Aspiring Artist

Hi Scott!

I am a 15-year-old aspiring artist who is interested in doing commissions for online customers. I am hardworking and passionate about art. Where should I start and how do I set up my own company? I have no idea how I am supposed to be paid online without giving away my bank details and possibly being scammed. What do you think?

Zoe

Hi Zoe,

I think you’re fantastic. That’s what I think. I also think that the lessons you’ll learn from setting up your business will be as valuable as any subject at school.

For simplicity, I’d start off as a sole trader which allows you to use your individual Tax File Number. Once you’ve got that, sign up for an Australian Business Number (ABN) with the Tax Office. Then set up a bank account with your business name -- Zoe’s Picasso Productions or whatever you want. Then it’s time to set up a basic online store -- via Shopify or PayPal -- to accept payments.

After all that, the real work begins: finding customers, working out your pricing, and building your brand. Good luck, and send me a link to your online shop when it’s up and running!

Scott

Tax Effective Way to Buy a New Car?

Hi Scott

A friend of mine, who is in real estate and whose mum is an accountant, suggests that it is more tax effective to buy a new car on a three-year finance deal with an agreed buyback figure than to drive a cheaper older car. My friend seemed to get a good tax return for her earnings due to this. Am I better off doing this than driving my older (but almost fully owned) car?

Chris

Hi Chris,

What a load of rubbish.Car dealers (and finance companies) have come up with all sorts of marketing gimmicks to get you to buy brand-new cars, which fall in value by 30 per cent as soon as you drive them off the car lot. That’s on top of the finance cost, of course.

You’ll always be better off buying a three-year-old car for cash, downloading the logbook app from the ATO, and claiming your expenses through your business. That’s what I do. Even better, small businesses can claim an accelerated depreciation of $20,000. Honk, honk!

Scott

Save Me from My Kids!

Hi Scott,

I am a successful elderly businesswoman. My business (which I started from scratch) is conservatively valued at $7 million. My problem is that I have a daughter who wants all my money. I thought I could leave the business to the family, but apparently that’s not going to be the case. My daughter says she will challenge the will and just keep going till there is nothing left. What should I do?

Helen

Hi Helen,

I see this quite a bit -- ‘kidults’ putting their lives on hold and waiting around for an inheritance they believe they’re entitled to. For no other reason than that they are a member of the ‘lucky sperm club’.

As a successful self-made woman, you’ll understand that money doesn’t, in itself, make you any happier -- it just magnifies the person you already are.

In other words, your daughter won’t find happiness from the money you give her (or that she tries to prise from you).

Anyway, let me take off my tweed jacket, put down my pipe ... and pick up my calculator.

If I were in your shoes, I’d do a few things:

First, I’d sell your business. It’s your life’s work, so you’ll want to ensure that your customers and staff are in safe hands. You should have the final say on who takes it over. If you leave it to your kids when you die, they’ll probably just flog it to the highest bidder.

Second, I’d think about placing your assets into a trust, which will bypass your estate and with it any potential claims from your daughter (that’s if you decide to give your precious little snowflake donuts).

Third, I’d think deeply about the legacy you want to leave. Right now at least part of your legacy will be your spoilt, entitled brats fighting over money they haven’t earned and don’t deserve.

You know what I’d do?

I’d pick a cause that your family believes in (funding a shelter for women fleeing domestic violence, granting wishes to kids with cancer, saving rare birds -- whatever’s meaningful to you) and pour your millions into a charitable trust for that purpose. If you really want to help your family find happiness, teach them the power of generosity.

Scott

Bless Your Cotton Socks, Barefoot

Hi Scott,

God love your cotton-picking socks, Barefoot! With your help I have, in under two years, eliminated all my credit card, personal loan and car debt, and built up some Mojo as well. All that’s left is my mortgage of $106,000. Thank you!

Caroline

Hi Caroline,

If you were standing in front of me, I’d give you a fist bump, homeboy style. Fact is, you’ve turned the corner financially. Now it’s time to put your retirement planning on autopilot: boost your pre-tax super contributions from the current 9.5 per cent to 15 per cent in an ultra-low-cost fund. Then set a date to be mortgage free. You rock!

Scott

I’m a Multi-Millionaire!

Hi Barefoot,

I have a question about how to deal with an upcoming bit of luck. I am the CTO (Chief Technology Officer) of a startup, and when I started I was allocated 5 per cent of the company’s shares. It now looks like we are about to be bought, and valuations suggest my share could be worth up to $4 million! I have been with the company for over 12 months, and I paid a notional $1 for my entire share. I have an outstanding mortgage of about $800,000. Mate, what do I do to maximise this opportunity?

Chris

Hi Chris,

Well played! The first thing you need to do is talk to an accountant who specialises in employee share schemes about your potential capital gains tax (CGT) bill. Given you’ve held the shares for over 12 months, you’ll get a 50 per cent discount on your CGT bill.

However, I’d definitely want a second opinion on what the value of the shares was when they were allocated to you.Once you have that sorted, I’d pay off your mortgage, put three months of Mojo in an online saver account, max out your aged-based super contribution allowances, and then invest the rest in blue chip shares (to balance out your riskier startup employment) via a family trust.

Good luck.

Scott

I am OFFENDED

Scott,

Last weekend I took offence at your comment about ‘double dipping’ on paid parental leave (PPL). The PPL scheme was designed so that government and industry can support families together, so there is NO SUCH THING AS DOUBLE DIPPING! To call taxpayers double-dippers is offensive and uneducated. The current PPL is already not enough, and you sending the wrong message does not help!

Narelle

Hi Narelle,

My wife agrees with you! Tony Abbott agrees with you! But I don’t!

The Government provides parents 18 weeks of PPL at the level of the minimum wage. Currently, an employee has the ability to ‘double dip’ by also accessing their employer’s generous maternity leave scheme.

My view is it should be one or the other -- but not both. It is not an entitlement; it’s a taxpayer-funded safety net. Either way, that was just one line in a column that focused on empowering first-time parents to save up at least $10,000 so they can create their own safety net.

Scott

The Medicine Man

Hi Scott,

I am currently (fairly happily) employed as a paramedic. However, I have been thinking about further study to pursue a career in medicine. The course fees will be $20,000 p.a. for four years, which if invested in the share market instead, would become a substantial amount of money. I would really appreciate your take on this investment from a purely financial standpoint.

Ben

Hi Ben,

From a financial standpoint it’s a no-brainer. You’re talking about an investment of $80,000 over four years to potentially earn $80,000 more each year for the next 40 years.

The only problem is that you really don’t want to be a doctor, do you? If you did, you wouldn’t be asking me about the ‘opportunity cost’ of the fees.

Seriously, mate, if you’re smart enough to study medicine, you’re smart enough not to choose a career based solely on the bucks.

I’d suggest you read a book called Strengths Finder 2.0. It is produced by the Gallup organisation, and it has an in-depth survey that will help you identify your core strengths. Build your career around them.

Scott

Wealth, Health, Love … and a Family of 10

Hi Scott,

I have recently separated from my (now ex) husband, who was extremely financially controlling (I have only just learned how to use internet banking!). He has left me to pay for everything -- two mortgages, both lots of utilities, insurances and all kids’ expenses. I have since fallen in love with a woman who also has four children (that makes eight children altogether). I need to support us all, and I have heard about a business called Coinspace. Is this a good investment to secure the financial future of my now huge family of 10?

Leanne

Hey Leanne,

You are the reason that people stop me in the street and say: “Those questions... they’re not real are they?” But this is your life -- and truth is stranger than fiction, right?

OK, so first off I think Coinspace sounds like a very, very bad idea. One of my investment safeguards is never to invest with a company that sounds like L. Ron Hubbard. The following is taken verbatim from the Coinspace website:

“FUTURE is in your hands. WITH US: you are literally creator of YOUR own money for YOUR future” (sic … very sic). And it goes on: “Coinspace is more, it can be translated into the beauty of living, lifetime support, wealth, health, love and education.”

Now let’s get serious, Leanne. Many women leave a controlling relationship without the skills to pay the bills. In your case, your ex had a vested interest in keeping you in the dark -- so you wouldn’t know what you’re entitled to.

The first thing you should do is consult a family lawyer and have them look over your divorce. There will be a division of assets, and it will take into account that you have custody of the kids. And as long as your ex-husband is working, he will have to pay you child support. The bottom line is this: there are four parents in this situation and they all have a responsibility to provide for their kids. It’s not all on you.

The other thing I want you to do for me is educate yourself on the basics of personal finance. Now, you’ve probably had your self-confidence kicked out of you by your ex, but I’m here to tell you that you can do it. If you can raise four kids on your own, learning the behavioural building blocks of winning with money will be simple. Good luck in finding your happy space (but not your Coinspace).

Scott

Real Estate Mistakes

A couple of years ago I hosted a 13-week prime time television show.

Don’t remember it?

There’s a reason for that … it was axed after the second episode.

I found out about its premature death via a text message (!) from the network. It started out promising — “We LOVE the show” — but went quickly downhill — “And we’ll play out the rest of the series on one of the digital channels … sometime.”

Television is a brutal game.

Then again, so is the property market, which is what the show was about.

If we’d made it to the later episodes, you would have seen a young couple making a life-changing mistake.

Spurred on by her father, the couple were half-heartedly bidding at an auction on an absolute dump of a joint. You could tell they didn’t want it, and you could also tell that they really couldn’t afford it.

And then the unthinkable happened … the bloke they were bidding against suddenly put his hands in his pockets and shook his head, and the auctioneer turned around and shouted “SOLD!” to the shellshocked couple.

Real Estate Mistakes

So let’s talk about the two biggest mistakes that first home buyers make.

The first mistake they make is they buy a home they can’t afford. They’re often spurred on by the ‘advice’ of family, friends, real estate agents and bank managers — none of whom have the responsibility of repaying the debt for the next 30 years.

That explains why I’m a stickler for saving up a 20 per cent deposit. Yes, a good deposit means that you don’t have to pay Lenders Mortgage Insurance (LMI), which can cost homeowners upwards of $13,000 simply to insure their bank. And yes, it also means you’ll be able to negotiate a cheaper rate with the bank. But the main payoff from saving a 20 per cent deposit is that you will have proven to yourself that you can handle a huge mortgage.

How long does it take to save up a 20 per cent deposit? Well, the average full-time pre-tax wage in Australia is $78,832 or $5,000 a month in the hand (excluding super). So a couple both earning average wages could live off one income (very frugally) and save a $100,000 deposit in 21 months.

The second mistake first home buyers make is … buying the wrong home.

It happens every weekend. Property prices in our capital cities are so insanely high that many young couples get worn down by being continually outbid on places. Some get so desperate they wind up behaving like a boozed-up bloke at a nightclub when last drinks are called … “You’re here; you’ll do”.

I get emails from people most weeks saying things like, “We know it’s tiny, a little dumpy, and totally not in the area we want to end up … but it’s only temporary.”

Haemorrhoids are temporary … a $650,000 home is anything but.

Trust me on this. The biggest purchase of your life shouldn’t be a chew-your-arm-off-in-the-morning moment. You should only buy a home that you can happily live in for at least 10 years.

Reason being, the costs of buying and selling (hello stamp duty and agent’s fees) mean that you will likely be out of pocket if you plan on selling within a few years. Also, the idea of turning your home into an investment property and upgrading is generally a bad idea from a tax (and investment) point of view.

The bottom line is that if you can’t commit to a 10-year timeframe then you’d be better off renting.

Yet that doesn’t mean you should hold off buying until you can afford to live in a trophy suburb. Far from it. When my wife and I went looking for our place in the country, we decided to rent there for a year. “You should rent in the country for a while… make sure she doesn’t miss her soy lattes”, my father wisely advised. It was good advice, given my wife, Liz, was brought up in North Fitzroy where even the ducks have their own bike lanes.

In that year of renting we got a feel for the joint. Not only did we become part of the community, we also got to study the market. I made friends with local real estate agents and even did a letterbox drop of places I wanted to buy.

In the end, the day we bought our home was one of the best days of my life. Not only could we afford it, but we knew it was the home we’d never leave (well, until it burnt to the ground). I actually sealed the deal by proposing to Liz on the verandah.

Okay, so you may not go that far, but I guarantee you that every first home buyer feels a sense of freedom from finally being able to delete the Real Estate app from their phone. Not only did Liz and I get our weekends back, but we now had a place to call home.

As my mum says, “Life doesn’t always turn out like it does on TV”. And thank God for that.

Tread Your Own Path!

Are We a Bankruptcy Case?

Barefoot,

I am humbled by the current state of the WA economy. My current job is paying me 50 per cent less than what I was earning four years ago. I now earn $115,000 and my wife earns $70,000, and we have a teenager in private school. We have dwindled away $120,000 in savings just to survive. Our house is worth $900,000 (oweing $720,000), and we have car loans of $35,000 and credit card debt of $50,000. We have now hit rock bottom and do not know what to do. Are we a bankruptcy case?

Terry

Hi Terry,

Are you a bankruptcy case? You’re certainly spending like it.

Despite what you’re telling yourself, you don’t have an income problem, Terry -- you have a spending problem. You ‘dwindled away’ $120,000 (and $50,000 in credit cards) ‘just to survive’?

Fair suck of the sav, Terry!

Even on your current household income you’re pulling in $11,000 a month after tax. Your mortgage is around $4,000 a month. Even with a kid in private school, $300 haircuts, and fuel for the jet ski, you should be able to make ends meet ... but you can’t. You’re spending way more than you earn, and you’re basically broke. That can only keep going on for so long.

So it’s time to wake up and shake the sauce bottle, buddy. You are still spending like a high-earning FIFO when you’re all but ... FIFO-ed. Financially, you can turn this around within a few years without going bankrupt -- but only if you and your wife are prepared to change your behaviour.

Scott

Help! My Broker Sent Me Broke

Scott,

My husband died in September 2014. I was too emotional to invest the money I received, so I thought I would go with a broker to reduce my stress in those raw, grieving days. In April 2015 I gave $30,000 to a broker -- and by the end of August it was down $27,000 with just shy of $3,000 left in my trading account! I was livid. Obviously I had words with the broker.

He now has my account standing at $8,000, saying he will make it back up to the $30,000. But the damage of trust has been done. I am between a rock and a hard place. If I take out my money, he has no chance of recouping what he has lost. If I leave it there I am afraid to do any trades in case it all disappears. I suppose my question is this -- do I have any rights to recoup my losses from him?

Linda

Hi Linda,

You may as well have given your money to Tom Waterhouse to go bet with. Your broker has zero credibility and you should deal with this immediately. As in right bloody now.

Write a letter of complaint to your broker’s compliance manager that paraphrases what you told me, and attach copies of your statements. Sign off with the following: “Immediately withdraw all my remaining funds and compensate me for my losses.”

Under the dispute resolution process the broker has 45 days to respond to your complaint. So to give them a gee-up, follow your letter up with a call to the compliance officer and use the words “I’m mad as hell, absolutely livid, and I am lawyering up.”

Third, call the Financial Ombudsman Service on 1800 367 287 and register a complaint.

I can’t guarantee any of this will work, but it’s worth … a punt.

Scott

Trumped!

Scott,

I can’t believe the Americans could vote in such a loose cannon as Donald Trump. The experts are predicting that he will be an absolute disaster. The share market has been a rollercoaster and I am wondering what I should do with my shares, given that I am 10 years off retirement.

Beth

Hi Beth

There are many things we can learn from the US election, but the most important one is something I wrote a few weeks ago: experts are no better at predicting the future than my golden retriever, Buffett.

The experts predicted that Clinton had an 87 per cent chance of winning.

Wrong.

The experts also predicted that if Trump was able to pull off a miracle the share market would drop 13 per cent.

Wrong.

The US market has hit all-time highs this week. And now the media is going back to these so-called experts and asking them what happens next?!

And they say Donald Trump is crazy!

The truth is the election result has zero effect on where I am investing my money right now. Again, as I said a few weeks back, I just don’t think it matters who is in the White House in the short term, and in the long term compound interest takes care of itself.

However, I’m not surprised that the share market is hyped up because Trump is clearly pro-business (even though he’s not a pro at business himself):

First, he likes building things. And he has promised to embark on one of the biggest infrastructure spends in history.

Second, he’s not afraid of debt (as shown by his string of corporate bankruptcies), so I wouldn’t be surprised if he pushed things to the limit.

Third, he’s committed to dramatically slashing taxes in the most capitalistic country on earth. Like Ronald Reagan, he’s planning on a ‘trickle down’ approach -- allow rich people and companies to pay less tax and they’ll stimulate growth that will eventually trickle down to the workers. Or at least that’s the idea.

The final thing I’d say is this: the man lacks character. Whether it be the coach of a footy team or the CEO of a business, if you have a fundamentally flawed leader -- whose decisions are based on their own vanity and ego -- history has proven that it rarely works out well.

Still, I can’t control what goes on in the White House … the only thing I can control is what goes on in my house.

Scott

How Much Does it Cost to Have a Baby?

About four years ago, my wife entered our living room waving a pregnancy stick above her head like she was Mitchell Johnson triumphantly screaming HOWZAT! at the umpire. “We’re pregnant!” she cheered.

I was like a defiant Indian batsman disputing the inside edge. “Give me a look.”

We both stared at the plastic stick under the fluoro light in the kitchen. There wasn’t a second blue line.“Not out”, I boldly declared.

We ended up taking it to the third umpire -- our local GP -- who confirmed one of the great learning lessons of my life: my wife was right (she was pregnant). She’s always right. Even when she’s wrong, she’s right.

And if my life was a telemovie, the next scene would be a fast-moving montage (with Johnny Farnham’s ‘Playing to Win’ as the soundtrack), as we get married at our farm, have the baby (I almost pass out), the house burns down (I almost pass out), and we have another baby (thankfully, I’m now strong enough to cut the cord), and then the music fades down and we return to the present moment where I’m typing this to you ... as my three-year-old clean-bowls my one-year-old, and my wife yells at me like it’s my fault.

If you’re planning to start a family -- or even if you’re not -- the news that you are expecting a baby can knock you for six.

Here’s how to have a good opening partnership.

It costs $10,000 to have a baby? Howzat!?

In the year leading up to the pregnancy you should save up -- at the very least -- $10,000.

The average cost of having a baby in a private hospital is $8,500 per birth according to Medibank Private, and that doesn’t include obstetricians, nappies or ‘push presents’ that fathers are apparently supposed to buy to motivate their pregnant partners (like a bowling ball pressing down on them isn’t motivation enough).

Do you really need that much if you’re planning on delivering in a public hospital?

Yes, you do.

Sure, giving birth as a public patient in a public hospital is free -- but it’s what happens during the pregnancy that can really cost you. Think of all the visits to the doctor, the blood tests … and then there’s the ‘little emperor syndrome’. You see, most first-time parents go a little ga-ga when they are expecting.

I’m a classic case study of stupidity.

In the months leading up to my first son being born, I put more research into choosing a pram than I did into buying my first car (and I spent roughly the same amount). And when that state-of-the-art ‘all-terrain’ stroller was destroyed in our house fire ... I replaced it with a cheap and nasty $25 job from Kmart.

Think of having a baby as like starting a business. There are significant upfront costs that can be amortised over subsequent product releases, but these upfront costs are really going to hit you.

What you can do -- like any good business owner -- is to lower your costs by buying strollers, cribs and the like from Gumtree or eBay. Remember, it’s not child abuse for kids to wear hand-me-downs or, later, to share a room.

Still, that doesn’t alter the fact that you need a big chunk of change on hand for your first baby. You’re about to enter one of the most expensive periods of your life ... and you’ll be doing it on one wage -- with sleep deprivation and cracked nipples.

So for your sanity make sure you have at least $10,000 saved up.

Should We Go Private or Public?

We’ve done both, and I’d take public any day of the week. (That said -- I’m basing my opinion on the comfort of the chair I dozed off in, the cost of parking, and the fact that it was ... free). So I asked my wife and she agreed with me.

We’ve got one of the greatest public health systems in the world, and you’re already paying for it.

How Do I Know What I’m Entitled to?

New parents receive 18 weeks of paid parental leave, which works out to be $657 a week before tax, on top of whatever scheme their employer offers (and around half of all employers have some form of paid maternity leave).

Once your baby is born, you could be eligible for some Centrelink benefits, including the Family Tax Benefit, parenting payment, rent assistance or a health care card.To work out what you are entitled to go to Centrelink’s online ‘payment finder’. Then go to Moneysmart’s ‘parental leave calculator’ which will help you get a bird's eye view of your finances over the next 12 months.

My recommendation is that any parenting payments you receive should be in addition to the $10,000 you’ve saved up.

Should We Buy a House?

I get this question a lot from expecting first-time parents who currently rent. Some write to me in a state of panic at the thought of bringing their kid home to a rented home. But unless you have a 20 per cent deposit -- in addition to your $10,000 baby bounty -- I’d hold off buying a home for at least a few years.

Life is going to be very stressful without adding a move and a mortgage to the mix.

How Do I Ensure My Kid Gets a Good Start in Life?

By looking after yourself.

The first 12 months of being a parent are stressful. You have no idea what you’re doing. There’s very little sleep (at least in the beginning). You basically surrender yourself and serve the baby. And so the best gift you can give yourself in that first year is not having to fight or worry about money. And we’re planning on long innings with plenty of bouncers being thrown your way.

Howzat?

Tread Your Own Path!

What Happens When My Wife Dies?

Dear Scott,

My question to you is this. In your column you often state that couples should have their money in joint accounts. What happens when one passes away? We have been advised to have separate bank accounts just for such a situation, because when one passes away all accounts with their name on it are frozen, and the surviving partner has no access to the funds. How do you overcome this?

Robert

Hi Robert,

No, that’s not right. A bank will not freeze money in a joint account -- it belongs to both account holders jointly. If one of you dies, the other would have to present a death certificate to have the account changed over to their name only, but there’s no reason they wouldn’t be able to access the money in the joint account. Still, good on you for thinking about this stuff -- sorting out your affairs ahead of time is a really thoughtful, loving thing to do.

Scott

The $53,100 Question

Hello Scott,

I will be 65 next year and I am in good health. I have seen a financial advisor who advised me to transfer all my AustralianSuper money ($680,000) to Netwealth and to put it under my wife’s name so I can obtain a health card. We have cash and shares of $500,000 and no debts. Should I transfer at an entry fee of 4.5 per cent or stay with AustralianSuper? What is your opinion of Netwealth and the advice?

Bruce

G’day Bruce,

The strategy of sheltering your super in your wife’s name to reduce your assessable assets is a good idea. You can then qualify for a pension and a concession card, which can be worth up to $2,500 a year. (It gives you everything from free passes at your local tip to a cut on your rates bill and, of course, a range of concessions from the health system.) So in that sense it’s good advice.

However, you’re getting legged. If your advisor is charging you a 4.5 per cent entry fee, that works out to be $30,600, and if he can get his mitts on your other dough it’ll cost you $53,100. Bruce, just so you know, right now I’m leaning back in my chair, whistling, with one eyebrow cocked. Definitely do the strategy but stick with AustralianSuper. When your advisor follows up with you, give him a whistle for me.

Scott

Single Mum Buys a Home … but What About the Boyfriend?

Hi Scott,

I am a 33-year-old long-term single mum with a 16-year-old son, and I am finally ready to buy my first home. I am lucky enough to be in love with my defacto partner (of 10 months), who lives with us, but am wondering if I need a ‘worst case plan’ to protect the house in case we separate. All the deposit savings are mine, and my income is more than triple his. He is happy paying rent but could only afford around one-fifth of the weekly mortgage payments. Am I being paranoid or is it worth looking into a legal agreement?

Leslie

Hi Leslie,

You should be really proud of yourself. I’m proud of you. You rock!And you are not being paranoid -- you’ve worked bloody hard to get where you are, and you need to protect yourself and your son. Besides, you’ve known this dude only 10 months -- I’ve had toothbrushes that have lasted longer than that. You need to see a solicitor and get a binding financial agreement drawn up. Do this. Please.

Scott

The Church Just Gave Me $175,000

Hi Scott,

I have just won an insurance payout after seven years of fighting a rape case with the church. The payout will total $175,000 after my lawyers are paid. I am 27 and I work at a local library earning $48,000 a year. I want to use the insurance money to build a future, but I am so exhausted and overwhelmed from the case right now that I do not know what is best to do with it. Any suggestions?

Rebecca

Hi Rebecca,

I am so sorry for what you have gone through.

It is perfectly natural to feel overwhelmed right now. You’ve spent years fighting for justice and you’ve just received a huge, life-changing amount of money.

Oftentimes when people get a windfall, a lot of well-meaning people give them contradictory ideas on what they should do with it … all of which just causes more doubt, more indecision and more stress.

So I’m going to give you the same advice I give anyone who gets a major windfall: pay off any debts, stock up a three-month Mojo savings account, splurge on a well-deserved holiday, and -- most important of all -- lock the rest of the money up in a 12-month term deposit. You need to dial down the pressure and focus your energy on healing.

In the meantime, we’re going to use the money in the term deposit to build up your self-confidence. When it comes to finance, you don’t have to understand a thousand things -- you just need to know a few broad principles:

First, no one cares more about your money than you do.Second, keep things simple.

Third, focus on safety. Keep your three months of Mojo at the ready, then buy a home you can afford. Also, put your long-term retirement savings on autopilot by boosting your pre-tax super contributions from 9.5 per cent (what your employer pays) to 15 per cent (by adding some yourself). Then focus on paying your home off. That’ll keep you safe.

(Note to the reader: The details of this case have been changed for privacy reasons. I have spoken to Rebecca and have agreed to help her over the next 12 months and beyond.)

Scott

Buying the Family Farm

Hi Scott,

I grew up on a farm and have always wanted my own.My wife and I are in our late 40s. I work full time six days a week earning $145,000 per annum, and my wife works from home and earns little income. We are empty nesters with our adult kids having left home. We own our home and an investment property outright. We have $250,000 in savings and zero debts.The farm (weekender) I would like to purchase is 100-plus acres with no house costing somewhere between $600,000 and $800,000. A little voice in my head says, “Buy the farm. It’s what you have always wanted”, while another voice says, “It’s a lot of debt to get into -- plus further outlay such as tractors and fences.” What say you?

Doug

G’day Doug,

You’re obviously a little weird. It’s not normal to have paid off two homes and have $250k cash and still be in your 40s! Yet what good is having money if you can’t enjoy yourself?

I’d suggest you do three things:

First, buy a calendar.

Second, talk to a stock and station agent about leasing 100 or so acres. They’ll be able to find you a cocky who’ll bend over backwards to carve off a few paddocks for a year or two, especially if you don’t need a house on the block. It’ll cost you $5,000 a year tops.

Third, each time you return from a day at the farm put an ‘X’ on the calendar. At the end of 12 months, sit down with your wife and count up all the X’s.

You might find that working six days a week stops you from spending much time on the farm. You might find that your wife doesn’t share your passion for it. You might decide to continue leasing it as a (relatively) cheap hobby. Or you might find that you both love it and decide to buy your dream weekender.

Scott

Getting Better Returns

Hello Scott,

My husband and I are now retired. We spoke recently to a financial advisor about our super, which is currently in two industry funds (VicSuper and Equip Super). My super is worth about $250,000 and my husband’s is worth about $475,000. The advice was to roll our super over to MLC to get a better return. What do you think about this? My husband is keen, but I am not sure.

Marg

Hi Marg,

There’s no need to be confused. When the advisor was talking about ‘getting a better return’ it’s likely he was talking about himself -- he’ll get paid more if you switch to the products he flogs. He can’t guarantee that you will get better returns by simply switching to another product provider. In fact, most industry funds have underlying investment choices that are similar to what MLC offers -- the only difference is that in most cases industry funds are much cheaper.

Scott

Young Widow Wants Answers

Hi Scott,

I am a recently widowed 33-year-old mum of a one-year-old, and I am feeling the pressure of managing my finances. My situation: I have $350,000 in savings but I owe my in-laws $170,000. I have no other debt -- I own the house ($600,000), and some friends have set up an education fund for my child. My Centrelink single parenting payment application was rejected due to my having assets over $200,000. I plan to go back to work half time next year (earning $30-40,000) but I also want to focus on being a mum. Please help!

Nicole

Hi Nicole,

I’m sorry for your loss.

If I were in your situation, I’d do the following:

First, pay back your in-laws the $170,000. That way you don’t owe anyone anything, and you’re back on your own two feet.

Second, I’d put $10,000 in an online saver account (what I call ‘Mojo money’) so you don’t have daily money stresses.

Third, I’d make a $10,000 contribution to your super to kick it along.

Fourth, I’d invest the rest in an investment bond (in shares) for 10 years.

If you do this -- and you’re conservative with the value you ascribe to your car and other possessions (mark them down as gumtree value) -- you will get the full parenting payment (single) and the maximum family tax benefit A and B until your child turns eight.

Financially, you’ll likely be in a better position staying at home than you will working and paying childcare. In the long term you should work regardless (it’s good for your self-confidence), but right now you should take the opportunity to focus on the most important person in your life.

Scott