The Big Budget Changes You Missed

Far as I can tell, we’re the only country that goes a little ‘Hollywood’ for the Budget. Other nations just read theirs out on a Tuesday afternoon in parliament, and no one gives a toss. Not us. We lock all the journalists up, and give the Treasurer the prime-time razzle-dazzle.

And last week’s Budget was a little … Family Feud. A bit, er, boring.

So what did we learn?

My first takeout is that Australia is the Jay-Z of the world economy … we’re swimming in cash. That’s largely because there’s been an uptick in the global economy, which is boosting the price of our resources. It’s also because unemployment is low. Oh, and also because we’re running a fairly aggressive immigration policy.

This pile of cash is what’s funding the centrepiece of the Budget ‒ a $10-a-week tax cut for low- and middle-income earners. It’s also what ScoMo hopes will fund what is effectively a ‘flat tax’, where 94% of the population pays 32.5% or less.*

*In seven years’ time.

Look, in seven years’ time I plan on living on a Tuscan vineyard so I can drink vino and wear slacks without socks … but I’ll have three kids in primary school by then, so the closest I’ll get to bellissimo is my local, La Porchetta.

Bottom line?

I’m not getting my holiday, and you’re not getting your flat tax.

Anyway, while the tax cuts stole the limelight, the real story ‒ which was largely ignored ‒ was the changes to super.

So here are three things that really deserve prime-time attention:

First, if you’ve been shocked by what you’ve seen at the Royal Commission (and you should be), you can now teach these bozos a lesson, switch your super fund, and not get whacked with an exit fee.

(Still, anyone who’s tried to roll over their super knows it’s harder than breaking up with your high school sweetheart. There’s so much back and forth, so many itty-bitty details and forms … it’s almost like they want you to give up and keep your money there!).

Second, a campaign that I’ve been banging on about for years is the rort of compulsory life insurance through super. Young people collectively pay nearly $200 million a year in life insurance they don’t need. The Government will now force super funds to stop automatically charging young people under the age of 25. That’ll add thousands of dollars to young people’s end balances.

Third, the government is finally moving to protect one of the biggest cash cows of the super industry: the 6 million inactive (read: forgotten) accounts that super funds feast on. The Government has put a fee cap on these low-balance funds and is making it easier to consolidate them.

All in all, it was a terrible night for the super fund lobbyists, which means it was a great night for you and me. In fact, I think the super changes will potentially have a bigger long-term impact than the short-term tax cuts. Just don’t expect to read too much about it. After all, super isn’t very Hollywood, is it?

Tread Your Own Path!

Your Book Is Stressing Me Out

I started reading your book last night and was discouraged when I read about your SMSF strategy. About two years ago, on advice from a financial advisor, my husband and I set up an SMSF, and we have since purchased a property with it. It was extremely stressful to set up, and the cost of ensuring compliance is ridiculous. My question is: should we close it (and how do we do this?),  or would the financial and emotional cost be too high?

Prue

Hi Prue,

I must admit it doesn’t look so good.

For one thing, I’d be very wary of having the bulk of my super assets tied up in one investment property.

I’m yet to see a case where someone has bought a residential investment property via an SMSF that was actually a good deal for the client. Often they’re a three-way play — an accountant, a financial planner, and a property developer who share in upwards of $50,000 commissions they load onto the purchase price of the property (plus the SMSF fees, plus the borrowing commissions).

I’d also be very wary of the adjectives you’ve used in describing the process thus far: “extremely stressful” and “financial and emotional costs”. Sounds more like a colonoscopy than holistic advice.

But I don’t have all the facts. So if I were in your shoes I’d get some second opinions — firstly a valuation on the property from a local real estate agent, and secondly an assessment of the SMSF from an accountant with no links to the guys who set it up. Once you’ve assembled the facts, act quickly. I’ve never seen more time turn a bad property into a good one.

Scott

Baby, I’m Bamboozled

Hi Scott,

I just had a long chat with a financial planner. The topic came to rolling over to their actively managed SMSF, and I asked them about using a low-cost passively managed super fund instead. They then bamboozled me with talk of MERs, ICRs, fully-franked dividends and tax credits, and how these factors mean that their actively managed fund would perform better than a passive fund (even after fees). Can you enlighten me, please?

Terry

Hi Terry,

An example will work best here.

It’s like you go to your doctor for your annual check-up and say, “Do you think I should eat more fruit and veggies, and perhaps do 30 minutes of exercise each day?”

And the doctor replies, “Bugger that! I’m offering 20% off lypos this week. Wouldn’t you like some washboard abs, Tubby? Well, you can have them — next week. We’ll just suck that lard out like liquid. No lycra needed, and better than eating bloody broccoli!”

Bottom line?

The advisor just bamboozled you with bulldust.

There are three things you need to understand.First, finance is the only industry where (in most cases) the more you pay the less you get.

Second, you don’t open an SMSF (Self Managed Super Fund) for higher returns. Studies show that 80% of managed funds fail to beat a simple index fund over five years, principally because of the fees managers charge. There’s no way they can guarantee higher returns.

Third, you should walk away from any professional who tries to bamboozle you. At the Royal Commission this week, ASIC’s Peter Kell said the regulator had found that 90% of financial advisers who provided advice on SMSFs failed to act in the best interests of their clients.

Trust your gut!

Scott

How Do I Find a Financial Advisor?

Hi Scott,

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

Will

Hi Will, You’ve done well!

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

I’ll give you a really simple example:

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

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

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

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

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

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

Scott

Financial Planner Wants Advice

Hi Scott,

Am I in the wrong job? I am a financial planner. No, seriously please keep reading :) I got into the industry after being retrenched, as I was looking for something that would pay better than an admin job. I do my best to provide advice that is free from bias and not tied to products. Trouble is, sooner or later my boss is bound to notice and move me on. How do I help Aussies with their finances and still put food on my table?

Tim

Hi Tim,

The old saying ‘don’t hate the player, hate the game’ is true in financial services.

The Royal Commission is great, but unfortunately it tends to tar everyone with the same brush. The overwhelming majority of financial planners and mortgage brokers are good, hard-working, ethical people like you.

It’s the game that sucks. It’s been set up by the banks and AMP. It’s called ‘vertical integration’, and it’s basically where the banks manufacture products and then employ planners to sell them. If you’re working in a Holden dealership, you won’t be selling Fords.  Hopefully a recommendation from the Royal Commission will be to break up the vertical integration game. Yet what advice would I give you right now? Well, there are truly independent firms that charge hourly rates. Or there are financial counsellors, who do important work without flogging products.

Scott

Lock ‘Em Up!

Here’s something shocking that I learned about this week.

Apparently there’s been a spate of violent home invasions in which young thugs have been terrorising vulnerable pensioners, and it’s been going on for years.

In fact, one young thug was caught stealing $120 from a little old lady.

And when the cops caught up with him, and questioned him on it, he repeatedly lied and said it wasn’t him.

Yet, when he went up against the magistrate this week, he not only admitted his guilt but admitted he’d lied through his teeth to save his backside.

I’d say this young thug is heading for the slammer.

Okay … so I just made all that up. There was no gang. No young thugs ripping off $120 from pensioners.

But there is a gang … of wealthy, old banking executives on multi-million-dollar salaries who didn’t have to climb through a window — they were greeted at the front door.

And, according to the Banking Royal Commission this week, they didn’t steal $120 — they stole $120 million.

And that’s just Commbank, who the Commission called the ‘gold medallist’ in fee-for-no-service. Hell, they even slugged dead people fees for advice. For 10 years. Seriously, these guys are good!

All up, across the industry, some 306,000 people have been charged a combined $216 million for services they didn’t get.

And in the case of AMP, the Royal Commission found they’d even systematically lied about it to the corporate cops (ASIC).

(Though let me point out that while this has shone a light on what I’ve been saying about AMP for years, their investment bond — which I’ve previously said I’ve liked — is still a decent product.)

Yet let’s be clear — there will be no jail time.

Instead, the bosses will apologise — via their underlings, who they’ll send off to be shot on the Royal Commission’s frontlines — and they’ll quietly retire on their multi-million-dollar bonuses.

But here’s the rub: at its core, the banking and finance industry is based on trust. You need to trust that the company you’re dealing with won’t rip you off, and that they’ll have your best interests at heart.

What we’ve seen at the Royal Commission suggests we can’t trust them. And that’s backed up by ASIC, which recently found that in the case of bank employed advisors, in 75% of cases the adviser didn’t act in the client’s best interests.

Can you imagine our young thug appearing before the judge: “Look, Your Honour, I’ve made mistakes. I’ve robbed hundreds of thousands of defenceless pensioners for years. So it’s clear what I really need to do is … address my internal processes.”

Yeah, nah. I’m with ScoMo on this one. Lock ’em up.

Tread Your Own Path!

AFL Player Needs Help

Hey mate,

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

Tim

Hi Tim,

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

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

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

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

Scott

Escape to the Country

Scott

I keep falling in love with the idea of moving to the country. Whether it’s you or a happy-go-lucky couple I recently met, it seems many people are singing the praises of the ‘simple life’ ‒ ditching expensive inner city rents for a modest country abode with a manageable mortgage. But is the country life only suited to freelancers who have flexibility and work from home, or is it still worth it for those of us in our early 30s who will face a long and possibly dreary commute?

Roxy

Hi Roxy,

You’re falling in love with the ‘idea’ of moving to the country. Understand that the grass never looks greener than when you’re stuck in the concrete jungle, tailgating a Kia Rio.

Now, if you can run your own show (like I do), living in the country is bloody brilliant.

The Australian Wellbeing Index has repeatedly shown that people living in regional Australia are among the happiest in the country. Part of that is because you can avoid becoming what I call a ‘postcode povvo’. Deakin University Emeritus Professor Robert Cummins and his team have found that financial insecurity (read: mortgage stress) produces similar feelings to that of physical torture. Struth!

However, the grass starts to look a bit patchy if you have to commute back into the city each day. A study from a university in Sweden found that relationships where one partner commutes longer than 45 minutes are 40 per cent more likely to end in divorce.

My view?

I’d look at it as a three-year plan.

First, swing on the employment trapeze by building up some freelance work.Second, after that, look at renting in the country for 12 months to try it out. (That’s what we did. While I’m from the country, I shacked up with a woman who was born and bred in the hipster suburb of North Fitzroy, where even the ducks have their own bike lanes. So we both had to be certain that country life would work for us.)

Finally, if after all that you’re still in love with the idea, make the move!

Scott

#DeleteFacebook

Clearly I was having a ‘moment’ on the 25th of June 2010.

My Facebook data says that was the day I officially put my profile into lockdown.

It wasn’t an “I’m mad as hell and I’m not going to take it anymore” kind of moment ‒ just a realisation at the time that Facebook was kind of lame, they were selling my data, and I was done stalking people.

Yet I didn’t delete Facebook totally.

Why?

Purely for practical reasons: there are a lot of old people in my life who have Facebook (hello Aunties!), and, let’s be honest, it’s an efficient and low-contact way of keeping up with them. A few likes every now and again, and a couple of ‘happy birthday’ wall posts (which Facebook even reminds you of!), are much easier than a phone call, right?

“Happy Birthday, Aunty Colleen!”

Of course you may be someone who’s still having a ball playing Farmville on Facebook. If that’s the case, knock yourself out, and congrats on doing your bit to pass around the hat for Mark Zuckerberg (Facebook only raked in around $US40 billion in advertising last year).

Yet this week, with 14 per cent wiped off Facebook’s value due to the latest hacking scandal, it’s not all likes and selfies for the world’s fifth-richest man. Heck, #DeleteFacebook is even trending on Twitter. (Which is kind of like Ronald McDonald passing around a flier to boycott KFC.)

Zuckerberg is now begging for our forgiveness ‒ he doesn’t want to make this his ‘Microsoft moment’, when, 20 years ago, Billionaire Bill got rogered by the US government.

Let’s be honest though, it’s high time you do some rogering of your own. Here’s how to do lock down your Facebook profile in three simple steps:

First, go to the upside-down triangle, click on ‘Settings’, and then ‘Privacy Settings’. Facebook makes the privacy settings intentionally confusing in the hope you’ll give up. Don’t. Just select ‘Private’ or ‘Only Me’ or ‘Friends’ for each setting. Then go to ‘Timeline and Tagging’ and do the same.

Second, cull your list of friends. I’ve got mine down to 112. Realistically that’s probably 50 too many, but some social connections are complicated, right?

Third, download a copy of your Facebook data (‘Settings’, then ‘Download a Copy of Your Facebook Data’), and see what they’ve got on you. At the very least, strip out personal details like your phone number, email and date of birth.

Roger that!

Mortgage or Super?

Hi Scott,

On page 156 of your book it says: “So with your home deposit saved and your house bought, it’s time to give your super contributions a boost.” Could you please settle an argument for my husband and me? Do you mean house bought as in mortgage paid off, or do you mean purchased but still paying off the mortgage?

Kirsten

Hi Kristen

After you buy your home, you boost your super.

As the little girl on the taco ad says, “Why not do both?”.

To clarify, here are the relevant Barefoot steps:

Step 4: Buy your home.

Step 5: Increase your super to 15 per cent.

Step 6: Boost your Mojo to three months of living expenses.

Step 7: Get the banker off your back.

Now, there are three reasons you should follow the steps and the little Mexican girl:

First, for the average wage slave, super is still the best tax dodge going round.

Second, you’re diversifying your nest egg ‒ most people end up retiring with too much home and not enough super.

Third, it puts your retirement savings program on autopilot. The current compulsory employer contribution of 9.5 per cent isn’t enough ‒ you need 15 per cent if you want to spend your golden years swilling sangria in Spain rather than necking a stubby in Shepparton.

Finally, if you follow the Barefoot Steps, you’ll use your ‘fire extinguisher’ account to eventually hose down your home loan quicker (Step 7), which will have you livin’ La Vida Loca sooner.

Thank-you for reading.

Scott

Robbed with a Pen

Dear Barefoot,

Five years ago we were advised to start up an SMSF and buy a property within it. We bought a unit for $400,000, for which we had to borrow $275,000. Since then the value of the unit has dropped by more than 30 per cent ‒ it is now valued at $260,000! Our monthly super contributions are sucked into the property as the monthly rent does not cover the mortgage and expenses. Should we continue as we are and hope the property value increases over the next few years, or sell and start rebuilding our superannuation from scratch?

Dave

Hi Dave,

You got robbed with a pen, you poor bastard.

If someone walked into your home and stole $40,000 off your kitchen table, they’d be locked up for larceny.

Yet most of the spivs that market these SMSF schemes trouser up to $40,000 in commissions.

They know the apartments they’re flogging are horribly overpriced, and that they’ll eventually blow up their client (which is why they often advise their clients to “never, ever, sell” ‒ because if you never, ever, sell, you’ll hopefully never, ever work out you’ve been ripped off).

But these guys don’t go to jail, they go to Italy ‒ first class.Research firm Rainmaker says the true cost of fraud over the last decade from SMSFs is a staggering $103 billion, once you include the loss of investment returns from no longer having the money to invest.And that’s precisely where you are right now.

Your new super contributions are being eaten up by a loss-making property that you hope will come good. But hope isn’t a strategy, Dave. Besides, in all the years I’ve been doing this, I’ve never seen time turn a bad property into a good one.

So let’s deal with the facts: you were flogged an overpriced property that was never worth the $400,000 you paid.

If I were in your shoes, I’d sell the property, and begin again ‒ this time in an ultra-low-cost industry super fund.

The clock is ticking, Dave. It’s time for action.

Scott

Too Good to Be True?

Dear Scott,

A friend has signed up with an investment company where they have set up a self-managed super fund (SMSF). This group uses this money to buy him investment properties, which they buy and then run. It has not cost him a cent other than his super. He thinks this is a great retirement plan. We are middle aged and trying to get ahead for retirement. We have a big house (in a ‘povvo postcode’), a blended family of five kids, and a huge mortgage ‒ and we feel trapped! Is my friend’s experience too good to be true? Help!

Alison

Hi Alison,

Well this sounds like a thoroughly bad idea.

He claims “it has not cost a cent other than super”.

Well, unless his super consists of cans of Pal Meaty Bites, I’d suggest it is in fact a nest egg that he needs to grow to a sufficient level by the time he retires ... so he doesn’t end up eating dog food in his golden years. And if he’s investing in a scheme like this, it’s highly likely he’ll end up eating home-brand dog food (the stuff even my sheepdog rejects because it gives her gas).

Okay, enough of the dog jokes.

Alison, I want you to call your friend and invite him over.

Boil the kettle, pour yourselves a cuppa and, together, read the next question.

Scott

Tithing Is NOT Mandatory!

Dear Scott,

I read with interest your recent answer to a question from a woman who said that tithing was ‘not negotiable’ at her church. As a Christian, it sickens me that the church would do such a thing. It is between you and God ‒ not you and your pastor. The apostle Paul says to give according to what you have been given (1 Corinthians 16:2). Personally, I choose to tithe, as I have been convicted by the Lord and can easily afford it (though I could pay off my house quicker if I did not). But it is NOT mandatory.

Edward

Hi Edward,

I actually had a lot of readers respond to last week’s tithing question, and they all agreed with you:God doesn’t charge a 10 per cent toll on your wages before he’ll open heaven’s boomgates. (I chose your comment because you quoted scripture. So, on behalf of all my fellow sinners, thank you for the Sunday School lesson.)

That being said, one of the fastest ways to break the curse of entitlement, materialism and Kardashian-ism is to support a worthy cause that you truly believe in. Better yet, studies repeatedly show that we get more pleasure from spending money on other people than on ourselves. Still, no one should be guilted into doing it, nor should they put their children’s basic needs before it.

Scott

The Ambulance Ride from Hell

Last year my two-year-old decided to do a swan dive off his highchair.

He landed on our wooden floorboards.

On his head.

As he lay in my wife’s arms, concussed, I rang triple zero, and then quickly jumped in my ute and drove all the way to our farm gate to meet the ambulance. As I sat there waiting ‒ without knowing what was happening to my son back at the house ‒ I made a promise to myself that I’d get first aid training.

It ended up taking the ambos an incredibly stressful (for me) 25 minutes to arrive. Thankfully, they were amazing. And, thankfully, by that stage my son had come to and was re-enacting the fall for them by performing headstands in the kitchen. Still, just to be sure, they took him to the Royal Children’s Hospital, where he was given a clean bill of health.

Fast forward to this weekend, and I now have my Certificate in First Aid.

For my wife’s Christmas present, I paid for our 10-strong family (me, Liz, my mum and dad, etc) to come over to the farm and do the full-day course with an instructor from St John Ambulance. It was actually a fun experience for all of us to do together. I got to wrap my mummy up like a mummy, and I luckily avoided giving my father mouth-to-mouth resuscitation.

The cost of the basic one-day first aid course is around $200 per person, and you can do it at one of St John’s training facilities, which are located throughout the country. Alternatively, like we did, you can arrange a bunch of your family or mates and make a day of it.

Now, if you’re reading this and thinking to yourself “I really should do this”, please do me a favour: right now, whip out your phone and type in http://stjohn.org.au/. Book in a class for a weekend within the next few months.

It might well be a life-changing investment.

Tread Your Own Path!

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

Dear Barefoot,

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

John

Hi John

You have nine kids?

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

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

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

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

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

Scott

Man Overboard

Hi Barefoot,

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

Mary

Hi Mary

That’s really … strange.

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

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

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

Scott

The Financial Dominatrix

Hi Scott,

I am 24 and do financial domination on the side, out of my normal working hours. Income goes into my account for this, which is mostly gifts, the rest as payment for videos. I am doing pretty well — by the end of this financial year I think I will have doubled my income. But I am scared no one will talk to me seriously about this, as sex work is gasped at everywhere I look. My real question is, should I have an ABN set up, or continue as normal and add it to my tax return? 

Barbara

Hi Barbara,

First, yours is easily the wildest question I’ve had in 2018.Well done.

Second, I’ll admit that I actually had to google ‘financial domination’.

Here’s how the interwebs describe it:

“The fetish of financial domination basically entails men (or ‘pay pigs’ as they’re known within the fi-dom world) transferring large sums of money to women over the internet. The nuances vary, but a relationship can stretch anywhere from a pay pig sending his dominatrix $30 a week to donating the vast majority of his earnings and having his dom take full control of all his finances.”

Third, any men who get their rocks off this way, please email me!Finally, let me answer your question. You say that “no one will talk to me seriously”, but I can assure you the Tax Office most certainly will. One way to become more legit is to go to the Australian Business Register (abr.gov.au) and apply for an Australian Business Number (ABN). It doesn’t cost anything, and you’ll get it immediately.

It’ll also help should you want to register your business name (my suggestion: Financial Domination R Us), help you with the ID to get a bank account, and if you ever want to issue an invoice (which may well be a trophy for a submissive client), you’ll be able to quote your ABN number and not get hit with withholding tax.

Still, you don’t need to worry about GST until you’re turning over at least $75,000 a year. Until that point you can run the business as a sole trader and simply report the income in your individual tax return, using the section for ‘business items’ to show your income and expenses.

Scott

Tithing for the Church

Hi Scott,

I am a single mum of three. I earn $86,000 a year, pay $624.10 per fortnight in child support (my hubby doesn’t work as he is a stay-at-home dad to our teenage kids), and owe $275,000 on the mortgage. I am a teacher and tithe 10 per cent  of my salary each fortnight to the church (non-negotiable commitment). But I just cannot fill my buckets — what would you suggest?

Janice

Hi Janice,

When you factor in your non-negotiables — child support, mortgage repayments and the tithe — you’re already coming close to spending 60 per cent of your take-home pay! And that’s before you pay the other non-negotiables, like electricity, food, fuel, council rates and toilet paper.

If I were in your situation, I’d seek guidance from your pastor. If you’re a teacher, maybe you can pay your tithe by working for the church? Or perhaps you can do some tutoring? Either way you need to increase your income (or decrease your outgoings) until your teenage kids are off your hands.

Thank-you for reading.

Scott

We Smell a Rat!

Dear Barefoot,

My wife and I desperately need your help. We have been following your wise advice for many years. We do not earn a lot (I am on $80,000 a year) but by implementing your plan we have accumulated $1 million in super, $250,000 in shares and $160,000 in savings. I am 64 and want to retire, so I went to see a financial advisor. He recommended we take all our super and invest it in five Vanguard ETFs plus an SPDR Dow Jones Global Real Estate Fund. We smell a rat ‒ do you?

Frank

Hi Frank,

Before we get into sniffing rodents, first let me give you a pat on the back: on your income you’ve played an absolute blinder — well done, mate!

Now, I don’t know what you’ve got a whiff of, but I’m not sure if we can call it a rat just yet. See, the Vanguard ETFs (exchange traded funds) and the SPDR (or ‘Spider’) ETFs are ultra-low-cost index funds — the fees are around 0.20 per cent, or $200 for every $100,000 invested. To quote financial rapper Jay-Z, “I got 99 problems but the fees on these ETFs ain’t one”.

That being said, things might get a little pongy if the advisor tries to wrap in substantial admin fees on top (not that I’m saying they will, but keep a close eye on it). Know this: on your balance, paying an additional half a percent will end up costing you an extra $100,000 in fees over the next decade. Ay caramba! That’s a lot of Coronas!

Look, if you’re going to invest your super in low-cost index funds — and that’s a smart strategy — I’d suggest you do it via an ultra-low-cost industry fund. You should be able to replicate the advisor’s stated portfolio for fees of less than 0.10 per cent, and under $100 a year in administration fees.

Sniff, sniff!

Scott

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

GoFund My Lifestyle!

Dear Scott,

A young relative of mine, a single mum with a one-year-old, is in such a bad state that she posted her financial hardship story on a ‘crowdfunding’ website. The only donation she got was from her own mother — which (to me) says her mum is happy for her daughter to beg! She owes money for bills, a car and other things — and has even been to one of those debt companies you see on TV that ‘help’ you pay your bills, but to no avail. I genuinely want to do something, but I have learnt from trying to support her mum over the years that you can’t help those who won’t help themselves. So I am writing to you to get some constructive advice. I can’t sit by and watch her become homeless!

Nadine

Hi Nadine,

So you’re annoyed that her mum took your hard-earned money and started weeing it up against the wall!

Now you’re wondering if the apple doesn’t fall from the tree.And you know what? You’re probably right.

However, if you genuinely want to help this young woman, you’re going to have to really connect with her.

So, let’s you and I look at life from her perspective:

She’s a single mother, deeply in debt, unable to pay her bills, and now resorting to begging for a buck. Trust me, she doesn’t need your judgement — she’ll be judging herself more harshly than you ever will.

The bottom line is that she’s scared she’ll never get out of her situation … just like her mum.

What she really needs more than anything (much, much more than a handout that enables her bad behaviour) is someone in her corner who truly believes in her. Someone who believes she has what it takes to eventually dig herself out of the hole she’s dug herself into. Right now she probably believes it’s a hopeless situation.

So take her out for coffee and show her page 189 of my book. It’s a profile of a single mother who I nicknamed ‘Mojo Mamma’ . This young mum was once all alone, with thousands of dollars in debts, and trying to escape a bad family. It took her years of hard work, studying at night, and scrimping and saving.

But she made it.

And today that woman is one of the strongest people you’ll ever meet.

Even better, her young son is going to grow up knowing how much of a fighter his mother is. Now of course your support and encouragement may not work … but how amazing would it be if it does?

Scott