I Am Never Looking Back

Dear Scott,

Six years ago I left my ex, due to him punching me. It was the right thing to do, but it certainly set me back financially. That is why I have found your book so amazing. I already feel much better about my situation. I have my new fee-free accounts set up with better interest rates, have been on the phone to my super, and have split my money into ‘buckets’. This is the start of financial control, for my sake and my children’s. While I still feel anxious ‒ as a single parent with a mortgage and $8,000 of debt (personal loan and credit card) ‒ I feel more in control, and I know I’ve got this! I am never looking back.

Tanya

Hi Tanya,

What you’ve done is taught your kids two amazing life lessons.

First, that domestic violence is not acceptable.

Second, that you are strong enough to stand on your own two feet financially.

Thank-you for reading,

Scott

My Son is $120k in Debt … and Wants Me to Save Him

Dear Barefoot,

Twelve months ago my wife and I separated, so I am now ‘starting again’. We have nine children, and my eldest son has asked me to go guarantor, or have a joint loan, so he can consolidate his $55,000 credit card debt. He also has two personal loans amounting to about $70,000. He earns about $120,000 a year, and I earn about $100,000 myself. I gave him your book for Xmas but I fear it is not enough. His situation is crushing ‒ what can I do?

John

Hi John

You have nine kids?

That’s very impressive. I have a 66 percent fewer kids than you, and my life resembles the Teletubbies.

Now, with nine kids you’re in danger of setting a very expensive precedent by bailing out your eldest. Even if you could afford it, I still wouldn’t recommend it. Your son is in desperate need of a life lesson, and if you go the hook for him you’re denying him that opportunity (at best) and screwing yourself financially (at worst).

It takes a lot of guts for a parent to sit back and let their children learn from their experiences. Be courageous.

Besides, your son’s problem isn’t the interest rates he’s paying — that’s merely the symptom. His problem is that he has out-of-control spending. The sooner (and more brutally) he works that out, the sooner he’ll start behaving like an adult, take responsibility for his actions, and move forward.

There are no magic wands, but all the answers he needs are waiting for him in the book you’ve already given him.

Scott

Man Overboard

Hi Barefoot,

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

Mary

Hi Mary

That’s really … strange.

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

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

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

Scott

My Parents Nicked My Money

Dear Scott,

My grandmother passed away in 2013 and left me, along with her other four grandchildren, $50,000. Unfortunately, my parents put the money into their mortgage offset account without discussion, as they thought I was too young to be in charge of the money (I was 22, but I have always been very responsible and a great saver — unlike them). Five years on and I want my money! The question is, should they be paying me the interest they made off my inheritance?

Anna

Hi Anna,

What a pickle.

If I were you, I’d do three things:

First, arm yourself with the facts by reading your grandmother’s will. Were your parents required by the will to hold the money in trust for you until a certain age? Whatever the answer, I highly doubt you’ll want to bring legal action against your parents — that would make Christmas lunch awkward, right?

Second, as financial guru Noel Gallagher advises, “don’t look back in anger”. Look on the bright side: at least your parentals haven’t blown your inheritance on Bitcoin. The money is still there. And using an offset account is actually a tax-effective strategy for parking short-term money … well, so long as it’s your offset account and you’re not being treated like a 28-year-old kidult.

Finally, by all means you should cut the apron strings and get control of your money — but first have a plan for it. I’d like you to set up your three ‘Barefoot Buckets’ and, assuming you’ve paid off your debts, start saving for a house deposit. Then take this plan to your parents. Explain that you have a responsible financial plan that honours your grandmother’s legacy — and then hit them up for $58,000 (which includes $8,000 in interest you’ve forgone over the past five years).

That’s more than enough stuffing for the turkey for this year’s Christmas lunch.

Good luck!

Scott

I’m Down on Bended Knee

Hi Scott,

I have been seeing my girlfriend for three years now, and I am finally ready to propose! She pointed out the ring of her dreams on the weekend, and it looks like it is going to cost me $4,800. The jeweller is offering a payment plan which requires 10% deposit plus 14% p.a. I have enough to cover the deposit, but I would also love to take her to Fiji in one month so I can propose. I am unsure if I should go with the payment plan option or pay the ring with my credit card, or what?

Dan

Hi Dan,

It sounds like you’re about to get yourself on the hook, cobber ... in more ways than one.

So let me spell this out for you:

First, there is no correlation between how much you spend on the engagement ring, and how happy your marriage will be. None.

Second, diamond rings are one of the biggest marketing con-jobs in history (though of course I bought one anyway). The key is to save up and buy one with cash … hopefully via Gumtree at a substantial discount from a bruised bachelor. You’ve got rocks in your head if you borrow money to buy an engagement ring. Don’t do it.

Third, I proposed to my wife on the back porch. Would she rather it had been in Fiji? Sure. But she still said yes. Job done. If your girlfriend loves you, it won’t matter where you propose.

Finally, and most importantly, know this: the spending decisions you make today will set the tone for the rest of your married life.

Bula Bula!

Scott

My Husband Ran Off with a Younger Woman

Dear Scott,

Well, I never thought I would be writing this but … a month ago my husband of 21 years fessed up to wanting to run off with a girl 25 years younger who he met only a week before. Ouch! Fortunately, I have been Barefooting for the last few years and have paid off all debts (apart from the mortgage), and I have put $6,000 extra into the mortgage and saved $5,000 in Mojo.

It is probably not enough to get me through the financial mess of separating our finances, including the family home and a used-to-be jointly run business. But, despite the dent to the ego, I realise that if I am clever enough to have come this far, I will be okay. My question now is, how do I pay off my house after giving him his share?Thanks,

Kirsten

Hi Kirsten,

You sound like the dream person to get divorced from — if I did that to my wife, I’d literally be in fear of my life.

Without knowing your particulars, let me tell you the number one financial mistake that I see most women make when they divorce: they keep the family home.

Do you still need a big family home? Can you afford it on one wage? And, even if you answered yes to both of these questions, do you want to live in a home with all that emotional baggage?

If you can sell it as part of the settlement and come out with cash in your pocket, that would give you less stress and more freedom — and that’s exactly what you deserve. New Year, New You. You Got This!

Scott

Daddy’s Girl

Dear Barefoot,

My father monitors my money from afar and, as a 25-year-old woman, I feel I am being treated like a child. He thinks my partner and I are financially illiterate, and disagrees with us having joint bank accounts (he and Mum keep their money separate). He does not have my account passwords, but he does ask for updates on my money, and has forceful discussions with me about my budget — talk about pressure! Reading your book, I want to take control of my money, but I know this will be very hard for Dad. How do I tread my own path?

Jessica

Hi Jessica,

Your old man just wants the best for you, but he’s got boundary issues.

You’ve probably worked this out by now, but forceful conversations about money are rarely about money — they’re usually about control — and it sounds like your father wants to control you just like he did when you were a kid.

Of course you’re now an adult, living with your partner, and your financial situation has nothing to do with your dad.

My suggestion would be to give him a copy of my book for Christmas. This will show him you’ve got your head in the right space financially. Then explain to him that if you ever need any further advice he’ll be the first person you ask.

Scott

Help! My Wife’s a Ball-Breaker

Hey Scott,

My wife and I are currently following your teachings. However, we have come unstuck on overtime payments and additional income. I am working a second job, and doing overtime in my main job, to increase the amount of ‘fun money’ I have. But the wife says these extra funds should just be put on the home loan and I should not have access to them. I have searched but cannot find what you say to do with overtime and additional income. Can you please enlighten us?

Corey

Hey Corey,

You should check the index of my book — under ‘B’ for ‘ball-breaker’.

(Only joking.)

Then again, she could be right. If your mortgage is eating up more than, say, 40% of your income, I’d definitely side with her — it’s time to put in the overtime and pay that sucker down.

But if it’s under control, I’m on your side. You have every right to a bit of ‘fun money’.

The reason I lay out the Barefoot Steps is to get people to focus on the big moves that will get them to financial security. However, some people get a little overzealous, and get so focused on reaching the end that they forget about stopping to smell the … Bintang in Bali.

Bottom line: money in marriage is a team sport, so you should both have a say on how you spend your money.

Scott

My Mother-in-Law is a Sponge

Scott,

My soon-to-be mother-in-law is bad with money. She has over $100,000 in credit card debt, as well as a couple of 60-month interest-free loans that were never paid and are now charging 29.99% interest. My fiancé (we are both 25) is considering getting a loan in his name to ‘help’ her, but I believe she will just go back to her old ways. I worry about this debt when it comes to us buying our first home or if she does not pay for the loan. Over the past two months we have already paid $5,000 for her bills. Help me!

Gillian

Hi Gillian,

There’s no such thing as one Smartie.

That’s the lesson I’ve learned from my two-year-old: I give him a Smartie, knowing full well that it sets me up for a full-blown tanty if I won’t give him a second one.

After paying $5,000 of his mum’s bills, that’s the situation your fiancé is facing (and it sounds like your mother-in-law is behaving like a toddler -- not so smartie).

Bottom line?

Your mother-in-law is financially crazy. And you’re absolutely within your rights not to invite crazy into your life -- and you sure as hell don’t need to be guilted into funding her stupidity.

However, that’s a harsh message to deliver to your fiancé.So here’s what I’d do instead:

Explain to your fiancé that your mother-in-law needs love, kindness and understanding. She needs expert guidance. She needs a financial hero who can help her … in fact, she needs James Bond! Or, more accurately, she needs to call the not-for-profit Financial Counselling Australia hotline on 1800 007 007.

However, if she’s stamping her foot, quivering her lip and demanding another Smartie, you may need to book an appointment on her behalf. You should even offer to go with her -- that’s what a loving daughter-in-law would do. The financial counsellors are the best people to help her face up to the reality of the decisions she’s made, and provide solutions for her path forward.

Now repeat after me: no more Smarties!

Scott

Romantic Comedy or Horror Movie?

Hi Scott,My partner comes from a wealthy family. We are engaged, are having a baby, and have joint finances. Four years ago he was briefly engaged to someone else and he bought a house with a $50,000 inheritance from his grandfather. At the time, he and his parents agreed to a caveat to protect his asset from her. Wise move, and it worked. Fast forward to now, and I have been jointly paying for this same mortgage for a long time, on my wage of $110,000 a year. We want the caveat removed; they don’t. Advice?

Tess

Hi Tess,This sounds like the plot of a made-for-TV romcom. You meet the man of your dreams, but his meddling parents don’t approve of you!While I’m only getting your side of things, here’s what I’m reading:One: it was originally your fiancé’s inheritance, so it’s his money, not his parents’ money.Two: you’re now helping pay off the mortgage, so your name should be jointly on the title, if it’s not already. What’s more, if you can get the caveat lifted, you may find that you can get a cheaper deal on your mortgage.Three: the difference between you and his last squeeze is that you’re pregnant with his child -- their grandchild.In other words? Dude’s on the hook for 18 years, as Kanye would say.Besides, in the grand scheme of things, $50,000 isn’t a huge amount of money -- it’s more about the principle of your in-laws treating you like a fly-by-night floozy who’ll one day shake down their son.My advice? Just like in all good romcoms, your fiancé needs to stop being a mummy’s boy, stand up to his parents, and defend your honour!Thank-you for reading,

Scott

My $297,641.32 … errr, investment?

The first time, my wife flung her arms around me and, through tears of sheer joy, whispered “we’re pregnant”.

The second time, she raced up behind me and squealed with delight.

The third time, she pushed open the bathroom door, locked her eyes on me, and pitched the plastic preggo stick square at my noggin. (To be fair to her, it was a Friday night and I’d just got home from the pub … so I wasn’t exactly on my A-game.)

That was twenty-two weeks ago.

For the record, we’re over the moon to be having a new baby … it’s just that Liz was wanting a few months before going back into the ‘baby bubble’. (Fun fact: at our pre-marriage counselling session, Liz put down that she wanted three kids … I put down six. Time will tell who wins.)

Here’s one thing I do know: unlike buying a slab of beer, it doesn’t get cheaper the more kids you have. According to a study by Suncorp, the average Australian parent spends $297,600 raising a child to age 17.

Hang on — $297,600? That’s a very specific number. Maybe Simon from Suncorp followed Junior around with a Casio every day of his life. And then on his 17th birthday Simon hit ‘equals’ and triumphantly announces, “You cost me $297,641.32! But hey, I’m your dad, so let’s round it down to $297,600.”

Either way, it’s a huge number.

Worse, Suncorp’s research suggests it costs $984 per month for the first two years of your child’s life. That’s a huge whack of dough for any young family, let alone for those of us who want six kids (no wonder Liz threw the stick at me!).

So in celebration of our currently baking baby, this week I’m answering questions from new parents and parents-to-be.

Tread Your Own Path!

Burning Through the Bucks, Baby

Dear Barefoot,

I am 35 and engaged to the most generous guy, who I love. But we have spent $31,000 in two months! We earn $330,000 p.a. combined and have equity of $850,000 in our two properties, which we will sell next year so we can get a nice home with a small mortgage. Recently I did an audit and found we had spent $31,000 on … nothing! Meals out, weekends away, events at home, clothes, bond, removalists, some double rent for a period. I want to be debt-free in five years. Kick us up the pants!

Amanda

Hi Amanda,

Honestly, on your income you probably don’t need a kick up the pants -- you’re going to be fine ...… so long as you continue earning $330,000 a year. But if the money dries up, things can go into reverse pretty quickly.

It’s a three-step trap that I’ve seen plenty of high-income earners -- doctors, lawyers, footballers -- fall into:

First, buy expensive toys (boats, cars, and cash-draining McMansions).

Second, spend like a Kardashian -- and only invest in money-losing ventures that ‘lower my tax!’.

Third, get hit with one of the big D’s: divorce, disease, disability … or a downturn where you lose your income.

It’s more common than you’d think: recent research from Digital Finance Analytics (DFA) found that 30,000 households living in wealthy suburbs like Sydney’s Vaucluse (median price $4.5 million) and Melbourne’s Brighton (median price $2.6 million) are at risk of defaulting on their debts.

Truth is, wealth isn’t what you earn, it’s what you save.You want to impress me?

Don’t humblebrag about the $31,000 you’ve peed into your Prada handbag over the past couple of months.

As financial philosopher Shania Twain says, “That don’t impress me much”.

Instead, buy a house you can afford, pay it off, then show me your plan for how you will eventually replace some of your income through passive income, i.e. your investments.

Thank-you for reading.

Scott

It’s 2am and I Can’t Sleep

Hello Barefoot,

I am typing this at 2am -- I cannot sleep. My husband and I have a household income of $200,000 and have three small kids -- but we never see them, as we work in the city and live 60 kilometres away. The three-hour daily commute is taking its toll on us all. The house is great, and affordable, but a long way from work. Yet moving to a house big enough for all five of us that is close to the city would put us into mortgage stress. We are stuck -- what do we do?

Jenny

Hi Jenny,

Do you want the money or the box?

On one hand, a study from a university in Sweden found that relationships where one partner commutes longer than 45 minutes are 40 per cent more likely to end in divorce.

On the other, Deakin University Emeritus Professor Robert Cummins and his team have found that financial insecurity (read: mortgage stress) produces similar feelings to that of physical torture.

And you’re stuck in the middle!

Or are you? You see, it may not feel like it -- especially at 2am -- but you do have choices.

You can choose to ditch your commute and seek out jobs closer to home -- even though they’re likely to pay less. (Perhaps one of you could try this option while the other continues to commute.)

Or you can choose to spend less, and spend more time with your young kids. This is what I’d work to if I were you.

Besides, the proof is in the pudding: the Australian Wellbeing Index has repeatedly shown that people living in regional Australia (Woop Woop!) are among the happiest people in the country.

Happy travels.

Scott

My Partner’s Secret Debt

Hi Scott,

I have read your book and love it. Using your formula I have already paid off a long-term debt. Unfortunately, my partner and I have separate finances (her choice) and I recently found out that, in the time I paid off my debt, she racked up another for twice as much. Frustrating! We both earn OK incomes (combined $200,000), but are still renting at age 37. As we have three kids, I really want to get into our own home in the next four years … how do I convince her?

Jake

Hi Jake,

Uh-oh.

So you two have made the ultimate commitment -- three puppies -- and yet she’s still keeping you in the kennel when it comes to sharing her bank account with you?

As Dr. Phil would say: “Hmmm”.

And now you want me to tell you how to convince her?

Honestly?

I only have one party trick. I wrote about it in my book. It’s called a monthly Barefoot Date Night.

And I can tell you that, over 450,000 copies later, it works unbelievably well. Not only will it get you on the same (financial) serviette, but you two will be stronger and happier when you’re working towards a shared financial goal -- especially when it’s something as amazing as buying your own family castle.

That’s how I’d sell it to her anyway (and then I’d bribe her with great food and wine).

And if that doesn’t work?

Well, maybe it’s time to stop talking and start watching: after all, money talks and bulldust walks.

I’ve learned that if you want to know what someone values, look at what they’re spending their dough on.

So the question is, Jake, what’s your partner spending her dough on?

Scott

When Dad Is a Mum

Dear Scott,

We are two mothers -- a couple wanting to have a baby. We finished reading your book a couple of weeks ago and have started implementing the strategy. The trouble is, I have never wanted to have kids until I had enough money, but my partner wants them as soon as possible. And I admit the biological clock is ticking. We both work but have next to no money. I thought you may be interested in a same-sex couple. We too have financial troubles ... it is not easy, that’s for sure.

Annie

Hi Annie,

On one hand, you wouldn’t be the first broke parents to decide to have a kid.On the other hand ... what the bloody hell are you thinking?

Look, I don’t care if you’re gay, straight or polygamous -- you need to take responsibility for your financial situation before you can take on the ultimate financial responsibility of having a child. You’ve read the book, so you’ve got your road map -- now it’s time for wine, garlic bread … and action.

Scott

How Does Getting Married Affect My Tax?

Hi Scott

We are getting married in June 2018. Planning ahead, I’d like to know what tax implications there are after we get hitched. We are both 27, I earn $64,000 p.a. and he earns $74,000 p.a. We currently keep our finances separate and plan to do so until the marriage (though we have joint savings for the wedding, which will be spent!).

Kelly

Hi Kelly

Congratulations. You are the first bride-to-be to ever put ‘tax planning’ on their to-do list.

Bridesmaids’ dresses? Check. Flowers? Check. Tax implications of nuptials? … Email the Barefoot Investor.

Then again, you’re talking to a guy who times his Barefoot Date Nights to coincide with the monthly Reserve Bank meeting.

HOT!

Okay, so the big change is an administrative one: once you’re married, you’ll need to record on your tax return that you have a spouse, and include his taxable income. (And your spouse will have to do the same on his tax return.)

Why?

Well, it’s part of a reality show the ATO is pitching as a rival to The Bachelor (“You told me you earned $200k!!”)

Okay, so that’s not true. In reality, the ATO needs your spouse’s income to work out if they can slug you with extra tax (couples without private health insurance that earn over $180k combined will be hit with a 1% Medicare Levy Surcharge, rising to 1.5% for couples earning over $280,000), and also to work out any family tax benefits.

(Interesting factoid: even though our pollies are spending $122 million on a postal vote to decide on same-sex marriage, the bean-counters at the ATO are much more liberal: they define a spouse as being either a registered partner or a de facto, so you may be doing this already.)

There are a few other implications:The Good: you can split your (non-salary) income with your spouse, so always invest in the lower-earning spouse’s name.

The Bad: if you both own a home, you have to choose (or apportion) which one gets the capital gains tax (CGT) exemption. Talk to your accountant to crunch the numbers if you’re in this situation.

The Ugly: watch Seven Year Switch on Channel 7.

Congratulations!

Scott

I Need $372,255 ASAP

Hi Scott,

How do I come up with $372,255 ASAP? I am 43 and going through a divorce and property settlement. My ex-husband has offered the house and 20 acres to me if I can come up with the money. But I am a low-income earner with no assets (other than my two gorgeous children) and no substantial savings. I am thinking I need to either go to the bank for a whopping loan or find some investors, and I am planning on subdividing 2 x 5 acres to pay them. Any suggestions would be greatly appreciated as I am out of my depth.

Claire

Hi Claire,

Don’t take on the house.

You can’t afford it, and, in the unlikely event you raise the dough, you’ll end up working round the clock and stressed out about your debts.That’s not fair on your kids. They need you right now -- they need all your focus and energy to help them through this really difficult time. So give it to them, and not to a pile of bricks, your husband, or your bank manager. The house doesn’t matter; instead focus on the dining room table you sit around each night as you talk with your kids, wherever that may be.

Scott

Can I Buy a Corvette?

Hi Scott,

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

Rob

Hi Rob,

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

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

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

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

Bottom line?

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

Scott

My Husband Is My Banker

Hi Scott,

I am a 31-year-old stay-at-home mum of two kids. My hubby has a new job (paying $130,000 p.a.) and has arranged for payroll to pay the money into his account each fortnight. Once paid he direct-debits money into my account to pay all bills for the fortnight. He also has a (maxed out) credit card on his online banking which he adds to. He works long hours and deserves some spending money, but I honestly do not know how much he spends each fortnight! Please help me address this issue without ruining us.

Eliza

Hi Eliza,

This is going to sound like a blatant plug (because it is), but the easiest way to address this issue is to get a copy of my book. The book is set around Barefoot Date Nights, where the two of you sort out your finances as a team (with a wine in your hand). The book explains why married couples should share the same account. If he baulks at the idea, well, he has the rest of the dinner to explain why he doesn’t trust you enough to share money with you. Good luck!

Scott

Should I Dob in My Brother to the Cops?

Dear Scott,

For the last year or so, my younger brother has been doing some online share trading. Long story short, he has lost it all -- hundreds of thousands of dollars. In the process he has nicked money from some of my family members, which has wiped out their savings. He even took a loan out in the name of a family member without them knowing! Given he is family, is it better to keep this amongst ourselves or to involve outside parties?

Hamish

Hi Hamish!

‘Nicking money’ is like $20 from your mum’s purse. You’re talking about wiping out their life savings!

That’s not nicking, that’s fraud. And the fact that your mother used to change his nappy doesn’t change the fact that he’s committed a crime.

It sounds like he’s an addicted gambler, yet rather than sitting in front of a pokie screen he sits in front of a trading screen. It’s the same thing (and has basically the same odds).

What would I do if I were in your shoes?

Well, I’d tell your brother that he needs to do three things: first, he needs to get legal advice (and so should your family, even if no charges are ever laid. It will bring home the gravity of what he’s done). Second, he should get professional help for his addiction. Third, when he’s sorted out, he needs to start repaying the family debts by getting a job and earning some real income.

If he doesn’t do these things, I’d consider handing the matter over to the authorities.

Good luck.

Scott