How Do I Find a Financial Advisor?

Hi Scott,

I have read lots of advice about avoiding excessive fees charged by financial planners. Problem is that we still need one! My wife and I now have over $1 million in super — $400,000 in Australian Super and the rest with a non-bank retail manager (it’s an Asgard account with three managed funds). This is all great, but we’re in our early 50s and need some professional help to manage it. Any ideas?

Will

Hi Will, You’ve done well!

Let me be clear about this, the biggest cost you’ll face in dealing with an advisor is ‘compounding fees’.

I’ll give you a really simple example:

Let’s go to ASIC MoneySmart’s super calculator (moneysmart.gov.au), and punch in some numbers. I’ll assume you want to retire when you’re 67 and you currently earn the average wage.

You have a choice between two funds: what the calculator calls a ‘medium high’ share fund that charges 1.3% in fees, and another fund called ‘medium low’ that charges 0.3% in fees.

Let’s assume they both earn historical rates of return on shares on your $1 million fund.

If you choose the lower fee fund, you’ll have $270,000 more in your account after 15 years when you retire.

That’s why when it comes to choosing your advisor it’s incredibly important that you pay a true professional a reassuringly expensive one-off fee for independent advice (it could be upwards of $5000). However, make it a non-negotiable that you are invested in an ultra-low-cost portfolio that compounds without any tacked-on costs.So, how do you find such an advisor?

Well, just like any relationship, the first time is free — and then you start paying. So I’d suggest you go on dates with at least three financial planners before you commit.

Scott

AFL Player Needs Help

Hey mate,

I am a professional footballer. I received a copy of your book through the Players’ Association, and it is honestly the first book I have read from start to finish ‒ overnight! I have learnt a lot from your book after being in almost $1 million in debt. My situation is as follows: I earn $220,000 a year, I own my own home (no mortgage), have $40,000 in a term deposit, $300,000 in an investment trust, and $200,000 in super. My question is, now that I am approaching 35 (I won’t be a footballer forever), how can I maximise my percentage growth?

Tim

Hi Tim,

I wish all the professional sportspeople I have dealt with were in as good a financial shape as you!

Look, so long as you don’t do anything stupid with your investments (read: Bitcoin, investing in a start-up, punting on property), and so long as you resist the need to upgrade to newer flashier digs ‒ you’ll be able to live out the rest of your days very, very comfortably.

You’ll never have to worry about money again: you have your home paid off. You have $40,000 in a term deposit, which I’m going to call your Mojo. You have a decent amount in super. You have $300k in a family trust (that’s hopefully invested in a low-cost share fund). If you tick the dividend reinvestment plan (DRP) box and let compound interest do its thing over the next 30 years, it’ll likely grow to $1.5 million in today’s dollars.

The main thing you need to maximise is your income after you hang up your boots. That’s where I’d be investing ‒  in education, training and career counselling ‒ because you’ve got everything else sorted. Well done!

Scott

What Would ‘Rich Dad Poor Dad’ Do?

Hi Scott

My husband and I (in our late 30s, two kids) both run our own small businesses. We work part time and are not earning steady money, about $60,000 combined per year. Our incomes never meet our expenses -- NEVER -- and now we have stopped paying our mortgage because we are so tired of ‘the game’, as I call it. My question is this: is it really worth all the effort to own your own home? ‘Rich Dad Poor Dad’ author Robert Kiyosaki calls a home your biggest liability -- not an asset! Do you agree with him?

Katie

Hi Katie,

Please insert your thumb into your mouth and begin sucking it while I pat your head and gently whisper: “Being a grown-up totally sucks, doesn’t it?”

The ‘game’ you say you’ve opted out of is called ‘being an adult and facing up to your responsibilities’. You made the decision to buy a house and take out the mortgage … so you either sell your home and rent, or you continue honouring your commitment.

It sounds like you’re not earning enough money in either of the business (presumably because you’re both only working part time?). If they aren’t making you enough money, and you see little prospect of improvement, by all means get out of that game. Either way, my advice is simple but brutal: one or both of you need to get a job so you can put food on the table for your kids, and avoid losing your home.

Now to your actual question: Is it really worth all the effort to own your own home?

Well, I agree that maintaining a home is expensive, and at times it can be a huge drain on your cash. But I still think it’s worth it.

Yes, creating your own castle involves sacrifice, hard work and a commitment to providing stability for your family. Yet that’s what being a parent is all about, right?

Finally, what would ‘Rich Dad’ do? I have no idea, though I do know he filed for bankruptcy in 2012.

Scott

My Totally Independent Financial Advisor … Sucks

Barefoot,

My wife are in our early 50s. Adult kids. We earn $180k a year combined, with $200k left on our mortgage, $200k in savings, and $350k (combined) in super. This week my wife and I met with a financial advisory firm who claim they take ZERO commissions and proudly claim their independence from EVERYONE. All good so far, but when we saw their fee pricing … bill shock moment! They want $7,500 up front as a project fee, then $600 per month thereafter. They were admittedly thorough in their fact-finding about our situation, but we just cannot accept their price as a good value proposition. Curious as to your thoughts.

Warren

Hi Warren,

Well done for seeking out an advisor that takes zero commissions. However, let’s be honest: your advisor is not truly independent … he has a vested interest in advising you to write him a $600 cheque each month!

However, it may be worth having them review a simple, set and forget plan: pay off your mortgage. Review your insurance. Build up a three month Mojo fund for emergencies. Then continue working hard, but save harder: salary sacrifice $25,000 each into a low-cost super fund. Invest the rest via a family trust into low-cost index fund that you can distribute tax-effectively to your adult kids.

Think of it this way: if you invest the $600 a month into shares, in 20 years time it could be worth $330,000.

Scott

Why Young Women Are Miserable

The email subject line simply read: “Crisis”.

It was from Jess, a 26-year-old, university-educated Melbournian who wrote that her life was “a disaster”.

Her email was brief, punchy, and melodramatic. Just the way I like ’em.

She also left her mobile number, so I gave her a call … at 8.51 pm on a Thursday night.

Barefoot: “It’s Scott Pape, the Barefoot Investor.”

Jess: “No way.”

Barefoot: “Way.”

Jess: “You’re calling about my email?”

Barefoot: “Yes. Apparently your life is a disaster.”

Jess: “Well, that’s how it feels. I’ve got about $6,000 in debt across three cards that I can’t ever seem to pay off … and I hate my job.”

I spent the next 15 minutes talking Jess off her $75,000-a-year ledge.

Why Young Women Are Miserable

Seriously, if I had a dollar for every broke young woman who emailed me … well, I’d have enough money to pay Jess’s debts off.

Yet it turns out that this runs deep:

This week the National Australia Bank (NAB) released its quarterly wellbeing index and, shockingly, it found that young women aged 18 to 29 are the most unhappy people in the country.

To be more accurate, the survey found that young women have the lowest wellbeing score of all the 48 groups surveyed, and that almost 50 per cent of young women reported they suffer from high anxiety.

Anxiety is worrying about stuff that hasn’t happened yet.

And, like Jess, a lot of young women look into their futures and see a lot to be worried about: they’re living through a unique time in Australia’s history where houses are severely unaffordable, debts are at record highs, and they’re getting married later.

Women are biologically inclined to seek out safety and security — eventually most women (but not all) will want to have children. And that explains why the NAB survey found that one of the biggest positive impacts on overall wellbeing and happiness is having your own home.

And if you can’t see a way of achieving this, it creates a lot of anxiety.

The Triangle of Happiness

The big shift for me happened a few years ago, when I lost my own home.

It was the first time I got it — in my gut — just how important safety and security are to happiness.

Deakin University Emeritus Professor Robert Cummins says the key to wellbeing is what he calls the ‘golden triangle of happiness’:

You need to have a sense of purpose.

You need to have strong personal relationships.

And you need to have a sense of financial control.

The research clearly states that money doesn’t make you happy, but it also shows that not being in control of your finances will make you very unhappy. In fact, Professor Cummins and his research team found that financial insecurity produces similar feelings to those of physical torture!

Cummins found that low-income earners who rated themselves at least an 8 out of 10 for being in control of their finances were far happier than those who were earning substantially more but rated themselves as not as in control of their finances.

Raising Strong, Financially Fearless Women

On paper Jess looks the goods:

She went to a private school.

(“We paid for her to go to a good school … we did our job!” say her parents).

She got good marks in Year 12, went to university, and graduated with a degree.

(“She got good marks … we did our job!” says the school).

Yet now, five years later, she’s tearing up talking to a total stranger about how her life is “disaster”.

Here’s the rub: at no stage of her education did anyone teach her how to manage her money, introduce her to the spirit-strengthening power of saving, or sit down and explain just how amazing the opportunities in front of her are.

And that’s why I’m so very, very passionate about shaking up the current schooling system — kicking out the credit card floggers and their ‘edu-marketing’ (Hello Cred!), and bringing honest, empowering financial education to girls (and boys) in our schools. And I’m going to do it. You just wait and see.

Tread Your Own Path!

Thank You Barefoot

Scott,

We spoke way back in 2010. That was the year when my husband died, I had a six-month-old baby, and I could not afford my mortgage repayments. Since then I have treated your (first) book like a bible. Now I have tripled my super, am building up my savings, and am working towards being financially independent. I just wanted to say “thank you”.

Alex

Hi Alex

Six years ago your family tree probably looked like a shrivelled up little sapling.

Today it’s not only strong but it’s growing into something magnificent!

Make no mistake, your actions over the past six years have literally changed your family tree forever.I’m proud of you.

Scott

Where to Invest $5 million?

Scott,

My wife and family are in a very fortunate position after selling our business in February this year. We have no debt, own our house valued at $5,000,000, own a beach house valued at $1,700,000, super $1,700,000, and approximately $5,000,000 in cash. We have sourced some advice on how to invest the $5,000,000 to provide an income stream of hopefully around 5 to 6 per cent per annum (they have suggested buying a commercial property and some investment properties). We now have financial advisors all over us like wet dogs. What would you do?

Gary and Helen

Hi Guys,

Congratulations on your success!

To get rich you will have concentrated your risk, and focussed all your effort into one business. However to stay rich you need to do the exact opposite: spread your money across a large number of investments, and take very few risks.

Therefore I’d run away from all the wet shaggy dogs that are trying to gnaw on your juicy assets. They have dollar signs in their eyes. Also, stay away from anyone who is recommending you invest directly in commercial or residential property. Reason being, it’s simply not diversified enough, and if you lose a tenant, you lose your yield!

Look, you’ve earned the right not to have to worry about your money. So if I were you, I’d keep a hefty amount of in cash (for opportunities, and because a $5 million home sounds kind of expensive to maintain!), and invest the rest in a broad mix of shares (local and overseas), via ultra-low cost index funds. The income you generate from dividends should be enough for you to live off without having to draw down on your capital.

Finally, you say that you’ve got got $1.7 million in superannuation, however, the cap is actually $1.6 million per person, so you may have the ability to contribute more. If you can, you should.

Scott

Will Interest Rates Rise Eight Times in the Next Two Years?

Barefoot,

This week I nearly had a heart attack when I read in the newspaper that economist John Edwards says that interest rates may rise eight times (!) in the next two years. There is no way my family could support this on my husband’s wage (I am a stay-at-home mum), be able to service our mortgage ($550,000) and afford to put our two children through school in a few years time. Can you please tell me that this guy is joking?

Erica

Hi Erica,

Is he joking? Well, let’s see: he’s an economist. He’s middle aged. He’s wearing a sober suit, sensible glasses, and he’s not smiling. I’m pretty sure he wasn’t doing a stand up routine.

However I think he was taken out of context. Edwards is smart enough to know that no one can predict the future (least of all economists, who on the whole are no better than dart throwing monkeys). What he was trying to say was that interest rates would move higher (at some point) in the future.

Here’s the interesting thing: anyone under the age of 45 -- and that includes you and me Erica -- has never experienced a recession in their adult lives. We have no reference point for it. In fact, our only experience is that housing prices go through the roof, and interest rates fall through the floor. People think it’s normal. But it’s not … not even close.

The truth is we’re living through one of the greatest booms in modern history. Eventually it will end (though only the monkeys know when). The only advice I’ll give you is to start preparing for higher home loan rates immediately. The worst that could happen is that Edwards and I are wrong ... and you pay your home off quicker.

No jokes.

Scott

An Update on the First Home Saver Super Accounts

I’m a little ‘dusty’ as I write this.

You see, as a card-carrying DIK (Dad I Know), I don’t get many leave passes from my wife … so when I got an invitation to an EOFY (End of Financial Year) finance shindig, I couldn’t pass it up.

After all, the EOFY is the one time of the year it’s socially acceptable for bean-counters to get on the grog.

You can picture it, can’t you?

Sharon was in the storeroom dishing out Cabcharges like party pills. Craig had a shandy. And late in the night Dennis got loose and moved his superannuation investment option from ‘balanced’ to ‘high growth’.

Boom!

So today I’m a little like a bear with a sore head.

And when I’m hungover, my tonic of choice is to call Treasury and talk tax policy on behalf of a reader.

Paula’s Problem

I got this question from Paula last week:

Hi Scott,

I’ve been reading your newspaper column since I was in primary school (my dad got me into it)! Now I am studying nursing at university, working part time in aged care, and saving for a home. I am very interested in setting up a new ‘home super saver account’. However, I called up my super fund (HESTA) and they don’t seem to know much about it, and they actually said it won’t come in till next year. Can you please clear this up for me?

Paula

My first reaction was “hell, have I been doing it for that long”?

My second reaction was, on Paula’s behalf, to follow up on the progress of the First Home Super Saver Scheme (which, if you remember, I talked about in my column some time ago). What I found is that it looks about as well planned as my son’s finger-painting, currently stuck on our fridge:

“What do you think of my picture, Daddy?”

“Oh that is beautiful! It’s a …. truck … right?”

“No! It’s a picture of you and mummy riding a horse.”

“Oh, yes! So it is!”

A quick refresher for those of you in the back row:

The First Home Super Saver Scheme was announced by our Treasurer on Budget night as a $250 million air kiss to housing affordability. As ScoMo crowed on the night, by making voluntary contributions of up to $15,000 per year and $30,000 in total, “most first home savers will be able to accelerate their savings by at least 30 per cent”. For an average earning couple it’s worth an additional $12,000.

From ‘Yeah!’ to ‘Meh’

That was in May.

The First Home Super Saver Scheme is set to launch on 1 July but, like Paula mentioned, none of the super funds I spoke to had the foggiest. And after speaking to Canberra, I worked out why.

The Government has had a bit of legislative constipation — the scheme hasn’t yet been passed into law. A spokesperson for the Treasurer said they were adamant that it would be tabled in the Spring session of Parliament, and that it would be passed.

Fair enough. But, to my mind, there’s a lot of uncertainty around it.

So should you open one up?

Maybe … (and, of course, only if it actually makes it into law).

You could consider opening a First Home Super Saver if you’re planning on buying a home in the next few years, and you already have a decent deposit. After all, it could be worth $12 628 extra to an average earning couple, compared to saving in the bank. Not bad.

However, since the Government announced these accounts I’ve had a lot of well-meaning parents and grandparents — not to mention savvy young savers like Paula — write and ask about opening one up for the long term.

My advice?

Don’t touch it.

Quite apart from the fact that the Government is still in need of some legislative laxatives, what happens if the current mob is voted out and the new mob decides to ‘ghost’ the First Home Super Saver Scheme (like you did with that mummy’s boy you dated twice in 2004)?

Well, if the scheme were scrapped, it’s possible your savings could be locked up in your super till you retire.

So, Paula, all I can say right now is: watch this space.

Tread Your Own Path!

The overnight $60,000 pay rise

Can you imagine getting an immediate $60,000-a-year pay rise?

Well, that’s what happened this week to a bunch of young blokes that I work with.

Even better, the average 20-something who got the pay rise is pulling in a whopping $371,000 a year.

I’m talking about AFL footballers … who this week scored a six-year, $1.84 billion collective pay deal.

But now for the tackle: despite the serious dough they get, a lot of these players will end up kicking their finances out of bounds on the full.

It’s a worldwide phenomenon: American footy players (lycra and crash helmets) earn an average of $US1.9 million a year, but most of them are broke within three years of retirement. NBA basketball players earn an average of $5.15 million a year, but 60% of them are broke within five years of hanging up their boots, according to a fascinating ESPN documentary called Broke.

How does this happen?

Well, this week I sat down with a bloke who knows: North Melbourne coach Brad Scott.

A few things you should know about Brad: first, he’s whip smart; second, he cares deeply about his players; and third, he happens to be a Barefooter!

(Oh, and fourth, I’m helping his boys this year … with their finances, not with their footy. Obviously.)

When it comes to footy and finances, Brad has seen it all.

In fact, when he was first drafted in the nineties, he was paid an outrageous sign-on fee:

“I got seven and a half grand”, he tells me.

“… and $250 a game.”

(And, just like my sheepdog Betty, if he got rubbed out or injured … no pay.)

While you may scoff at the players’ pay rise (and pay packet), after 20 years of playing and coaching Brad knows why many of them end up broke.

Let’s start the siren.

Show Me the Money!

“Part of the problem is that everyone else thinks they’ve got it made”, says Brad.

And then he proceeds to throw cold water over the “$371,000 average wage” claim that’s bandied around in the media (and by yours truly at the start of this column).

“Look, of the 44 players on our list, only 14 are earning above the average wage, and the rest are below it … and that would be similar for all the clubs.”

And ‘below’ is actually … really low:

The minimum wage for a rookie is $71,500, and for a second-year player it’s $100,000.

Sure, good money for doing something you’d do for free … but you’re hardly turning up to training in a Porsche 911.

And herein lies the problem:

“When you’re a young AFL footballer … you get a lot of female attention.”

“And the players … well, they’re not going to downplay the image. Really, it’s not in their interests to say … ‘hey I umm, actually don’t earn that much money’.”

And it’s not just the girls. Often when the players go home they shout their mates, and their families, who all believe they’re loaded.

I know what you’re thinking at this point: “Yeah, but that’s just what they start on, they’ll soon earn the big bucks.”

And you’re right.

Brad tells me that when some young players get a sizeable contract that can mean their salary is double or triple their first pay. And that’s when the real problems begin.

He’s My Private Banker

When your income triples, so do the opportunities to spend it.

There’s no shortage of banks — with private bankers in tow — wanting to lend these players huge sums of dough, to fulfil their Instagram images.

“The average AFL player career is just three years”, says Brad soberly.

“So, yes, technically they can service the debt while they’re playing … but what happens when they stop?”

A financial shirt front. “I’ve seen it too many times”, says Brad. “Plenty of guys I’ve played with end their career with a negative net worth position.”

That’s why Brad tells his players there’s only one thing he’s really impressed by: “It’s not what you earn, it’s what you save.”

Boofhead’s Bar and Grill

The final trap for many players … the world over … is that they tend to invest badly.

“They often invest in exotic investments”, says Brad.

Generally, it’s not their idea either.

The one thing I’ve learnt from dealing with professional sportspeople over my career is that there’s always a ‘bunch of blokes’ waiting around to hip-and-shoulder them into something complex, confusing, and high risk: restaurants, bars, property developments, you name it.

And best of all?

These high-tax-paying players can be so negatively geared, they’ll be positively screwed!

The Good Coach

The AFL and the clubs understand the problems players face, and that’s why they’re investing a lot into player development. Every club employs staff whose sole role is looking after player welfare. Plus, each player is mandated to have at least one weekday off per week to focus on professional development, either study or work placement.

Before the final siren sounds, the last word must go to Brad:

“The reason I’m passionate about financial education is that I’ve seen too many players who struggle after retirement, when they should be a step ahead. The reality is that a lot of players don’t succeed in the AFL — but they can all succeed in life.”

Tread Your Own Path!

What I learned from reading 385 job applications

Okay, so I’m kind of weird.

This year I’ve employed six people.

It’s not supposed to be this way; just ask the Daily Telegraph:

“The chance jobseekers with little or no experience have of finding work has plummeted, with startling figures revealing entry-level positions are ‘virtually non-existent’. Graduate jobs represent a mere 4 per cent of the entire new job market, falling 20 per cent in the past five years.”

Uh-huh.

When I talk to people (especially graduates) they bitch about how tough it is to get a foot in the door:

“It’s impossible to get a job without experience!” — “I can’t even get an interview!” — “How do I stand out?”

Yet, amid all the complaining, there are enterprising people quietly landing jobs … like the six I’ve hired this year.

And they didn’t have relevant qualifications, or fancy résumés, or stellar interview skills.

So what made them stand out? And how can you do the same thing?

Today I’m going to answer those questions, using one of my recent hires as a case study.

First, let me set the scene:

I had 385 applications for a producer role at Barefoot.

But I didn’t ask for résumés. Reason being, most people lie in résumés (and If I want to be lied to I can read Donald’s tweets).

And I didn’t ask for qualifications, or experience, because they don’t necessarily mean they can do the job.

And I didn’t even talk to them. Some people are excellent at talking about a job (you’ve been in meetings with these people), while others excel at interviewing for a job (because they’ve done a lot of interviews!). But, again, it doesn’t mean they can do the job.

As a boss I have an itch I need scratching, and all I care about is how good you are at scratching it (and not in a weird way).

That’s why at Barefoot we’re famous for long online surveys where we get candidates to do the actual task we’re hiring for. And, not surprisingly, a lot of people give up. (That’s part of the plan.)

Now, a confession: I don’t read through an entire application to work out what’s special about you.

No-one else does either. Recruiters spend an average of six seconds on each résumé, according to Time magazine. (Admittedly that sounds like a bulldust statistic. Personally, I spend about 18 seconds.)

Instead, I use a favourite tactic of many business owners: I put in a ‘hidden question’ that I go straight to, so I can do an initial cull. Then I read the ones I haven’t culled.

Now this may seem a hard-nosed way of doing things. Game of Thrones almost.

But I think it’s the most egalitarian way of employing people: I don’t care if you’re male, female or androgynous, how old you are, or where you’re from. All I care about is how good you are.

It doesn’t suit everyone. I once had a senior journalist contact me to apply for a role. We’d worked together years back, and he was a legend in his own lunchbox. Here’s how our phone conversation went.

Journalist: “I see you have a job going … I think I’d be perfect for it.”

Barefoot: “Sure! Just fill out the survey on the website.”

Journalist: “Really?! I mean, I have 20 years’ experience, so I am clearly very qualified.”

Barefoot: “You’re right. No need to do the survey.”

Journalist: “Great! So when would you like to meetup to discuss the role?”

Barefoot: “Never.”

As a postscript to this story, a few months later he did the survey … and his answers sucked.

He’s now working for a competitor of mine, bless his cotton socks!

How to Stand Out From the Crowd

So let’s talk about the person who actually got the position. How did she stand out?

Firstly, she got my ‘secret question’ spot on. She realised there was a question behind the question — so rather than giving a short answer, she explained her reasoning in detail, showing me she knew her stuff.

Second, she joined the Barefoot Blueprint to see if she’d be a good fit — and figured out what I needed to hire someone for. That showed initiative.

Third, she linked me to her profile on the freelancing site Upwork, where she’d done a few jobs in her spare time — which told me she didn’t mind hustling for extra work, she could manage her time, and she could get things done.

None of these things took her long to do, but they paid off in a big way.

Now, I know what you’re thinking: “Okay, Barefoot, but I want to work for Company X, where they have a hiring process with real résumés and real interviews. So your advice doesn’t apply to ME.”

I thought you’d say that. So let me tell you how you can use this strategy no matter what job you’re going for.

Barefoot’s Advice to Jobseekers

My ‘secret question’ technique is ruthlessly efficient: it forces you to show how you can do the job at hand.

And that’s the secret to any job application.

All any employer wants to know is this: “Can you do the job, or not?”

So get to the point.

Ask yourself: what are they actually asking for? What do they truly need done? What’s the real job here?

And then make sure your answer (or your résumé, or interview) addresses that.

What you want to say is: “Here’s the job. Here’s why I can do it better than anyone else. Here’s evidence of how I’ve done it in the past.” Show them, don’t tell them.

Here’s you: “But Barefoot, I don’t have any experience.”

Here’s me: “Well, go and get some. Freelance on the side. Volunteer. Heck — offer to do the job for free for two weeks to prove you can do it.”

Yes, it takes a bit more elbow grease than submitting the same résumé to 56 applications on Seek.

But if you do this, you’ll be irresistible to any employer … and you’ll be too busy getting job offers to complain about how few jobs there are.

Tread Your Own Path

I Got This!

Hi Scott,

I have suffered with chronic alcoholism and drug addiction my whole life. Father not present, nor any real family. Mum (the main provider) died suddenly when I was in my mid-twenties. Never really holding down a job, I faced being homeless. Very scary times.

But I took control. I cleaned the family home and rented it out. This gave me space to go to rehab. I was there for 18 months and re-learnt everything -- how to live, how to look after myself, how to be accountable -- and I have been 100% sober now for five years. I also went to TAFE, and secured a role in sales at a contact centre. I have held that job for three years now and have been promoted to managing a team of sales reps.

Earning around $80,000, I have some money to invest, so I have got onto your newsletter and am learning more each day. I now have $40,000 in my ‘Grow’ account and an investment portfolio worth $27,000. I am proud to say I have just built my brand-new home, and am renting out a room to subsidise costs. I have also been overseas six times in the last two years. I took control of a very scary situation at a very uncertain time in my life. I am now living the life of my dreams -- a far, far cry from the person I was when my mum died.

Bill

Hi Bill,

You’re a shining example of how anyone can tread their own path. Your mother would be proud. You got this!

Scott

Rich Girl Loses it All

This week we’re going to do something a little different.

See, right now, the newspapers are full of the tragedy. It’s desperately sad and heartbreaking and futile all at the same time: but the fact is, none of us can control the acts of terrorists.

So this week I’m going to focus on things you can control. I’m going to introduce you to three Barefooters — readers of this column. Each of them reached a turning point in their lives — a teenage rich kid who suddenly found herself homeless, a go-getting bloke whose financial advisor almost ruined him, and a woman who stared down her violent husband.

But the real story … is what they each chose to do next.

Rich Girl Loses it All

Courtney grew up an only child in a middle-class family.

By her own admission she was extremely spoilt, always getting whatever she wanted, whenever she wanted.

Yet when her parents separated, when she was 13, her childhood ended and things unravelled — quickly:

Courtney went to live with her father in January of that year. Tragically he suddenly and unexpectedly died in September of the same year. So she moved in with her mother.

Courtney knew that one of the reasons for her parents’ break-up was her mother’s drinking. Yet what she didn’t know was that in the year since the separation her mother had turned into a full-blown alcoholic, drinking from the moment she woke up until she passed out.

A few weeks after Courtney moved in, her mother abruptly took her keys and kicked her out. At age 14, she was homeless. For the next five years Courtney spent time on the streets, in refuges, couch-hopping, and in and out of government housing.

At 19, with $1.92 in her bank account, Courtney reached crisis point. Here’s what she did next.

“I went back to school and completed Year 12. I surprised myself when I got good enough marks to get into uni, where I’m currently studying commerce. I can only do it part time, because I work to support myself. Along my journey, I have read every single one of your newspaper columns. I have 412 of them marked ‘financial’ in case I have to re-read any of them. I feel like Barefoot is the financial parent I never had.”

The Go-Getter

Mick was always a go-getter.

He didn’t want to live an average life like other people. And the key to living the life of his dreams was to build wealth, so he hooked up with an equally go-getting advisor.

Over the next few years, Mick’s advisor took him down the ‘borrow to invest’ path, and go-gettered him from one investment turd to another.

He was losing money. The interest payments were crippling. The stress began to jeopardise his marriage. Mick had reached crisis point. Here’s what he did next:

“One day, while up in the mountains (must have been the fresh air), the penny finally dropped. My wife and I decided there and then to become debt free and take control of our lives.

“The first thing we did was dump the adviser. Then we offloaded the crap he’d signed us up to — the margin loan, the costly managed share funds. And then we paid off our house — in three years — and began stashing cash into super, into an index fund, and buying shares in low-cost index funds.

“Until we became debt free, I had no idea just how much of a burden it is. The best advice I could give anyone is to follow the Barefoot principles and KEEP IT SIMPLE. We all work too hard for our money to blow it by making mistakes. Funny, but through my mistakes I found financial freedom.”

He Has No Hold Over Me Anymore

Sandy was happily married for 10 years, and had two lovely children.

Three years ago she was sitting in the backyard when her husband announced, “I want a divorce”.

Like every woman who faces this situation, she was terrified:

“How am I going to support my kids?”

That fear stopped her from ‘rattling the cage’ for the next two-and-a-half years.

It kept her from having the courage to leave the house (or boot her husband out). And whenever she tried to broach the idea of finalising a property settlement he would threaten to not pay child support. Sandy knew he was controlling her. She knew she had to stand up and take care of herself. And then one night he became violent.

Here’s what she did next:

“It wasn’t until I read Scott’s book that I fully believed I could do this on my own. Now I’m taking back control. True to form, once my husband wasn’t getting his own way, the child support ceased. However, I’ve now sorted my buckets and I’m days away from the property settlement being finalised, which will allow me to purchase a home on my own.

“I’m also looking at investing for the future for me and the children. My plan is to be financial independent and not reliant upon what child support he deems fit to pay. I used to rely on it, but now — if I receive it — it will be a bonus that goes into the Grow Bucket for my children’s education.”

You Have More Power Than You Think

What I love about these stories is that they’re so different, but they share one similarity: each person found themselves in deep trouble and then took control of their situation — and changed it.

Over to you.

Tread Your Own Path!

You Ripper!

Barefoot,

I just wanted to tell you about my latest Barefoot Date Night. Like you advised I rang the bank, followed your script, and they reduced my rate from 5.35% to 4.54%, all in a six minute phone call!  I was sceptical at first, but now I'm over the moon on the outcome of the phone call. Thanks again mate!

Daniel

Hi Daniel,

Well done man!

And to encourage everyone else to follow your lead, here’s my “$22,064 Phone Call Script” from my book:

You: Hello, my account number is ______. I’ve been with you for ___ years, but I’ve applied to refinance with UBank. Their rate is ____ per cent, which is a full ___ per cent cheaper than you’re charging me. Given our longstanding relationship, I’d like you to match the offer—or send me the forms I need to switch to UBank.

Bank rep: One moment, please.(You’re bluffing, of course. However, the bank’s sales team have strict targets, backed by incentives, that they have to meet—one of which is giving profitable customers discounts to stop them leaving.)

Bank rep: We can’t match the rate you have quoted. However, we understand you are a valuable customer, so we would like to offer you a 0.15 per cent discount.

You: That’s not good enough. I’ve already got conditional approval … so in order to stay I need at least a 0.5 per cent discount. Could you please speak to your supervisor? I’m happy to wait.

Bank rep (a full six minutes later): On reviewing your case, we can offer you that 0.5 per cent discount on your current rate.

You: Brilliant! Please send me an email confirming the new rate and confirming that it will be applied as of start of business tomorrow.

Scott

Reminder: I first wrote about this years ago and highlighted the low fees. Today there are better bank accounts on offer. How do I know? Because my readers constantly email me about them! So before you do anything, google the best accounts on offer now.

What a 90-year-old gardener taught me about real wealth

Today I’ve got a real treat for you.

I’m going to paint you a picture of what real wealth looks like.

I’ve spoken to a lot of amazing people over the 12 years I’ve written this column, but the two hours I spent with legendary ABC broadcaster and garden guru Peter Cundall proved to be one of the most thought-provoking discussions of my life.

And it began terribly.

“I don’t like economists … and I hate financial writers … ”, the 90-year-old told me gruffly.

“Oh…kay”

“… but I love the Barefoot Investor!”

“Okay!”

At this point, dear reader, you’re probably thinking to yourself, “what can an old gardener teach me about achieving real wealth?”

Trust me, keep reading.

Our tale of riches begins in the working-class town of Manchester, England, on the 1st of April 1927. Cundall was born in a room that his parents rented for a shilling a week.

They were dirt-poor, but at least Peter was born healthy. Tragically, two of his baby brothers died — one almost immediately after being born, the second when just two years old. “That was quite common in the 1920s … my brothers basically died of malnutrition”, he says.

This was at the height of the (not so) Great Depression.

Of the one hundred homes in his street, only five had a job: “We really were the poorest of the poor … though I didn’t know it at the time. After all, there was no television for us to compare ourselves to anyone else.”

His father was a violent alcoholic who repeatedly bashed his mother. And so it fell to young Peter to step up. Despite his love of learning, he quit school at age 12 and began working seven days a week, from sun-up to sundown, to support his mother.

And it didn’t get any easier as he got older — fighting not only in World War Two but also in Korea.

The avowed pacifist tells me the Korean War was non-stop slaughter: “We were surrounded by rotting corpses all around us. These were your mates. The smell of death never left us for a year.”

The Power of Perspective

Here’s the thing: right now my inbox is chock-full of people worrying about the ‘crises’ they face in their lives: “I can’t afford repayments on my Audi — should I sell it (sad emoji)? I have to pay tax on super over $1.6 million … it’s not fair! The housing market is …. brutal.”

Uh-huh.Cundall — by contrast — has lived through genuinely tough times.

In fact, looking back on his life after nine decades, you wouldn’t blame him for being a bitter old bugger.

But he’s not.

Cundall’s genius is his sense of perspective.

“I had a magnificent childhood … I was extraordinarily happy”, he tells me, without a hint of irony.

His fondest memory is of his mother encouraging him to grow veggies in the next-door council block, to feed his family.  “I remember when I was three years old, sowing some peas, pushing them into the soil. I started growing organic food way before it was trendy. The streets were strewn with horse manure … that was the food for the veggies!”

And here’s how he describes the time in World War Two when he was locked in solitary confinement (for six months): “When I heard the cell door clink behind me I thought …  ‘Aaaah, finally a room to myself.”

The fact is, no one could go through the devastation he’s seen without being changed. For Cundall (and many of his generation) it instilled a steely sense of resolve, self-determination and inner self-reliance that he could handle whatever life threw at him.

Case in point, here’s what he says about debt:

“I’ve never had debts … never! If I didn’t have money, I didn’t buy it. And if I still wanted it, I’d make it.”

And about government handouts:“I have never, ever taken anything from the government”, he says (despite being entitled to a military pension after years of service). “I have no interest on being on the public teat.”

Now Cundall may be 90 years old, but he’s still as sharp as an axe.

Throughout the interview he punctuates his stories with hook-lines with the skill of an old-school advertising man: “And let me tell you another thing  … and this will shock you …”

I’d find myself leaning in to find out what will shock me …“I like paying tax … because of what it provides! We need to pay more taxes in this country!”

The Power of Contribution

After surviving two wars, Cundall began his career in the media.In fact, he was the pioneer gardening guru, starting the world’s first gardening radio talkback show, in the late 60s. And a couple of years later he began presenting on television, which became Gardening Australia, where he stayed until retiring in 2008. (“I am totally unqualified for anything”, he says. “When I got on telly, I just bullshitted my way through.”)

Key point: he didn’t do it because he wanted to be famous. He didn’t do it because he wanted to become rich. And he certainly didn’t do it to fluff his ego. He did it because he wanted to help people and show them how to grow healthy, nutritious food.

Or as he puts it: “I don’t have ambitions for myself … I’m ambitious about what I can contribute.”

And after 60 years, he’s still contributing. Most nights he works until 3 am in his study, writing for the Weekly Times and the Organic Gardener, and he does a weekend talkback show on the ABC.

He also volunteers his time helping soldiers who’ve returned from combat. “These are veterans who are suffering. And when you’re stressed out, you should go to the garden and push the shovel in. As you turn the earth, it releases something back to you. It’s like an all-natural anti-depressant.”

You can learn a lot from listening to the wisdom of people who’ve lived through genuinely tough times. When it comes to Peter Cundall, you can learn just by watching what he does. My hope is that when I’m 90 years old I’ll still be furiously bashing away on my keyboard and helping families manage their money better.

That, for me, would be true wealth.

Tread Your Own Path!