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

My First Year as an Adult

Dear Scott,

Just over a year ago I was a 17-year-old high school graduate with literally $0 to my name. Luckily, I managed to find a farm job over the summer break before starting uni. My boss, a charismatic Canadian lady, had just finished reading your book. She bought copies for her children and, to my surprise, one for me. I am sure you can imagine my first thoughts — what does a 17-year-old girl need with a finance book?

Nevertheless, I decided to give it a go. Reading your book made me feel like I had been living in the dark. There were so many things I should have known! I was taken aback by how easy it was to read and how everything was explained in a way that even I, who knew nothing about finance, could understand. Back then I had one everyday bank account and no super fund. Fast forward to now …

I have switched to a low-cost super fund. I have set up two daily accounts (‘Expenses’ and ‘Splurge’) and two long-term accounts (‘Smile’ and ‘Fire Extinguisher’), and have $3,000 in ‘Mojo’. I love my ‘Barefoot Date Nights’!

In the past year I have saved, using your methods, for a $3,000 trip to Japan, a $3,000 car, a $1,000 trip to Brisbane, a $1,000 University Games tournament, and $2,000 for braces … and I still have $4,000 of my original money from the farm job. I have no debt, I receive no money from my parents, and I don’t worry about money.

The Barefoot Investor has helped me survive my first year out of home, and my first year as an adult. I owe you a tremendous thank-you. If not for the Barefoot Investor, I’m not sure where I’d be today.

Jess

Hi Jess,

You just nailed why I wrote my book.

See, most teenagers don’t have much confidence. Especially teenage girls. And especially when it comes to money.

Let me tell you what typically happens next:

You turn 18, and the world is waiting to reinforce your belief that you’re no good with money:

Advertisers spend billions of dollars targeting you to buy stuff you don’t need, to impress people who (you’ll eventually come to understand) don’t really care about you. Social media makes you feel like a loser if you’re not living an expensive Instagram-filtered life. And your bank will send you a credit card ... and then begin upping the limit.

And within a few years your negative beliefs will become a self-fulfilling prophecy:

“See, I am a loser with money! It must be true! Just look at my credit card statement!”

And then these negative beliefs feed on themselves. They colour your entire life. They keep you stuck in jobs you’ve outgrown, in relationships that aren’t good for you. And life passes you by.

But that’s not you, Jess.

You have confidence. You’re a strong woman. No one messes with you. Keep treading your own path. You got this!

Scott

High Returns from Medical Cannabis?

Hi Scott,

We are in our mid-forties with a combined income of $110,000. We own our home and have an investment property worth approximately $420,000. We would like to further secure our future and are thinking of investing a small amount, $3,000 to $5,000, in shares in a medical cannabis company. We could invest more but, because we have never played the share market and do not really know anything about it, would like to start small. What are your thoughts, and do you think medical cannabis is a safe choice?

Christine

Hi Christine

The dot bong boom!

Mark my words, the medicinal marijuana business is set to explode. Analysts are suggesting that the domestic market could be worth $1 billion a year, and that the global market could reach as high as billion by 2025.

Even better, earlier this year the Federal Government gave the green light for exports of medicinal cannabis. Health Minister Greg Hunt sparked up a spliff and told reporters, “Australia is brilliantly placed to be a world leader in medical development and medical cannabis”.

Exhale.

So it is a good investment?

I have absolutely no doubt that medicinal marijuana will become a huge industry all around the world. And I also have absolutely no doubt that there are hundreds of companies around the world that are looking to cash in on this boom.

Listen, I have a simple, old-fashioned rule when it comes to investing: I only invest in companies that make money.

And none of these medicinal marijuana companies are making any money … yet.

Take the largest pot player on the ASX, the Cann Group. Its share price has had a phenomenal run, up close to 500% since May last year, and the company is now valued at around $350 million.

However, they’re also burning cash like Bob Marley rolling a spliff with a hundred dollar note: they lost $1,462,561 in the six months to 31 December 2017. Despite this, they still hit investors up for more dough, even though they admitted that they had no expectations of being profitable in the short term, and that their financial projections were unreliable.

Look, if you’re just getting started in the share market, don’t dabble in dope. Now, this is the straightest thing you’ll ever hear me say: call your super fund and make a tax-deductible contribution to your fund, man.

Scott

I’m Freaking Out Here!

Hi Scott,

As I write this, the Dow Jones has suffered its “biggest fall in history”. They are saying on Sunrise that our market will plummet today. I feel physically ill. I am 62 years old, earn $110,000 a year (I work in logistics for a government department), and am due to retire in three years — or at least that was the plan until today! I feel so stupid. This was the year I was finally going to sort my super, work through the steps in your book, and get on top of it all. But have I left my run too late? What should I do? Help! I’m panicking.

John

Hi John,

Thanks for your email, which brilliantly captured the madness of Monday’s market.

It’s like you wrote it on a plane just as the oxygen masks fell from the ceiling: “Captain Kochie says the market’s plummeting!”

But then after a few scary bumps the pilot’s voice comes over the PA saying “sorry about that, folks, we just hit some unexpected turbulence; everything is back to normal now”.

So adjust your tray table, resume your in-flight viewing, and notice that Kochie has gone back to dancing with the Cash Cow.

Okay, enough with the analogies.Monday saw some brief market turbulence, but there will most certainly be a crash at some stage.

That’s because, historically, the Australian stock market crashes every 10 years or so.The good news is that it’s not too late.

What I’m saying, John, is that you need to harness the fear you were feeling when you wrote me this email on Monday, and make sure you strap on your financial life jacket right now.

Here’s what to do:

First, get rid of any debt you have. Interest rates have never been lower — but that won’t always be the case. The time to get out of debt is right now.

Second, get rid of any dodgy investments you have. They fall into three camps: the ones your brother-in-law talked you into, the ones you’ve borrowed money for that aren’t paying their way, and anything you don’t understand. Ditch ’em.

Third, my advice to anyone over the age of 60 who is preparing to strap on the sandals and socks is to start aggressively building up three to five years of ‘Retirement Mojo’ — a cash buffer of living expenses. (If you think you’ll get a pension or part-pension, that’ll reduce the amount you’ll need to save to reach your buffer.)

Better yet, put it on autopilot — contact your super fund and request that all future super contributions go to a cash and fixed interest investment option.

Why would you do this?Well, my old finance professor called it ‘sequencing risk’ — which is a fancy way of saying that a market crash in the final years leading up to your retirement has a significant impact on the future income you can generate from your nest-egg.

I learned this first hand in 2008 when I saw many retirees watch in horror as their super got smashed. What did they do? They sold out at the market bottom … and locked in their losses.

Think of last Monday as a test-run, John. When the real crash comes, you want to be able to say yourself: “That’s Day 1 — it’s a good thing I have 1,825 days (five years) of living expenses set aside to ride this sucker out.”

That way you won’t end up having to rely on the Sunrise Cash Cow!

Scott

I Was Robbed … by the Police!

Hey Barefoot,

I have managed to rack up a large sum ($15,000) in parking and speeding fines. Not being able to come up with the money, I tried to pay fortnightly, but the ‘hardship’ rate was unreasonable; and when it caused food to be taken off my table, I refused to pay. I have not driven for three years now, and the sum has magically jumped to $25,000. I am helpless to argue for a justified repayment plan or a fair total, and the lack of licence is destroying my career potential. I feel robbed by the WA Police!

Nick

Hi Nick,

Fair suck of the sav, cobber! The only person robbing your career is the hoon who racked up 15 grand in fines, and then couldn’t cough up the dough (even on reduced ‘hardship’ terms).

Also, there was no magic involved with your fines jumping $10,000. If you google “what happens if I stick my thumb in my mouth and don’t pay my fines for three years?”, you can clearly see the escalating fiscal repercussions of your decision.

So there are two pieces of advice I’d give you:

Call the National Debt Line on 1800 007 007 and see what your options are — there may be a chance for you to do community work to pay off the debts, if you have no other means.

And, most importantly, sit down and make a life-changing decision. Are you going to play the victim for the rest of your life, or are you going to take responsibility for your actions and make something of yourself?

Or let me put it another way, sport. If you keep avoiding the problem, there’s every chance you’ll wind up with a free pair of striped pyjamas, enjoying an extended sleepover with a bunch of other thumbsuckers.

Scott

How to Invest in Shares With No Risk

Hi Scott,

My partner and I are quite young (both 28) and have bought our first home already. We are now looking to invest in the share market, and would like to take out a ‘protected equity loan’ to do so. Yes, the cost of it is high, but after that you own the asset. We are in it for capital growth over time, so we can accept breaking even for 10 years or so, particularly with the potential for tax minimisation. The trouble is, I know you do not think highly of this product. Could you please explain why?

Angie

Hi Angie,

On first glance these things look like the best thing since sliced (gluten-free) bread.

Here’s how Westpac describe their protected equity loan:

“The potential of Australian shares. The certainty of capital protection at maturity.”

Let’s say you take out a Westpac protected equity loan of $1,000 and invest in an Aussie share fund. If in five years’ time the shares are worth less than $1,000, all you need to do is hand them back to Westpac, and just walk away Renee (or Angie -- word up to those 90s kids who got that music reference).

Hot diggity dang! Who doesn’t want the potential of shares with the certainty that you won’t do your dough?

Sign me up!

Trouble is, there’s no free lunch in the stock market, and Westpac sure ain’t handing out gluten-free dinner rolls.

The devil with these loans is the interest rate you’re charged. Westpac builds in the cost of the capital protection (otherwise known as a ‘put option’), then adds a bit of gravy.

How much gravy?

Well, Westpac charges an interest rate of 8.95%.‘Trời ơi!’, as my Vietnamese friends say.

Bottom line?

These fancy loans are dreamt up by bankers and flogged by financial planners with one goal: to make them fat ongoing fees … not to help you.I’ve been Barefoot for years now, and I’ve come to understand a few things:

First, most people make dumb decisions just to save tax.

Second, most people don’t have the ticker to invest in the market with their own money, let alone with borrowed money.

Third, most people borrow at the wrong time. Like right now, when the market has been going up for over a decade and everything appears ‘safe’. The time to go ‘balls in’ (as my father would say) is straight after a crash, precisely when no one wants to invest in the share market.

So what should you do?Stick to the Barefoot Steps.You’ve bought your home at a young age -- well done!

That’s Step 4 done and dusted. Now it’s time to move on to Step 5 and increase your super contributions from the basic 9.5% (paid by your employer) to 15% by salary-sacrificing some of your pay packet (up to the $25,000 cap per person per year).This has two benefits:

You’ll get a genuine tax deduction (possibly slashing your top marginal tax rate by almost two-thirds) and, if you choose a super fund with ultra-low costs, your returns won’t be eaten away by some banking fairy.

Scott

Do I Have to Pay Tax on Bitcoin?

Hi Scott,

I have just bitten the bullet and invested in Bitcoin (and it has been a wild ride over the past week!).

Judging from what the experts suggest, the price could hit $60,000.This got me thinking -- what tax will I pay on my gains?

Lloyd

Hi Lloyd,

If your purchase of Bitcoin was under $10,000, and you’re only using it to pay for goods or services, any capital gain you make will be tax free because the Tax Office considers it a ‘personal use asset’.

However, you’re speculating (i.e. hoping to ‘get rich or die tryin’, as Fiddy Cent says), so you’ll pay tax on any capital gain at your marginal tax rate. Having said that, if you hold on for at least 12 months, you’ll be able to claim a 50% capital gains tax discount.

Even though the Tax Office can’t track Bitcoin, they still want their share of any capital gain you make. So make sure you keep good records (transaction dates, how much you invested, the price you bought and sold for) in case you get audited.

Finally, if you cop a loss on your Bitcoin, you can use it to offset capital gains made that year, or you can carry it forward to offset against gains made in the future. (Losing money on Bitcoin? That’s never going to happen, right?)

Scott

The 3 Smart Gifts I’m Giving this Christmas for Under $30

Christmas shopping sucks, right?

Not for me.

Years ago, I cracked the Christmas shopping code: buy people books.

They’re the ultimate present, they cost under $30, they don’t need a separate card (I simply scribble a Merry Christmas message on the inside cover), and my local bookstore will even gift wrap them for me.

Job done!

Here are the books I’ve got in my Santa sack this year:

How to Get Rich

Felix Dennis started out with nothing and rose to become one of the wealthiest men in Britain. Then he died of cancer from smoking too many cigars. Several years before sucking his last stogie, he sat down in one of the most expensive homes in Europe and wrote How to Get Rich. It’s vulgar, manic, cutthroat, and one of the most brutally honest accounts of what it really takes to build a fortune. And what you have to give up to do it …

Raising Boys

Okay, so this one doesn’t have much to do with finance, but I’ve got two boys … and a baby is due in a few weeks (and no, we haven’t googled what we’re having). Anyway, there’s a reason that Steve Biddulph’s Raising Boys has sold over a million copies, and that’s because boys are crazy and we parents need all the help we can get. This book navigates you through the testosterone-charged challenge of growing great boys. It’s helped me a lot.

I’ve Got This!

And last, you guessed it, I’ll be giving away my own book: The Barefoot Investor: The Only Money Guide You’ll Ever Need. (Side note: at wileycompetitions.com/barefoot, my publisher is running a little promo where they’re offering $5,000 in Mojo to one person who gifts the book in December.) I estimate that 80% of the sales so far have been from people gifting it to their family and friends. Why? Because the Barefoot Steps work, and they keep you safe. And that’s a pretty cool Christmas present to give, right?

Tread Your Own Path!

Why Advisors Hate Barefoot

Hi Scott,

My husband and I would like to share with you a conversation he recently had with our financial adviser.

Husband: “My wife and I have been looking into our shared finances. We think we are paying too much for financial advice on your managed super fund. We will be switching to a ultra low-cost super fund.”

Adviser: “Sounds like your wife has been reading the Barefoot Investor.”

Husband: “I bet that’s the bane of your life.”Adviser: “Yes. Hmf. Well, our fund is better because …”

You can guess the rest. We are so thankful to you, Barefoot!

Meg

Hi Meg,

Just for kicks, let me visualise the rest of the conversation:

Adviser: “You’ll get better returns from our actively managed fund, which employs some of the finest fund managers in the world and has a history of outperforming the market.”

Meg: “Go on.”

Adviser: “Fees are important, but they’re not the only consideration. You need to consider long-term performance.”

Meg: “Do you have access to exclusive hedge funds?”Adviser (panting): “We most certainly do!”

Meg: “Well, did you read about the million-dollar bet Warren Buffett made in 2007? He bet that a basic no-brainer index fund that simply tracks the market would outperform the most elite hedge funds over 10 years. Guess what happened? The $1 million invested in the expensive hedge funds gained $220,000 … the ultra-low cost index fund gained $854,000.”

Adviser (closing his folder): “I’m late for my next appointment.”

Scott

The First Home Super Saver Gets Up!

Hi Scott,

I heard you on Triple J this week talking about the fact that the First Home Super Saver Scheme has finally been passed by Parliament. My parents, being traditional hardcore Asian parents, are telling me I have to open one up. But realistically it will be 10 years before I buy a house (I am 23). What do you think I should do?

Mandy

Hi Mandy,

Honestly, I thought the First Home Super Saver Scheme was as good as Sam Dastyari’s political career (dead and buried). Yet after seven long months the Government took some legislative laxative and passed it into law.

Here are the basics:

First home buyers can now divert extra money into their super (maxed at $15,000 per year), and then draw it out as a deposit on their first home. The maximum they can save is $30,000 per person ($60,000 a couple).

For someone earning $65,000 a year, after three years of using the First Home Super Saver Scheme they’ll have $6,314 more than if they’d saved via a standard bank account.

So I’d certainly use the First Home Super Saver Scheme if I knew I was going to buy a home in a couple of years and I’d already saved up a big deposit. For an average-earning couple it’s an extra $12,628. I wouldn’t kick it down a drainpipe if I was walking along the street and saw it. Do it.

However, if I were in your shoes, Mandy, I honestly wouldn’t bother. There’s ‘legislative risk’ to doing something 10 years out (i.e. Krusty the Clown could be our PM in 2027). Instead, I’d focus on getting your buckets set up and sorted.

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

Facebook Gets Freaky

Mark Zuckerberg wants to get to know your kids.

Specifically, he wants to get to know your primary-school-aged children (after all, he already knows more about your teenager than you do).

Hang on, isn’t Facebook restricted to people who are at least 13 years old?

Yes it is. In 1998 the US Congress passed laws that restricted children under the age of 13 from giving out their personal information without their parents’ permission. The cost of complying with these laws meant that most platforms put it in the ‘too hard basket’.

Until now.

This week Facebook introduced ‘Messenger Kids’, for children aged 6 to 12.

Zuckerberg says it’s totally not about trying to lock little kids into using his platform. Rather, he’s motivated by wanting to help parents keep their kids safe online. Messenger Kids will be advertising free (for now), and the app has built-in parental controls.

Yes, the billionaire boy wonder is here to help you. True dinks!

Well, let’s take a look at that.

Earlier this year a 23-page Facebook report marked ‘Confidential: Internal Only’ was leaked to The Australian.

In the report, Facebook promised advertisers the ability to track a teen’s emotions: “By monitoring posts, pictures, interactions and internet activity in real-time, Facebook can work out when young people feel ‘stressed’, ‘defeated’, ‘overwhelmed’, ‘anxious’, ‘nervous’, ‘stupid’, ‘silly’, ‘useless’, and a ‘failure’.”

This is truly the golden age of advertising!

Facebook advertisers can target that anorexic girl right at the very moment she truly hates herself.

For its part, the social media giant issued a public statement about the leaked report saying, “Facebook does not offer tools to target people based on their emotional state”.

Yet.

But as the old saying goes, if you don’t pay for the product — you are the product.

My view?

Give a bunch of my son’s little mates a backyard-built billycart and a hill that my wife has already warned me is “way too steep”, and these kids will get all the ‘likes’ and ‘LOLs’ they need. (Besides, they have the rest of their lives to learn to hate themselves, engage in superficial online relationships, and have billycart envy.)

The simple reason Facebook is worth $511 billion is that you and I hand them our private data. Even better, we devote an average 250 hours per person per year to updating our personal data for their advertisers!

Now parents have to decide whether or not they want to sign up their kids to work for Zuckerberg’s advertising machine.

Tread Your Own Path!

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

Too Old to Die Young

Scott,

Subconsciously I always thought I would die young, as my parents and older sister did. So I have tended to ‘live for the moment’. Now that I am still (thankfully) here at 69, I am too old to die young! My husband and I continue to work in our own business, which we enjoy. Our joint taxable income last financial year was $116,000, and we have $750,000 in business loans. If we sell the business and pay off the loans, we should realise about $600,000, but that’s it — no super, no house, no assets. Should we buy something modest, or rent?

Jill

Hi Jill,

You’d be amazed how many people I meet who tell me that retirement ‘just sort of crept up on them’ ...… over 50 years.

But I’ve got a few suggestions that should help you out.

First, talk to your accountant before selling the business, as there are capital gains tax (CGT) exemptions for small business owners who are selling and retiring, especially if they’ve owned the business for 15 years and it has a turnover less than $2 million per year. Depending on your circumstances, it may be more tax efficient to roll the money into super — and then you could take out a lump sum and buy a modest home.

Second, given that you’ve enjoyed your business, why not negotiate with the new owners (once you’ve sold) to continue working in it a day or so a week? It’s good for your transition to retirement, and good for the transition of the business. Best of all, you could earn $20,800 ($13,000 p.a. of work bonus and $7,800 income) before your rate of Age Pension is reduced.

Combined this equates to $35,058 of Age Pension and $20,800 of employment income, for a total of $55,858 p.a. of income. The best part is that it would be tax free — couples can have $28,974 p.a. each of income tax free, thanks to the Seniors and Pensioners Tax Offset (SAPTO).

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

The Barefoot Movie

Hi there,

I am successfully following your instructions on splitting my income -- 10% to ‘Splurge’, 10% to ‘Smile’, 20% to ‘Fire Extinguisher’ and $3,000 in ‘Mojo’. I see in the book it says that Mojo will grow, but I cannot find any instructions on how to add to it. Is this something we add to later in the process, or have I missed something?

Wendy

Hi Wendy,

You’ve shot off an email at page 132, haven’t you!

You just need to keep reading. In fact, you remind me of trying to watch a movie with my wife. She sits on the couch next to me whispering, “Why did he kill her? I thought she was on his side?” To which I reply, “I don’t know either -- let’s wait and find out”.

So let me lay out the closing credits for you. My book is organised into 9 Barefoot Steps that you complete in order, one by one:

Step 1: Schedule a Monthly Barefoot Date Night

Step 2: Set Up Your Buckets

Step 3: Domino Your Debts

Step 4: Buy Your Home

Step 5: Boost Your Super to 15%

Step 6: Boost Your Mojo to 3 Months

Step 7: Get the Banker off Your Back

Step 8: Nail Your Retirement Number

Step 9: Leave a Legacy

The power of the Barefoot Steps is that they focus on you doing just one thing at a time.

You won’t get overwhelmed.Just move through them one at a time.

Thank-you for reading!

Scott

Spill the Beans

Hi Scott,

I am a 32-year-old tax accountant earning $100,000 a year -- and I am facing a dilemma. I could (for $300,000) buy in as a partner in the accounting firm where I currently work, replacing a partner who is soon to retire. But I am not happy at this place and have always wanted to start my own accounting business. I already have some clients on the side, worth about 20% of my salary. Would quitting my job and going it alone be the right move?

Ben

Hi Ben

You haven’t said how much partners get paid at your firm, and therefore how long it would take to earn back your investment. But I don’t think it really matters. If you’re not happy there, why would you sink $300k into it?

Personally, I think being in a traditional suburban accounting firm is a really tough business, and it’s only getting tougher.

In the coming years technological advancements like ‘blockchain’ and artificial intelligence will revolutionise the industry. Even now, the bread-and-butter business of tax preparation and compliance is dwindling -- and if Labor gets in they’ve promised to limit deductions for tax advice to $3,000 a year. (Okay, so that last one doesn’t have legs -- I’m sure it just means that accountants will charge clients ‘financial strategy’ fees instead.)

Still, there’s no doubt in my mind that accounting is going to look very different 20 years from now. To succeed you’ll need to be a truly trusted financial advisor to businesses, rather than a suburban cardigan-wearer doing tax prep.

If I were in your shoes I’d do what I call ‘swinging on the trapeze’ -- that is, keep your $100k-a-year job (holding onto the trapeze bar) while you invest time and money into building up your side hustle, then move to it full time when you’re ready (landing on the other side of the trapeze). That way you might just create a business you’ll want to spend the next 30 years in.

Scott

Jimmy Barnes and I go head to head

“Last year industry outsiders Jimmy Barnes and Scott Pape taught the book industry how to sell books”, wrote the Bookseller + Publisher recently.

Yee-haw!

Two working-class men who — let’s be honest — couldn’t give a Khe Sanh about a semicolon are now rubbing our dewey decimals up against famous authors like Tom Winton (or whatever his name is).

My book has officially been in the bestseller charts for 52 weeks in a row, and has sold over 500,000 copies.

(Catch me if you can, Jimmy!)

Okay, so now that I’ve bragged about the book, let me tell confess how dumb I really am:

This time last year I told my wife that books were ‘dead’.

“No one buys books anymore. It’s all about ebooks and audiobooks downloaded on Amazon”, I told her.

Wrong!

In the UK and the US, sales of ebooks plunged by nearly 20% last year, while sales of physical books were up 7%.

And Australians are some of the biggest book buyers per head in the world: according to Nielsen BookScan, collectively we spent close to $1 billion on 53.6 million books in 2016 … and this figure didn’t include ebooks or audiobooks.

My own experience backs this up: over the last year The Barefoot Investor has topped the charts for both ebooks and audiobooks … and yet roughly 90% of total sales were still of the dead-tree variety.

And it gets better: the bulk of these books have been bought from … shock horror! … local bookstores.

There’s a good reason for this: I’ve purposely never sold my book on my website, even though I’d get a higher clip.

Why?

Well, when I published my first book as a young and unknown author, it was booksellers who helped sell it. They recommended it to their customers, and in so doing helped me build a following. So this time round I wanted to return the favour by getting people to go out and buy the book from bookstores.

And buy they did, with many scooping up multiple copies as presents for family and friends. And that makes sense when you think about it: when was the last time you handed someone a gift-wrapped ebook for Christmas?

Tread Your Own Path!

Uber’s Dirty Little Secret

If you’ve got an Uber account, you really need to read this.

You may have heard that last week Uber fessed up to the fact it had been hacked in October last year — with the names and contact details of 57 million of its user and driver accounts being stolen. But instead of making the breach public, they paid the hackers $100,000 to destroy the copied data.

Trustworthy fellows, those hackers. I’m sure they did what they said … even used the recycling bin, right?

Here’s you: “Uber are clearly morons … but how does this affect me?”

Here’s me: “The Australian is reporting that ‘more than one in ten Aussies may have been affected’.”

So how do you know if you’re the one in ten?

Well, Uber is continuing to dig its hole — they’ve decided not to contact customers whose data has been breached, and instead have said they’re “monitoring the affected accounts and have flagged them for additional fraud protection”.

Poor form!

It’s like if you find out you’ve got an STD. The right thing to do is to ring up your former partner and say, “Look I probably deserve a slap, but you’d better get tested … because I’ve got the clap”. Uber is doing the equivalent of checking in on your ex’s Instagram every now and again to ensure none of their bits are mysteriously falling off.

For the record, if this hack happened next year, Uber would be toast. That’s because laws to be introduced next February will force organisations to contact victims and report data theft to the Australian Privacy Commissioner.

So what can you do if you have an Uber account?

Three things.

First, you should assume that your details have been breached.

Second, you should change all your passwords. If you’re normal, you have one password that you use for everything. Stop doing that, and start looking into encrypted password vaults like LastPass.

Third, you should check your credit file, which you can get for free if you write to the credit agencies.

Actually, for $79.95 you can get your file plus an alert system that pings you if any changes are made to your credit file for 12 months, via MyCreditFile.com.au.

Hang on, can you trust MyCreditFile.com.au?

Err, well, it’s a product of credit reporting agency Equifax (formerly Veda Advantage), which earlier in the year suffered one of the biggest data breaches in history.

Tread Your Own Path!