I’m Grateful to Be Alive

Hi Barefoot,

My wife and I are 40 and we (almost) own our home -- with a mortgage of $70,000 on a house worth about $900,000, about 10 kilometres from the CBD. She works part time and I, due to a near-death experience, do not work, so I look after our child. We have $70,000 in super and no credit card debt. After nearly dying I feel deeply grateful to be alive and so we both only ever want to work part time. We earn $35,000 a year. If we sell the property when we are 65 and downsize, would we have enough to retire on and live a simple life?

Mark

Hi Mark,

A near death experience will certainly cause you to rethink things.

Here’s what I’d be thinking: “Why am I limiting myself to only one course of action, 25 years into the future?”

If you only ever work part time, you’re unlikely to accumulate enough in super to give you a decent standard of living in retirement. And what happens if you and your missus get 20 years down the track and decide you don’t actually want to downsize?

It might happen. Most pre-retirees tell themselves they’ll downsize when they retire -- but most don’t. It might be because of their emotional attachment to their home, or their community, or the arrival of grandkids, but they tend to delay it for as long as possible. What do you do then?

Look, I’m all for living a pared-back lifestyle and taking time to stop and smell the roses. But you’re young and you still need to work. My advice is for you to find a job that will give you meaning and purpose, and do that.

Scott

Help -- We Won Lotto!

Dear Scott,

My partner and I are both age pensioners and we have just been confirmed as sharing a 1st division prize in lotto, which we never ever expected! Having worked and tried to make ends meet all our lives-- and not done the correct thing with money -- we do not want to make that mistake again. We are scared. What should we do?

David

I’ve helped quite a few lotto winners over the years, and I’d say that fear is a totally natural, healthy emotion to be feeling right now. Here’s what I’d do in your situation:

First, don’t tell anyone.

Second, seriously, don’t tell anyone. Trust me on this: nothing good will come from telling people that you’ve won the jackpot. It’ll make at least some of your friends envious, and it could cause your kids to plot to ‘granny grab’ their inheritance, rather than living their own lives.

(Speaking of which, seek out a lawyer to create an estate plan for you. Ask them about setting up a testamentary trust so you can have more control over who ends up with your loot.)

Third, since your winnings will be tax free but the earnings on them won’t be, talk to an accountant about the most tax-effective structure for investing your money. Hopefully you’ve already paid off your home, so I would suggest you splurge a little (keep it under the radar), give some away, put some aside for emergencies, and put the rest into good-quality shares.

Given you’re already retired pensioners, you’re not going to be able to put the money into super, and this windfall will affect the amount of Centrelink pension you get. But who cares, right? You’re rich!

Scott

How a Single Mother Made $17,000 in 7 days

I’m not proud of what I did this week.I used my position in the media to blackmail a man.(And it worked.)What follows is the true story of how I made a single mother $17,000 in 24 hours.Let’s begin ...Pop!That’s the sound my brain made when I read the following email from a worried single mum:

Dear Scott,

I am an anxious 46-year-old single mum, raising two boys on $50,000 a year.

I have credit card debts of $17,000. The reason is that I invested in a wealth creation course but have not seen nothing from it yet. I am upset with my decision because I had no debts before that time!

However, I am expecting a gift of $12,000 and I should pay off the cards. But I have zero savings and want some security through having cash in the bank.

What to do?

Leah

I know what you’re thinking, dear reader — the same thing that was going through my noggin:

How the hell does a single mum wind up paying some wealth guru seventeen grand?

So I called up Leah and asked her that very question:

“Look, I’ve been a single mum for 10 years. I’ve been renting all that time. I guess I just wanted a better life for my boys”, she said.

Last week the corporate cops, ASIC, announced they will be sending undercover operatives to pursue property spruikers and identify shonky practices within self-managed super funds (SMSFs).

Well, boys, Leah’s gone undercover for you.

In August 2015 Leah attended a free wealth creation seminar at the urging of a friend.

But the seminar was just a sales pitch.

“When I first arrived, my defences were definitely up — it felt like a cult.”

Yet over the course of the next three hours Leah was sucked in as the guru bragged about how wealthy he was, and explained that most people are J.O.B. (Just Over Broke). And that led to his pitch: sign up for a $3,000 multi-day seminar and learn the secrets that the rich are keeping from you.

Problem: Leah didn’t have $3,000.

Solution: They offered her a deal — come up with $500 now and pay off the rest at $40 a week.

But the course was just a sales pitch.

When she attended the multi-day course, the spruiker spoke about the value of credit cards.

“He advised us to get multiple credit cards with multiple banks … so when opportunity strikes you’re ready to invest and take action.”

Strewth!

Now here’s the interesting thing: just before signing up for the course, Leah had proudly paid off her credit card. However, in the communal confines of a multi-day seminar where everyone was getting excited, Leah applied for credit cards with NAB, ANZ and Westpac — total limit $17,000.

Next, he spoke about the benefits of opening an SMSF. And on cue he introduced an accountant to the room who offered to set one up — at $2,800 a pop.

“They explained that an SMSF is like a bank you can use to fund your property deals … and that we could invest our SMSF money into property deals with his associate. I only had $42,000 in an industry fund, so I thought, what the hell, and signed up for an SMSF.”

The spruiker then brought out his big guns, selling $50,000 ‘mentoring packages’. Leah didn’t take the bait. But as part of her course she’d qualified for a one-on-one ‘mentoring session’ with the spruiker a few months later.

But the mentoring session was just a sales pitch.

“I went in saying to myself there is absolutely no way that I will sign up to anything”, said Leah.

“He sat there in front of me with all the financial details I’d provided in the previous course. He said I was like a windscreen wiper (furiously working, but never getting anywhere) and that I needed to take action … by doing his course.”

After an hour-and-a-half of hard-core sales pressure, Leah buckled.

But how would she pay for the course?

“He looked at me and said: you’re a single mother, you don’t have any money … so we need to find another way.”

Remember those credit cards the spruiker advised Leah to open so she’d be “ready when opportunity strikes”?

Well, hot-diggity-dang, that opportunity had just struck!

The spruiker said he would give her a $5,000 discount if she signed up for his $21,000 course “NOW!”

Then he pointed to her financials and said “put it on the Westpac card”.

“It was a full-on sales pitch. I walked out of there feeling totally defeated.”

“So”, I asked, “he used high pressure sales tactics to get you to hand over the money, huh?”

“Yeah”, said Leah glumly.

“Well, let’s give him a taste of his own medicine.”

Barefoot Turns the Tables

I called up the organisation and (eventually) spoke to the head wealth guru (spruiker).

Spruiker: “I love the Barefoot Investor!”

Barefoot: “You follow my column?”

Spruiker: “Yes!”

Barefoot: “Awesome! Because next week’s article is about a wealth creation guru who pressured Leah, a broke single mother, into buying his $17,000 course … on her credit card.”

Spruiker: “…”

Barefoot: “Look, I have a very special deal for you today … but only if you act within the next 24 hours.”

Spruiker: “Huh?”

Barefoot: “Listen to me very, very carefully. If you give Leah a full refund — today — I won’t mention your name or your company’s name in the article I’m writing.”

Spruiker: “But … you see …”

Barefoot: “Look, I’m on deadline for the newspaper. If you want this, you need to commit. NOW!”

Spruiker: “I’ll transfer her the money today.”

The Ultimate Opportunity

“What I’ve done is embarrassing”, said Leah, “but I am not a naive person. I’ve always been good with money. Being a single mum, I have to be. I have to run a tight ship.”

I don’t doubt her for a second, but everyone is vulnerable to emotional manipulation. Even spruikers, which is how we got her money back.

But I wanted her to go a few steps further. After all, the only reason she started this nightmare in the first place was to provide a better life for her boys — and why the hell shouldn’t she?

So I gave her a copy of my book, The Barefoot Investor, and paid $1,000 out of my own pocket to shut down her SMSF and help her roll her super back to a low-cost industry fund.

The other day Leah texted me to say her credit cards were now paid in full. Of course the spruiker would say she’ll miss an opportunity. I say she’s just landed the ultimate opportunity — total control of her family’s finances.

Tread Your Own Path!

How Not to Raise a Spoilt Brat

Recently, I received the following email:

“Hello Scott,

We’re a PR firm representing a toothpaste company. We’ve commissioned some research on how much Aussie kids get from the Tooth Fairy. Can we pay you to comment on the research for our press release?”

“No” was my firm answer.

I mean, seriously, who do they think I am … the Easter Bunny?

Still, I have young kids, so I’m inherently interested in the parental construct of the Tooth Fairy. Not that I’ve broached it with my son, Louie, for fear he’d never sleep (or eat a toffee apple) again:

“Mate, each time one of your choppers is ripped from your gums, we wash off the blood under the tap, then we pop it in a glass of water by the side of your bed. And then in the middle of the night, a fairy will creep into your room, take your tooth, and leave you some money for it. Sweet dreams!”

The survey, of over one thousand Aussie parents, found that the average payout for a first tooth has hit $3.51, which sounds suspiciously like the amount of shrapnel in your car’s cupholder that evening. Yet the survey also found that some parents in Western Australia and New South Wales are shelling out a whopping $40 per tooth!

What sort of message is little Timmy getting when he wakes up, looks at his bedside table and sees two crisp $20 notes sticking out of the glass?

For an entrepreneurial kid it says, “My little brother’s mouth is a goldmine! Where are Dad’s pliers?”

Or, more realistically, it tells Timmy, “I just got forty bucks for doing nothing”.

How Not to Raise a Spoilt Brat

No one wants to raise a spoilt brat, but plenty of otherwise well-meaning parents do.

And often the bratty behaviour begins with the best of intentions — giving out pocket money.

According to a recent study from comparison site Finder, the average parent is shelling out $483.60 per year in pocket money per child.

Yet here’s the kicker: the survey also found that, of the 3.3 million Aussie kids who receive pocket money, only a third have to do any chores to earn their cash!

Is it any wonder some kids grow up to be entitled little brats?

So, parents, here are my five pocket money tips for raising financially fit kids.

#1 Don’t Pay Your Kids For Basic Chores

Most kids get paid to do nothing. Bad.

And even if they do end up working for their pocket money, it’s usually for doing a few basic chores around the house.

The danger is that if you pay them for basic chores then you’re creating a pavlovian response that tells them that the only reason they should bother lifting a finger is if they’re being paid.

No, no, no!

You need to explain that everyone needs to pitch in and help out the family, for free.

Example: “Boy, have I got a deal for you! If you set the table each night, you get to … eat.”

#2 Give Them Responsibility

Understand that pocket money isn’t about the money — it’s a tool for financial education.

If you get it right, your kid will gain an appreciation of the value of a buck, a sense of accomplishment, and the self-confidence that comes from being able to earn their keep.

So, set them age-appropriate jobs: younger primary school kids can mow lawns, wash cars, crutch sheep. Older primary school kids should be able to cook the family dinner once a week: give them a budget, make them do the shopping, and have them explain over dinner how much it all cost.

#3 Pay Them Quickly

How much should you pay?

A good rule of thumb is $1 for each year of their age — so a five-year-old will get $5.

Now, and this is important, make sure you have a good supply of $1 and $2 coins on hand so you can pay your kids straight after they’ve finished a job. Don’t keep them waiting till the end of the week — what we’re trying to do is create the link between work and money.

#4 No Bank Accounts

For primary school kids, bank accounts totally suck.

The only reason student bank accounts are popular is that they’re a lucrative marketing tool for the big banks, who want to sign up kids as quickly (and as cheaply) as they can.

Yet kids learn by seeing — you want them to watch the dollars piling up as they work. Enter my infamous ‘Jam Jar’ approach: grab three empty jam jars and label them ‘Spend’, ‘Save’ and ‘Give’.

Divide the gold coins evenly each time they do some work. These are the building blocks of good financial behaviour: encourage them to spend wisely (their choice), encourage them to save up for something, and, finally, show them how much fun it is to give to other less lucky kids.

#5 No Fairies

A survey by Westpac found that 66 per cent of parents are worried about how financially savvy their kids will be by the time they finish high school.

With good reason. Despite my best endeavours, your kids are unlikely to be taught about money in school (and if they are it will be from Commbank, who have wonderful cartoon characters with such catchy names as ‘Cred’ (and, no, I’m not making that up).

The bottom line is this: there’s no magical fairy who’s going to teach your kids how to be good with money.

Raising financially fit kids — generous, hardworking kids — is your ultimate responsibility as a parent.

Tread Your Own Path!

Thanks, Barefoot

Dear Scott,

Last year I wrote and explained how the Barefoot Investor had changed my life. Lucky for me, you wrote an article on my letter (‘Here’s One for the Grandparents’) and then called me to give some advice. I just thought I would bring you up to date on my situation:

I am driving around in the crappy car that I bought with cash after selling my hugely expensive one. I now have no credit cards. I asked the girl of my dreams to marry me; luckily she said ‘yes’. We saved up a deposit and bought our first home. We have no debt apart from the home loan, with our wedding paid for thanks to us working overtime and taking jobs on the side. I am now taking your business advice and learning how to quote, run jobs and manage clients at the new company I’m working for. Again, thank you mate. You have changed my life, and now my fiancée’s as well.

Rhett

Hey Rhett!

That’s awesome man, I’m really proud of you -- and I bet your fiancé is too. This is totally politically incorrect, but I’m going to say it anyway: your actions show that you’re going to be a great provider for your family. You got this!

Scott

What Would You Do?

Hi Barefoot

,I am 35 and on a good salary ($190,000). My question is this: If you had an investment property that, if sold, would clear $80,000, and you had personal debt of $50,000 (credit card and car loan), would you sell the property to clear the debt?

Brad

Hi Brad,

How the hell do you earn $190,000 a year -- over $10,000 a month after tax -- and think the only way out of debt is to sell off the family silverware? You need to decide whether the investment property is a good long-term investment. If it is, you keep it, and you knuckle down and you pay off your debt comfortably within 12 months, cobber. The real question you need to ask yourself is whether or not you plan on continuing to piss your money up against the wall. It’s time to harden up, cupcake.

Scott

Give a Brother a Hand

Dear Scott,

My husband’s brother and his wife have recently taken out a $360,000 home loan, with $60,000 in an attached offset account. They’re paying 3.99 per cent interest. He works full time while she is a stay-at-home mum with four primary-school-age kids. They are not too stretched by the loan, and they have not asked for any assistance. However, my husband has suggested we could help them reduce the interest by putting $200,000 into their offset account for two years. They would then pay us 3 per cent. The only formality would be an email between the brothers, giving their word that they would honour the deal. What are your thoughts? Generous? Foolish? Both?

Leah

Hi Leah,

I don’t like mixing money with family, so I wouldn’t do it, but that’s just me.While the deal is a good one for your brother-in-law (it’s worth at least $2,000 a year to them, plus the added benefit of the principal reduction), you should only do it if he and his wife feel totally comfortable.

If they are, make sure you have a signed, written agreement between the two families, to guard against anything coming out of left field: what happens if one of the brothers dies? Or gets divorced? Or develops a pokie addiction?Finally, the question I’d ask your husband is why are you limiting yourselves to earning 3 per cent? Over the long term you could do much better than that in the share market -- without muddying the family waters.

Scott

I AM FURIOUS WITH YOU

Scott,

I have a question -- and then I have a complaint. First the question. My wife and I run a successful business and earn income both in Australia and the US. I have just obtained an ITIN (Individual Taxpayer Identification Number) for the US. Is it worth splitting our income between the two countries?Now the complaint. In your columns you have made some not-too-polite references to ‘Hair in a Can’. Well, our top product is GLH ‘Hair in a Can’, made here in Australia and exported all over the world. It is No. 1 in its category on Amazon on the back of what is considered the most successful infomercial on US TV, with amazing high-repeat sales. Our product goes back to the ‘Fabulous Baker Boys’ movie. Stop using it in a derogatory way.

Bill

Hi Bill,

This is a very big call given how early in the year it is -- but you, my friend, are already in the running for the best letter of the year.

Let’s deal with your tax question first. As an individual your starting point is to determine whether you are classified as being an Australian resident for tax purposes (the ATO has a nifty online tool that'll help you work it out). If you are, the ATO will tax you on your worldwide income from all sources. If you’re not, you’ll only be subject to local tax on your Aussie-sourced earnings.

That being said, if you're running a successful business with international earnings, I'd strongly suggest you get professional help you wade through the 73,954 pages that is the US tax code.

Now, let’s talk about spray-on hair in a can.

Bill, I’ll be honest, at first I thought you were pulling my hair. However, a few clicks showed me that you’re ridgy didge: GLH stands for Good Looking Hair, and a few more clicks showed me that you are a bestseller on Amazon. Well done! I love it when an Aussie company kicks it on the world stage. There is obviously a huge market for your product, especially in the US. My tip is to come out with an angry-orange color: Trump would love it.

Scott

Why it sucks to be a young person in Australia

If you see a Millennial — a person aged between 18 and 34 — go up and give them a great big hug.

They need it.

Australian Millennials are among the most miserable young people on the planet — well, according to the findings of a new survey released by consulting firm Deloitte this week.

The survey, which tracked 8,000 responses from young people across the globe, including 300 from Australia, found that our kids are the emos of the global community:

Only 8 per cent of Aussie Millennials believe they’ll be better off than their parents.

And only 4 per cent believe they’ll be happier.

(Sad emoji.)

Then again, every young generation, to some extent, believes they’re hard done by:

The Baby Boomers had The Doors: “This is the end …”

Gen X had Alanis Morissette: “Isn’t it ironic … doncha think?”

Gen Y had Eminem: “His palms are sweaty, knees weak, arms are heavy …”

And the Millennials have whiney Avril Lavigne: “Why do you have to go and make things so complicated?”

You’re right, Avril, why is everything so complicated?

Let’s discuss.

Why it Sucks to be a Millennial in Australia Today

These days, having a degree isn’t enough.

For years our education system has acted like a corporate conveyer belt, punching out wandering generalists with fancy letters after their names.

But the internet has jammed that conveyer belt: those entry-level graduate jobs, which previous generations used as a career stepping-stone, are increasingly being outsourced to cheaper destinations with hungrier workers.

Case in point: the Deloitte survey found that the most optimistic young people on the planet live in the emerging markets of Asia, where 71 per cent of Millennials believe they’ll be financially better off than their parents.

Damn straight!

Your average young Indian programmer is under no illusion about being a special unique snowflake — he’s too busy kicking ass, taking names, and pulling himself out of generational poverty.

So what advice do I have for our melancholy Millennials?

In a word, ‘focus’.

Your problem is in your pocket.

Technology — especially social media — is not only highly addictive, it’s rewiring our brains, overloading us with dopamine, and interfering with our ability to focus for uninterrupted stretches of time.

Here’s you (texting): “Uh-huh. Focus. Sure. On what?”

Here’s me: “it really is as simple as developing one ‘hard skill’ and one ‘soft skill’ — and the payoff could be worth millions of dollars over your career.”

The Hard Skill …

A hard skill is something that you come out of uni with: you’re a computer programmer, you’re an accountant, you’re a graphic designer.

Job done, right?

Actually no.

The question you want to ask yourself is this: how long would it take an intelligent, diligent Indian university graduate to learn the ins and outs of my job?

See, Australia is awash with qualified, but disengaged, workers. A 2013 Gallup poll found that more than 70 per cent of Aussies are either “ambivalent or completely disengaged with their jobs”.

These are the people who wake up one day to find their job has been rightsized, downsized, or outsourced. Bugger that. If you really want job security, you need to go deep and immerse yourself in challenging work. That’s how you become an expert. And most experts don’t live in fear of losing their jobs.

When you’re focused, and throwing yourself into challenging work, you stand out — people notice — and you’re more likely to be headhunted into something bigger, and better.

The Soft Skill …

Still, there are plenty of hard-ass experts who haven’t reached their full potential because they’re … well, hard-asses. That’s why mastering a soft skill is so important.

What’s a soft skill? It’s how you interact with people — focusing on your E.Q not just your IQ.

Case in point: legendary investor Warren Buffett has made many amazing investments over his 86 years.

But do you know what he calls his best investment?

A public speaking course he did after completing grad school.

Before doing the course, Buffett says, he “would throw up if I had to speak to anyone. In fact, I arranged my life so that I never had to get up in front of anybody.”

Buffett described his first class, where he met up with 30 of his classmates at a local hotel: “We were all just terrified. We couldn’t say our own names. We all stood there and wouldn’t talk to each other.”

What a bunch of weirdos, right?

Well, stop for a moment and think about what you do when you’re in an awkward situation.

Chances are you whip out your phone and teleport yourself out of reality. But what opportunities are passing by as you superficially, like, swipe and text?

That public speaking course completely changed Buffett’s life, teaching him the skill of developing strong bonds with people — people who would go on to make him tens of billions of dollars.

Even better, young Buffett doubled down. To further hone his communication skills after the course, he signed up and taught a finance class to women at the University of Omaha.

So let’s return to Avril. Life really doesn’t have to be complicated.

Fact is, you’re going to spend 90,000 hours of your life working. And for you Millennials, you’re right at the start of it. So you have a choice. Go deep and throw yourself into both the hard and soft stuff, or stay skimming along the surface. Over to you.

Tread Your Own Path!

I Was Stupid

Hi Barefoot,

Your new book has me in stitches: “Tickets to Gaga is not an emergency”. I am 38 and I earn $90,000, and I have a gnawing money problem I need your help with. I was stupid to co-sign a vehicle loan with my ex-boyfriend. The vehicle was never in my possession and then (in 2010) it was repossessed from him. A credit company is now chasing me for 100 per cent of the amount owing, which is $11,000. I tried to negotiate it down to 50 per cent, but no joy.

What can I do?

Melinda

Well that sucks. The jerk gave you a nasty case of Sexually Transmitted Debt (STD). When you co-sign a loan and the other party doesn’t pay, the lender will indeed chase you.

However, I have good news.It sounds like this debt could be ‘statute barred’. Basically, if the debt is older than six years, under most circumstances the debt collectors can’t chase you for it. Even better, the default should have fallen off your credit card file as well.

The most important thing is not to make any kind of payment or admission of owing the debt. The other thing is to sit down with a community-based financial counsellor and check whether the debt has in fact lapsed. Call them on 1800 007 007 and book an appointment.

Finally, think of it this way: you kissed a frog but you came out of it relatively unscathed. Imagine what it would have cost if you’d married this loser!

Scott

The Shipping Magnate

Hi Barefoot,

I am currently looking at making some investment decisions for the next 3–5 years to save a healthy deposit for a first home. An option I am considering is to purchase shipping containers (at least four). Of the companies I have researched, the terms are: $5,000 per container, 5 year minimum hold, sell-back at full purchase price (capital preserved), 9.75–12 per cent fixed lease options, paid monthly if four or more owned. You always say ‘when something sounds too good to be true, it is’. Thoughts?

Martin

Hi Martin,

You’re talking about an unregulated investment -- meaning you have no protection if it all goes pear-shaped. I’d be as tempted to invest in this as I would to live in a shipping container.Yes, it is too good to be true.

Scott

Your Book Is WRONG, Barefoot! Pulp It Immediately!

Hi Barefoot,

I’m sorry to say this but your book is WRONG.

In the chapter on retirement -- “The Donald Bradman Retirement Strategy: Why You Don’t Need $1 Million to Retire” -- you state:

“You can’t retire until you have $250,000 in super for couples of $170,000 for singles. What’s so special about these numbers? This is the maximum dollar amount of assets (excluding your family home) that you can have and still get close to the maximum age pension.”

WRONG!

According to the Centrelink website, you can have $375,000 for a homeowner couple and $250,000 for a single homeowner, and still qualify for the FULL age pension.

You will need to PULP your bestselling book!

Doug

Hi Doug,

Thanks for the all-cap! I’m not wrong.

Centrelink applies two tests for the age pension: an asset test and an income test. Then they base your pension payment on whichever test gives the lower figure.

If you were a couple and had $375,000 in financial assets, you wouldn’t actually get the full age pension -- because you’d fail the income test.

Stay with me here, and I’ll explain why.Centrelink ‘deems’ a rate of return that retirees get from their assets. If you’re a couple, the first $81,600 of your combined assets (other than the family home) are deemed to earn an income of 1.75 per cent per annum, and any amount over that is deemed to earn an income of 3.25 per cent per annum.

If you do the sums you’ll find that a couple with $375,000 worth of assets would be deemed to have earned an income of $10,963.50 per year from their assets.

Now let’s look at the income test.

Retired couples can earn a maximum of $292 a fortnight ($7,592 per annum) in income before their age pension is affected. For every dollar they earn over that, their age pension is reduced by 50 cents in the dollar.

Do the sums again and you’ll see that if a couple has $375,000 in assets, then their age pension will be reduced by $1,685.75. Only on (roughly) $250,000 would the pension not be affected, like I say in my book.

To be clear, the figures in my book take into account both the asset and the income test -- but I didn’t want to bore anyone to death (though for you I’ve made an exception). The truth is that financial planners, banks and other financial floggers scare the hell out of people when they say you need $1 million to retire comfortably. It’s complete self-serving rubbish (the more assets you have, the more fees they can grab).

Only about 1 per cent of people have super balances over $1 million. I’m writing for the 99 per cent, showing them that they can retire with dignity if they have a paid-off home, have $250,000 in combined super, and work a day or so a week.

Scott

My Daughter Is Missing

Hello,

I have worked as a nurse my whole life, supporting two daughters and a mentally unwell husband who has since passed away. I am 64 and now retired, and completely overwhelmed. My 31-year-old is in LA; I pretty much support her, though I do not mind helping her out. My 27-year-old became a missing person back in 2015 and I have spent a lot of money looking for her on the US west coast. I intend to find her, and to do this I want to sell my fully-paid-off home (in Mullumbimby, NSW), for which I would probably clear $480,000. But what then?

Beverley

Hi Beverley

As a parent my heart breaks for you. But you’ve asked me for financial advice, so here goes.

You know when you’re on a plane and the flight attendant does the safety demonstration. Have you noticed they always say, “put on your own oxygen mask before you help others”. There’s a reason for this -- you’re no good to anyone else if you can’t breathe yourself.

The same goes for your financial situation. You’re retired now, so you’re not earning any more income.

There’s safety and security in owning your own home, so please don’t sell it. Rent it out, and head over to America by all means, but don’t sell it.

Scott

Johnny Depp Did a Bad, Bad Thing

Grab some popcorn. Dim the lights. Settle back in your easy chair.

Today we’re going to watch one of the world’s top actors, Johnny Depp, in his most challenging role yet.

The story starts in 2010 when Depp reportedly walked off the set of the movie Black Mass when the producers tried to slash his paypacket from the standard $20 million to $10 million.

At the time, everyone thought he was a Hollywood megastar sticking to his guns, driving a hard bargain.

Turns out, though, he may have just needed the dough.

See, Johnny is currently suing his former managers (TMG), alleging they lost him tens of millions of dollars.

In fact, Johnny claims that he only realised he was facing financial ruin when TMG advised him to sell a large piece of property to pay his debts.

But this is Hollywood, so the drama is being played out before the courts: TMG are counter-suing, alleging that Johnny’s real problem was that he was spending like a drunken pirate … to the tune of $2 million a month.

How do you burn through so much coin?

Well, Johnny spent $3 million blasting Hunter S. Thompson’s ashes out of a cannon, he spent $400,000 chartering a private jet to save his handbag dogs (Pistol and Boo) from Barnaby ‘I’ll Kill Yer Dogs’ Joyce, and he spent $300,000 a month on wages for his 40-person entourage. And that’s just the start.

In their submission to the court, Johnny’s managers sounded like me answering one of my Q&As:

“Depp, and Depp alone, is fully responsible for any financial turmoil he finds himself in today. He has refused to live within his means, despite the best efforts of TMG and the repeated warnings about his financial condition from TMG and his other advisors.”

They continued:

“Depp often responded by rebuking and cursing his managers for issuing such warnings and advice, while increasing his extravagant lifestyle and spending, and demanding that his managers find some way to pay for it all.”

Okay, let’s pause the movie.

What did Johnny do wrong?

One thing, obviously, is that he spent more than he earned. It doesn’t matter whether your income is $20 million a year or $20,000: if you overspend you’ll end up pretty much the same way — being forced to dress up like a pirate to entertain kids.

Arrr!

Yet Johnny’s real failing was his decision to outsource control of his money to someone else.

(Seriously, it’s as if he’s never read a celebrity biography … Johnny, it always ends the same — the manager rips them off, bro! The Beatles. The Rolling Stones. Freddie Mercury. Charlie and his Chocolate Factory. The list goes on.)

That’s a lesson for you and me, too.

You should never, ever pass over full control of your money to anyone.

Not to your financial advisor, not to your accountant, not even to your husband, your wife, or a trusted friend.

You should always know exactly where your money is, and be able to explain clearly why it’s there.

I worked with an AFL star who told me about a small business that someone had advised him to invest in.

“Why are you doing this?” I asked.

“Money just isn’t my thing”, he shrugged.

“Well, you betta make it your thing”, I told him.

Thankfully, some big stars get it.

In a recent interview, Australian Open winner Serena Williams said that early in her career she made a decision that she wouldn’t become another statistic: “I’m an athlete and I’m black, and a lot of black athletes go broke.”

So she went to see the richest black woman she knew — Oprah — and asked her for money advice.

Here’s what Oprah told her:

“You sign every cheque. Never let anyone sign any cheques.”

Tread Your Own Path!

Now I know why everyone hates me

“I understand why everyone hates you.”

I was at a booksellers’ conference a few weeks ago, about to give a speech, when a suave, tanned bloke with silver hair walked up to me and delivered that opening line with a smug chuckle.

Twelve years ago, when I was a virgin author, such a confrontation would have caused me to wee on the carpet then and there. Not today. Instead, I shook his hand, smiled, looked him straight in the eye, and said, “Hang around, let’s talk after my speech.”

Game of Trolls

After twelve years of being in the spotlight, I’ve got a PhD in dealing with haters.

Back in the old days — when my first book hit the stands — it was much harder to be a hater. Remember, this was years before Twitter, Facebook and the interwebs gave everyone a digital machete to slash your self-confidence.

My haters had their work cut out for them. They actually had to take the time to write me a letter, affix a stamp, and pop it into the post: “Who are you to be talking about this stuff?” “How many years’ experience do you have?” “What sort of a stupid name is the Barefoot Investor?!” “Your feet are repulsive.”

Think about the psychology of someone who would actually do that. Then think about what it must have felt like opening these horrible letters. Yet it toughened me up — and it prepared me for living in today’s hyper-critical digital age.

Saving Your Self-Confidence

I’m sure you’ve had people give you ‘unsolicited advice’ about your life. They could be your colleagues, or your friends, and they’re probably your family.

Or it could be you have jealous people who speak about you behind your back. Over the years I’ve had people say the most horrible things about me — that I have credit cards (I don’t). That I secretly take trailing commissions (I don’t). That I bought a John Deere tractor just so my boys would think I was cool (well, maybe). Hell, even today I still have weirdos who try and hack my website.

The problem is that all this stuff can rob you of your self-confidence. And that can lead you to stay in jobs you don’t like or relationships you have outgrown, and it wastes the precious time you’ve got on the planet.

Now if your mum is like my Mum, she’ll at some stage have given you this pearler of advice, “Honey, just don’t listen to them! Your father and I think you’re wonderful.”

But you do listen to them, don’t you? You replay the comments over and over, and they drown out all the nice things people say about you, and the good things you’ve done.
Well, here are the three things that I’ve learned about dealing with the doubters:

1. Understand that it’s part of your progress

You need to understand that if you are doing brave things (working hard, starting something, backing yourself), you are going to make some people around you uncomfortable. Some of them will try and ‘take you down a peg or two’. Others will give you advice just so you don’t get ahead of yourself (or, more to the point, ahead of them). The more progress you make, the bigger the target you’ll become.

Don’t be surprised by it — expect it. It’s just human nature.

2. Make it personal

Let me tell you the biggest breakthrough I ever made when dealing with haters. When I’d get a nasty letter, I’d call them up (usually by finding their phone number which they sometimes had already provided).

When I did, a few things would happen:

First, they were always shocked to hear from me. Always. That’s because trolls don’t think about the person they’re hating on. It’s all about them and their issues. So if someone you know bags you out on social media, don’t get sucked into messaging back and forth — instead, call them directly. Totally freaks them out.

Second, after a few minutes of chatting, we would either found common ground, and they’d end up being a bit embarrassed about behaving like a jerk. Or I worked out that they were total whack-jobs, and I took them as seriously as the guy who yells at me as I walk past McDonald’s.

The bottom line is this: you want to size the person up — Why are they giving me this advice? Should I listen to them? What have they achieved in their life? Do they matter?

3. Have a Laugh

These days I’m so schooled in the subtle art of not giving a toss that I’ll occasionally showcase their efforts in a ‘hater of the week’ column. These are some of the funnest columns to write — and some of my most popular pieces. And that brings me back to the silverfox at the book conference.

After I finished my speech, I tracked him down again.

Barefoot: “What do you do?”

Silverfox: “I’m a financial planner.”

Barefoot (chuckling): “Oh … now I see!”

Silverfox: “See what?”

Barefoot: “You said everyone hates me. What you really meant is that it’s people like you who hate me!”

The silverfox (who later admitted he reads me every week, so … hello!) looked perplexed.

We continued chatting for a couple of minutes, and he proceeded to give me a series of backhanded compliments — that my stuff was “just common sense” or “for the idiot in the street”.

He then explained that he catered to wealthier clients and did more ‘sophisticated stuff’, which he said involved directing his clients to buy investment properties through their SMSFs.

“Oooh fancy!” I laughed.

The truth? I couldn’t care less what he thought about me.

Fact is, I don’t write for him (maybe for his clients, but certainly not for him).

I write for my tribe, the people who get what I’m about. My Barefooters aren’t flashy. They’re hard workers who avoid debt, maintain their Mojo, and look after their family. They think long term and keep things simple. Just like me.

And thankfully there’s a lot of them. My book debuted at #2 on the bestseller last week … behind some fly-by-night author named JK Rowling.

Tread Your Own Path!

The Barefoot Book

Scott,

I have followed you for years, and treated your first book like a bible since a good friend of mine gave it to me in 2010 -- when my husband died. At that time I could not afford my mortgage repayments, and I had a six-month-old baby. Since then I have tripled my super and am saving and working towards being financially independent. Thank you.

Wendy

A note to readers:

You are probably thinking to yourself, “Hey, this isn’t a finance question; it’s a blatant self-serving plug for Scott’s new book.”

And you know what? You’re absolutely right.

Truth is, my first book (published over a decade ago) helped a lot of people --mainly because readers shared it with their loved ones, including Wendy. My new book, ‘The Only Money Guide You’ll Ever Need’, was launched this week, and I’m confident it is going to help a whole lot more people.

Thanks for your support.

Scott

Are Family Trusts the Tax Haven They Used to Be?

Hi Scott,

My accountant told me that a family trust is not the ‘tax haven’ it used to be a few years ago. Is that true? We were thinking about establishing one for our family (we have two kids -- one aged four and the other two months). Our combined income is $190,000 before tax.

Cheers,

Keval

Hi Keval,

Your accountant is my kind of guy (or gal).

Family trusts can be tax havens if you have adult kids (at university, say). You can distribute income from the trust and take advantage of their tax-free threshold (the first $18,200 earned is tax free).But your kids are minors. And the Government doesn’t like rich people using their children (under 18) as a tax dodge, so it whacks them with a tax rate as high as 66 per cent on unearned income!

I’d suggest building up your Mojo, maxing out your pre-tax contributions, knocking out your mortgage, then investing in shares -- possibly through a trust. One day your kids will be adults!

Any accountant who talks a client out of giving him more fees deserves a pat on the back. He’s looking out for your best interests.

Scott

The Recovering Gambling Addict

Hi Scott,

I am a recovering gambling addict. I got hooked at a young age, but I have not gambled in the last 18 months. Now I am in my late 20s and have ruined my credit rating by taking out credit, loans and payday lending to fund my gambling. My credit score is 458 and I can’t even get a phone plan. I am now 100 per cent debt free, and I earn $85,000. How can I fix my credit score -- get a credit card? I want to fix it so one day I can buy a house.

Tim

Hi Tim,

You’ve got my respect, mate.It takes a lot of courage and determination to face up to and tackle your addiction, especially given the gambling industry actively targets recovering gambling addicts (hello Sportsbet).

Okay, so let’s lay down a strategy to wipe your credit file clean and get you into your home.

You don’t need to get a credit card, and for god’s sake stay away from those credit repair (spray-on-hair) spruikers. Those creeps are almost as bad as Sportsbet. (Almost.)

All you need to do is open up a savings account and deposit money each payday for the next five years. That’s how long the information on your credit file lasts legally. And that’s also how long it’ll take you to save up a very safe deposit.

Here’s the thing, Tim. Most people totally overestimate what they can do in one year, but totally underestimate the mountains they can move in five years. Then again, most people don’t have your guts. You’ve got this.

Scott

A Financial Man-Child

Hi Scott,

We live beyond our means -- especially my husband. We have been married two years; I earn $45,000 and he earns $70,000. I bought us a house three years ago, paying a deposit of $90,000 plus another $49,000 to clear his credit card debts. I now have a credit card debt of $15,000 and he has another of $40,000. We have separate finances with a joint account for bills. The house is worth $900,000 with a $680,000 mortgage. His solution is to get a small second mortgage to pay off our debts at low rates. No pre-nup. Unstable marriage. Should I agree?

Tammy

Hi Tammy,

I’m going to be honest with you.

The first thing that came to my mind as I read your question is “No. No. No. No. No.”

Seriously, that’s what I kept saying as I read your question.

I see the problem you’re facing. On one hand, he’s your husband. On the other, he’s a financial man-child.

You bailed him out once. Now he’s coming back again. The third time he comes back -- and there will almost certainly be a third time -- he’ll take you to the cleaners. It may take five or ten years, but that’s where this is heading.

Now, consolidating your debts via a second mortgage will save you interest. Honestly, though, that is the financial equivalent of using a surgically clean syringe to inject your heroin each day. It’s not the interest that’s the problem, it’s your out-of-control spending.

Not to get too airy-fairy, guitar-strummy-strummy with you, but your financial problems are a symptom of what’s going on in your relationship. Before anything changes financially, you (both) need to. The problem is that changing is hard at the best of times, especially when you’re married to a little boy who can’t be trusted with a credit card.

Obviously it is totally up to you, but if you were my sister I’d suggest you go Gwyneth Paltrow and ‘consciously uncouple’ from your husband until he can start acting like a responsible adult -- giving you space to focus on digging yourself out of this mess.

Scott

An Update on the Acorns App

Hi Barefoot,

I have been an avid reader of your column in the Herald Sun and have read your book back to front several times. With your inspiration, I paid off my $1.5 million dollar house last year at the age of 45. I have also been educating myself about investing -- using the Acorns app to invest $5,000 of my money. But do you think this app is any good?

Tom

Hi Tom,

Well done, dude!

The Acorns app is the investment equivalent of putting training wheels on a bike (with a bell and streamers on the handlebars). It collects ‘loose change’ (like rounding up your purchases) from your account and invests it, or you can set it to regularly drag out small amounts as well. It then invests your money into exchange traded funds (ETFs) -- charging an extra layer of fees to do so.

It’s an easy way to invest, but I wouldn’t commit serious dough to it. That’d be as ridiculous as a 45-year-old man riding around on a bicycle with training wheels. For beginner investors, though, it’s an okay deal.

But I’ll tell you what’s a stinker of a deal -- an investment in Acorns itself. Acorns Australia have just released an ‘investment opportunity’ for its young, inexperienced customers: the ability to buy shares in Acorns itself.

They emailed their customers last week attempting to raise as much as $6 million in what Acorns’ own lawyers have described as a “highly speculative” and “highly illiquid” investment opportunity.

Damn straight.

Reading the prospectus, I note that Acorns Australia generated a loss of $1.7 million in the 2016 financial year on skimpy revenue of $154,236. It’s a rolled-gold turd of a deal, and you should steer clear of it.

Don’t let them touch your nuts!

Scott