Instead, you were concerned about your brother’s needs, not your own.

That is deeply impressive.

So your next decision should continue in the same vein: it’s all about what’s best for him (and his kidults).

And giving them money is not it.

Your father’s money simply enabled his poor behaviour. It hindered rather than helped him. So deciding to give him more money would be like buying an alcoholic a beer because they’re thirsty.

My view?

Offer to help your brother to set up his basic spending buckets — and even be an ‘accountability partner’. Or, if that’s awkward, support him to go and see a free financial counsellor (call the National Debt Helpline on 1800 007 007).

Your old man understood that you were strong enough, both financially and emotionally, to make it on your own, and that’s why he didn’t feel the need to give you any money. He was right.

Your brother is the real winner, though. You’re not only someone who can be a good money mentor, but you sound like a great bloke too.

Good luck.

Scott

You Made a Mother Cry

Hi Scott,

Your Mother’s Day column brought a tear to my eye — touching stories of strong women taking control of their lives. My husband and I read your book a few years ago and it completely changed the way we manage our money. Recently the coronavirus has hit us hard, as my hours have been drastically reduced and our side business has ground to a halt, but you have us covered. Our three-year buffer in the bank means we can sit back and wait for things to improve. A deep bow of respect to you, and to your Mum!

Jen

Hi Jen,

I’m used to getting hundreds of questions, but last week’s Mother’s Day column melted my inbox — in a good way!

And you know what? I agree with you: there’s so much negativity in the media right now that it’s nice to focus on the one person in your life who’s really selfless — your mum.

After all the doom and gloom lately, it was really lovely to share some positive stories for once. Thanks for sharing yours.

You Got This!

Scott

A Hole in My Heart

Hi Scott,

Last March I came across your book in a store in New Zealand. Since then, it has completely changed how my husband and I use our money. We have paid off $8,000 on a credit card, and this year our loan will get hammered using our ‘Fire Extinguisher’ account. But the biggest help was earlier this year. My cousin’s two-year-old daughter relapsed with leukaemia, with no more options left for treatment. My cousin and I are very close but he lives far away, in Ireland. With our Mojo, we were able to drop everything and be there for his daughter’s final weeks. I was able to support my cousin and his wife through the hardest time of their lives. With tears in my eyes and a huge a hole in my heart, I thank you for giving me that gift. 

Mandy

Hi Mandy,

That is a beautifully written, emotional response -- and it shows exactly why people should get things together. None of us know what’s going to happen next. And to be in the position where you could do what you did is one of life’s great gifts. The events that have already happened this year — fires, floods and pandemics — have taught me that right now is a really good time to have a Mojo buffer. You never know when you’ll need it.

Thank you for reading,

Scott

Beware of 60-Year-Old Hussies!

Hi Scott,

My mum passed away two years ago, and it seems like my 80-year-old dad is being swooped on by several single women 20 years his junior. He lives alone in a lakeside community several hours away from us (my two brothers and me). We are concerned that he will be swindled out of his house and savings, so we have suggested he get his will and power of attorney (POA) sorted. We honestly cannot see what these women see in him, but his ego might tarnish his ability to protect his assets from clever predators. Do you have any family asset protection strategies that we should be aware of?

Dan

Hi Dan,

If you were my son, I’d give you a clip around the ears: “We honestly can’t see what these women see in him.”

Way to cut down your old man!

Then again, if you are dealing with the power of 60-year-old ‘predators’ (your words, not mine!), you’ll have your work cut out for you.

That being the case, I don’t feel qualified to answer this question, so I’ve called up my lawyer, Brett Davies. Here’s what he had to say:

“If your father is of ‘sound mind’, he is free to deal with his assets as he sees fit.“If it is clear he is of ‘unsound mind’, then you are free to use a POA. In fact, in most states you are duty-bound to do so, to protect the person who gave it to you. But the POA is only to help your father — you cannot use it solely to protect your inheritance.

“If he is of unsound mind, you can act against his direction, as he would lack mental capacity. For example, you could have bank accounts moved out of his control. But be careful — if you are wrong (i.e. your father is of sound mind) then you have broken the law. When in doubt, it may be prudent to go down the path of an administration order, which is when a court decides mental capacity, not you.”

Barefoot translation: by all means let your old man enjoy himself, just make sure he protects his nuts. 

Scott

Extinguishing Financial Fires

Hi Scott,

My mother’s home in Nymboida (northern NSW) was tragically lost in the bushfires that ravaged the community last weekend. My mother has spent the last 30 years building a beautiful home yet, within hours of evacuation, the entire place was wiped out. We contacted NRMA for a house and contents claim, only for them to insist we itemise everything — yet it’s all gone! In your book you mention you were able to demand payment in full after your house burned down. Is there a script that we can use to achieve the same?

Mel

Hi Mel,

Give your mum a hug for me.

Your mum has just gone through a significant, stressful life event — so understandably she may not be in the right frame of mind to make far-reaching financial decisions, let alone battle an insurance company.

There are two things to consider: reimbursement for your contents, and managing the rebuild process.

While I haven’t read your mum’s policy, most insurers have what’s known as a ‘sum insured’ value. Once they’ve established her home has been destroyed, they should pay that figure out as a lump sum for contents almost immediately. Don’t let them play games with your mum: go back to NRMA and tell them that it’s far too traumatic to make her itemise everything she’s lost. Tell them to pay up the contents insurance pronto (and if they give you any stick, write back to me).

But when it comes to getting a lump sum for her rebuild, I’d be wary. Yes, I did it, but I was confident of managing the entire rebuild myself (and investing the proceeds in the meantime). However, if the onus of the rebuild is on your mum (rather than having the insurer manage it), that could be pretty stressful … and that’s the last thing she needs right now. Let the insurer deal with it.

Scott

My In-Laws Lied

Hi Scott,

My retired in-laws are bad with money — in fact they had to sell their still-mortgaged house to pay off a $50,000 credit card debt. While they sold (over a six-month period), we paid their mortgage from our own house deposit account. And then they bought a new mortgaged house they could not afford, and lied to us about how much it cost! They will not listen to reason, and I am sure history will soon repeat. Do we help them again and sacrifice our financial future, or do we refuse and feel heartless for letting them suffer?

Casey

Hi Casey,

If I were you, my index finger would be in plaster from all the finger-waving I’d be doing at these financial fools. However, I’m not you, and I don’t have to sit across from them at Christmas lunch.

Ultimately, this isn’t about your parents-in-law, it’s about your marriage. Your husband would be conflicted: he’s caught between his parents and his wife.

So, to your question: do you keep helping them?

Three words: no, no, and no.

Again, easy for me to say, hard for you to do. So I’d suggest you go on a date night with your husband and explain that you’re willing to forgive and forget their past financial faux pas (because really what other choice do you have?).

However, from this point on, you want to make a pact that you won’t enable their poor behaviour again. Besides, as the flight attendant says: “In case of emergency, fit your own breathing device first.”

Then brace for impact!

Scott

Dead Broke in a Beamer

Christmas came early for my kids this year ...

Daddy finally got a job.

(Well, to be accurate, 220 hours of community service as part of my Financial Counselling qualification.)

On my first day, the three of them surprised me by getting up really early and having a celebratory breakfast with me (possibly with the aim of making sure I really did have a job to go to).

And when I returned home that night I was greeted — for the first, and possibly last, time — like David Boon coming home with The Ashes.

“Didja have a lot of meetings, Dad?” asked my six-year-old, beaming with pride.

In the schoolyard, real dads go to work and have meetings. (Not bum around the farm in their trackie dacks.)

It doesn’t matter that he can see me on TV, hear me on the radio, and watch me do book signings with lines a hundred deep: when I’m wearing a tie, carrying a keep-cup and battling the morning traffic, I am THE MAN.

So now that I’m a couple of hundred hours into this job I’ve learned that it’s like being a (financial) E.R. doctor.

No one wants to be sitting in front of me.

They’re often embarrassed, humiliated, angry, scared ... and completely strung out about their finances.

My job is to sit them down, calm them down, and assess their situation.

It’s basically financial triage: you patch them up, stem the bleeding, and send them back out (where you can). Or, if you deem their situation terminal, you tell their creditors and cut deals on their debts.

(This of course sounds sexy but, trust me, if your life gets to the point where a bank is willing to write off your debts, you’ll be celebrating with spuds and spumante.)

Above all, what I’ve learned is that this job is relentless.

Debt in this country is an epidemic, and people of all shapes and sizes stream through the door.

Like a bloke in his 40s that I saw today.

He arrived to our appointment in a BMW X5.

“Why does this guy need to see me?” I thought to myself.

He sat down, threw his fancy keys on the table, and buried his face in his hands.

He confessed that he’d leased the car five years ago and now couldn’t afford the final balloon payment. (And if you don’t know what a balloon is — don’t feel bad — neither did he.)

The upshot was that he was broke, and the Beamer would soon be repossessed.

Yet you know what?

To the outside world he’s THE MAN. He’s got an awesome car that he drops his kids off to school in.

By the time he came to see me, it was too late for him to avoid his mistakes.

But it’s not too late for his kids.

And what this financial tour of duty has taught me is just how much we need a financial revolution in our schools.

My client grew up thinking that success meant leasing a $100,000 Beamer … and he paid the price.

I want his kids to grow up knowing that success is driving a $15,000 Toyota … that you own outright.

Tread Your Own Path!

My Year of Being a Tafe Student

It all began on a Date Night last year, when Liz said to me:

“You’ve sold over a million copies of your book … what’s next?”

“Well, I’ve been thinking a lot about that”, I said. “And I think I’d like to go to … TAFE.”

Liz stared at me blankly.

“I’d like to study for a Diploma of (not-for-profit) Financial Counselling”, I continued.

“So”, she replied warily, “this will be a correspondence course you’ll do at night … after the kids are in bed, right?”

“Well … not exactly. I’m thinking I’ll head back to class … just like my old uni days.”

At this point, Liz began chewing her food very slowly, and raised her eyebrows.

“But you’re a married man, with a full-time business, and three children under the age of six!” she protested.

“Precisely!” I said.

So this year I’ve been one of those super-annoying mature-age students.

It’s been a lot of fun … I’ve sent selfies to my staff as I enjoyed a lazy beer on the lawn on a Thursday arvo while they worked (losers!) … but I’ve also learned a hell of a lot.

I have the finance part covered, obviously.

Yet learning the art of counselling people who are, in many cases, suffering severe stress and trauma — they may have fled a family violence situation, lost their home, or fallen gravely ill — is both challenging and rewarding.

Helping people who can never repay you is a real honour.

And now, a year on, I can happily say that I made it through my lectures (both in class and when I arrived home late … where my new-found counselling skills have come in handy).

There’s just one thing left for me to do before I graduate. The course has a practical component that I’m still completing: I’m required to spend 220 hours volunteering in the trenches … more on that next week.

Tread Your Own Path!

Sleepless Barefooters

Hi Scott,

My wife and I recently welcomed our first child, a boy.

While at the hospital, I noticed your book was in the hospital library with the caption ‘Great Books to Read Aloud to Babies’.

We have a copy at home that I have tried reading to our son, but he does not seem too interested right now!

Anyway, I wanted to ask for your advice on what type of bank account I should set up for him.

Regards,

Anna and Steve

Hi Guys,

Congratulations!

But I don’t think babies need bank accounts.

f you’re just going to use it for some grandparents’ birthday gifts and a few bucks here and there, you’d be better off creating an additional online saver in the lower-income-earning spouse’s name, and then nicknaming that account after your child. (That’s important -- names have power -- if you don’t, you’ll probably forget after a while and end up spending the money.)

However, if you’re thinking about saving long term for his future (10 years plus), you definitely don’t want to have that money in a bank account: better to invest it in the share market. I write about that in my book too.Feel free to read all about it in your rocking chair. However, I’d suggest you stick with Where’s The Green Sheep? and save my book for a few months’ time when you and your wife can tackle it together on a date night at a restaurant!

Scott