When cashed up bogans run out of luck

You know what really grinds my gears?

Cashed up bogans.

For years, their success stories have been clickbait for news websites. They all run along the same lines:

Craig and Cheryl were just like you - wasting their lives away reading empty articles on the internet instead of applying themselves at work. Yet unlike you, they made the decision to buy five investment properties five years ago.

Today the young couple are worth $3 million and they’ve retired (to run a property investment advisory business). The savvy couple’s advice to people wanting to follow in their footsteps? “If we did it, anyone can. All you need is passion” says Cheryl. “Hustle!” adds Craig.

(Insert photo of the smug couple with matching tans, tattoos, and teeth.)

“Come on, they were just lucky!” I yell at my computer screen.

They didn’t work, or create anything … all they did was take on a lot of debt and rode their luck!

Well, let me show you what happens when your luck runs out, this time with a real couple: Michelle and Ian Tate.

In 2013, the Tates decided to expand their property portfolio … to five properties.

Despite the fact they had three young kids.

Despite the fact that they were relying on only one income, which was heavily dependent on a cyclical industry (mining, as a fly-in fly-out FIFO worker).

It didn’t take long for things to go (as my father would say) ‘tits up’.

So, who is to blame?

Well, the couple blame the bank for lending them the dough.

And so do their lawyers, Maurice Blackburn, who have made them the lead plaintiffs in their blockbuster Westpac class action with the charge of irresponsible lending.Hang on a moment.

If we’re talking about acting irresponsibility, how about not taking a few moments to question how their single wage could possibly feed both a family of five, and five properties. It’s not that hard. All they needed to do was click away from Facebook and head over to a Mortgage Calculator:

“Strewth! If interest rates go up by 0.1% the computer says we’re cactus!”

It seems to me that there was a healthy dose of greed and stupidity on both sides.

The banks closed their eyes and went on a borrowing binge to hit their profit targets ... and many borrowers did pretty much the same thing. (And now, in the circle of corporate life, the greedy lawyers are licking their chops at the chance of a big payday.)

Look, I’m a fan of kicking the banks, yet I’m an even bigger fan of personal responsibility. And the media? Well, it’s a fan of whatever gets the most clicks, which this week was, “Family’s $1.8m Westpac mortgage hell”.

Tread Your Own Path!

Do I Need Renters Insurance?

Hi Scott,

I am a renter, and recently my new property agent mentioned contents insurance. I understand that the building is covered by the landlord, but I have never bothered with contents insurance before. I just had a quick google and it is a minefield! There is ‘contents insurance’, then there is ‘renters contents insurance’ ‒ I have no idea what the difference is and which one I should be looking at. Any advice?

Mardi

Hi Mardi,

Just so we’re clear, renters insurance (which is the same as contents insurance, just for renters) covers your personal contents at your property, and usually with an option to cover your personal effects when you’re out and about, whereas landlords insurance covers the building structure itself.

I did a few online comparisons for budget renters insurance, and the cost for insuring $20,000 worth of contents against fire, flood and theft ranged from $150 to $300 per year (though it may be different based on your own situation and what you want covered).

If you’re in a share house it gets a little trickier (you can’t insure individual rooms), but some policies allow you to detail the items you want to cover. If all your flatmates have expensive stuff like a laptops, fancy cameras, phones and jewellery, it may be worth you all chipping in for it.

Bottom line?

If you’re most expensive possession is a Bob Marley bong, perhaps you can pass on it. Otherwise, add up the cost of replacing everything and then run the sums.

Scott

He came downstairs brandishing a screwdriver

When I was in my early twenties I rented a shoebox apartment in the armpit of St Kilda.

My landlord, an excitable 70-something Jewish man, lived upstairs with his excitable 20-something Russian bride.

(They had a tumultuous relationship ‒ they were either loving or fighting, but they were always very, very loud.)

My entrance to the apartment was via a dodgy back alleyway. Someone had obviously tried to jimmy the door open, because as I was leaving for work the front door handle fell clean off.

So I called the landlord. A few minutes later he came downstairs with a screwdriver, which he handed to me.

“You want me to fix the door?” I asked.

He took a long drag of his cigarette, and began to chuckle.

“No. This is your new door handle, key, and security weapon … all rolled in one!” he barked through a coughing fit.

True dinks.

I still remember the strange looks I got when I arrived at work with my screwdriver.

My country-living parents found these big-city stories highly amusing. They were the ones, after all, who (lovingly) threatened to change the locks on our family home, and thus drop-punted me into the real world twenty years ago.

What a learning experience it was!

I learnt how to make my money stretch (hello homebrew), how to cook (once a flatmate asked me, “How long do I cook two-minute noodles for?”), the art of diplomacy and negotiation (eventually the landlord replaced the door handle with a … second-hand handle), and the importance of cleaning (something admittedly I hadn’t placed a high value on … because up until that point my mother had done it for me).

Yes, you’re not living until you’ve had at least one stint in a share house ‒ it’s the ultimate rite of passage.

What The Royal Commission Means For You

This column was supposed to be a rip-snorter.

See, Monday — when the findings of the Hayne Royal Commission were released — was like Grand Final Day for me ... I (almost) got more airplay than Kerri-Anne Kennerley. Not only was it the biggest news item of the week, it was arguably the biggest finance story since the GFC.

So, earlier in the week I wrote to the Barefoot Community — literally hundreds of thousands of people — and offered to answer any questions on the Royal Commission, in today’s column.

I had a tin of Nescafe Blend 43, and toothpicks, at the ready to answer the flood of questions.

Here’s what came through:

One guy wanted to know if marijuana stocks would be affected (ummm no, smokey), another asked what aftershave I use (?), and a few wanted to know if it was a good time to buy or sell homes.

So here’s my big takeout from this week:

You don’t really give a toss about the Royal Commission findings, do you?

(Sure, the media banged on about it, but everyone else was like, “How about that psycho on MAFS, am I right?”)

Yet there was one group who flooded my inbox: mortgage brokers — who were angrier than Alby Mangels (google him) at the Hayne-bomb’s recommendation to blow their trailing commissions to Timbuktu.

It was easy to spot them — they often wrote IN FULL CAPS. Why were they so mad?

Well, the biggest change from the Royal Commission recommendations will come in two to three years’ time when you shop for a home loan. If it all comes to pass, banks will be banned from paying both up-front and trailing commissions to brokers. Instead, you’ll pay an up-front fee to the mortgage broker for the advice.

Yet how will that work out in the real world?

Luckily, I happen to know, because I did this last year with one of my staff, Karen, who came to me and said she wanted to refinance her home loan.

We did three things:

First, we shopped around to see what rate online lenders like UBank and Homeloans.com.au were offering.

Second, she rang her bank and used the scripts in my book to see if they’d match thecheapest deal.

Third, I arranged for her to see a totally independent mortgage expert who charged an hourly fee for his unconflicted research, with absolutely no kickbacks. (This is the proposed model that will be in place in a few years.)

His fee for the research?

$4,000.

Well, you could have knocked Karen over with a feather.

“I don’t have $4,000!” she cried.

The independent broker explained it would take 20 hours of research at $200 per hour … but that he would also rebate both the upfront and the trailing commissions.

In the end, Karen ditched him and went with another broker who was recommended by her accountant.

“What did they charge you?” I asked.

“Actually, I don’t remember … but I know I didn’t have to pay anything up front!” she said.

And there’s the problem:

The finance industry has trained customers to expect that financial advice should be ‘free’ … free home loan advice, free insurance advice, and (back in the old days) free financial plans.

However, the truth is that ‘free’ is the most expensive way to get advice — because they’re loading up the cost of the product and generally expressing it as a percentage rather than a flat dollar cost, to obscure it further.

Still, most Aussies are like Karen … they’d rather have ‘free’ advice — no matter how much it costs them in the long run.

Tread Your Own Path!

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

Australian Scholarships Group Made Me Cry

Thanks for warning people last week about ASG. I wasn’t surprised you don’t recommend them. My husband and I had our first baby quite young (21) and at the time went to a baby expo to check out all the latest things. We wrote our names down for a ‘competition’, only to start receiving calls from ASG. We somehow got talking and then a guy came out to my mum’s house (where we were living while saving money) to talk to us about it. We said we could not afford it but might look into it later.

Anyway, the guy started calling me every day, then a couple of times a day. I ignored the calls, but then he called me 45 times in one hour! I was bawling my eyes out, so my husband called the head office and told them he would call the police if we were contacted again. It was horrible. I have told anyone who has ever mentioned them since to never go near them.

Justine

Justine

Hi Justine

He called you 45 times in an hour? That is intense. He really wanted that commission! This sales culture is why I’ve been so hard on ASG … here’s hoping the new CEO (who I interviewed for last week’s column) cleans up their act.

Scott

Preparing for Apartment Armageddon

Hi Scott,

A few years ago I read your prediction that inner city apartment prices would fall. Since then I’ve been saving hard and am relieved to see property prices finally going down! I am now a few months away from having enough for a 20% deposit. Do you have any advice for first home owners looking to buy in the next year?

Tammy

Hi Tammy,

Well done for playing the long game!

(In 2015 I wrote ‘an open letter to the young people of Australia’ where I predicted that 2018 would be the year that first apartment owners would get their revenge, because of an oversupply of newly built inner city apartments.)

My first bit of advice is that there is no need to rush.In fact, 2019 is shaping up to be an even tougher year for the property market. A NAB survey released late last month found that confidence in the housing market has hit new lows (then again, NAB’s own behaviour hasn’t exactly been a confidence-builder either).

The apartment market has gone from FOMO (Fear Of Missing Out) to FONGO (Fear of Not Getting Out).

Use it to your advantage. With a large (and growing) deposit, and the ability to negotiate, you’re in the box seat.

FONGO on!

Scott

Honouring My Husband’s Legacy

Scott,

My husband passed away on New Year’s Day at the age of 37. I am 26 years old and for the past four years he and I have had full-time care of his daughter. The day before he passed, we listened to your audiobook. He was so excited to make the changes and had his ‘alpaca attitude’ on. Unfortunately, he did not have a will, and had eight super accounts. I am heartbroken but somehow need to sort this out. Any advice on where to go from here?

Lisa

Hi Lisa,

I am so sorry for your loss.

The most important thing to do right now is look after yourself and your step-daughter.

The admin that’s required after someone dies can be overwhelming … especially when you’re grieving. So the best thing you can do is find someone (like a good friend or a trusted advisor) who can help you with it.

Your husband has died without a will (this is called dying ‘intestate’). You’ll need to apply for letters of administration. An administrator will then be appointed and your husband’s estate will be distributed based on a predetermined formula.

As for super, you’ll need to contact each of his super funds and ask what’s required to receive the ‘death benefit’ payment, which will be a combination of his final balance and any insurance held at the time of his death.

Finally, when you start to get on top of things follow the Barefoot Steps with all the ‘Alpaca Attitude’ you can muster.

You got this.

Scott

Are You Taking Kickbacks, Barefoot?

Hello,

I have a simple question: does Scott or his team receive payments from Vanguard to recommend their products?

Peter

Hi Peter,

I have a simple answer to your simple question: NO!

But your question does give me a nice segue into something I really want to talk about:

Jack Bogle, the founder of both Vanguard and the first ever index fund (the S&P 500 — you’ve probably heard of it), died a few weeks ago.

Literally the day before his death I put in a request to interview him, hoping to hear his wisdom on what could be done about the embarrassment that is our fee-gouging retirement industry.

Sadly, it wasn’t to be.

But he’s a legend and you need to hear his story.

Jack Bogle was a rebel who set up Vanguard in 1975 as a non-profit.

Vanguard could have made him one of the richest people on earth. But it didn’t. Instead, he put investors first, with an unrelenting focus on lowering fees.

Warren Buffett regarded Bogle as his hero, saying:

“If a statue is ever erected to honour the person who has done the most for American investors, the hands-down choice should be Jack Bogle.”

Last year the Vanguard index fund beat around 85% of the 100 large cap Aussie fund managers. So faced with this overwhelming evidence why don’t our Aussie super funds embrace low-cost index investing?

In fact, that’s the exact question I was going to ask Jack.

Now I don’t want put words in his mouth, but my guess is that he’d point to the collective $30 billion a year in fees trousered by our super funds.

Or to quote the man himself:

“The miracle of compounding returns is overwhelmed by the tyranny of compounding fees.”

RIP Jack!

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.

My thoughts on The Royal Commission

Sir John Barnard was by all accounts a ripping bloke.

He was one of the first officials to fearlessly take on the finance industry, and ask a simple question:

“How do we stop these greedy finance bastards from ripping us off?”

His answer was to pass investor protection laws, which later became known as ‘Sir John Barnard’s Act’.

Yet get this: these laws ‒ which aimed to stop the spivs and protect the public ‒ were passed in 1734.

Yes, society has been trying to rein in the finance industry for centuries … without much luck.

Today’s Sir John Barnard, Kenneth Hayne, has now had his go, and he’s done an admirable job cleaning up the corporate kitty litter which our banking fat cats have soiled themselves in.

Yet the truth is that Hayne, like Barnard, is up against it.

That’s because human nature hasn’t changed in 285 years, and it never will. Gordon Gekko ‒ the cigar-chomping, suspender-wearing Wall Street character ‒ nailed it when he said, “Greed is good”. (Well, for bankers at least.)

Greed is what caused the public to be fleeced (and outraged) in the South Sea Bubble of the 1720s, the Global Financial Crisis of 2008 (where bankers made billions in bonuses ‒ and only one went to jail), and the dodgy dealings that the Hayne Royal Commission uncovered.

And like clockwork, every decade (or so), the ramifications of this greed come to light and shock the public. New laws are brought in … and then, a few years later, things largely go back to normal.

How can this be?

Well, I like to think of it as a billion-dollar game of whack-a-mole: as you read this, the finance industry is poring over the Royal Commission findings, looking for angles. Then, like a bobbing mole, they’ll shift their position. They have, after all, 29.5 billion reasons (cash profits of the big four per year!) to care more about it than you and I do.

My view?

The bankers are going to bank, and the lobbyists are going to lobby.

And so, if the industry isn’t going to change … we must.

While Kenneth Hayne should be thanked by every Australian for the work he’s done, arguably the biggest gift the Royal Commission has given us is the proof that financial institutions do not have our best interests at heart. Strip away their fluffy advertising, and the talk of cultural change, and the fundamentals haven’t changed since 1734:

No one cares more about your money than you do.

If we really want genuine change, we need to teach the next generation this simple truth. By my reckoning, kids spend a total of around 2,300 days at school. Yet not even one of those days is dedicated to teaching them how to pass the ‘money exams’ they’ll be tested on every single day of their lives.

Mark my words, greed isn’t going away. Therefore, we owe it to our kids to make sure they learn the lessons we didn’t. And that’s why this Royal Commission should be about kicking off a financial revolution, that begins with us banking on our kids.

Because if we don’t the bankers will.

Tread Your Own Path!

Top of the Class

Hey Scott,

I was indoctrinated into the ‘Barefoot cult’ around Easter this year, and it has changed my life. I am a business studies teacher in a low socio-economic high school in Brisbane’s south and, since reading your book, have been going on about it to my class. I kept on answering the students’ questions … until I decided to purchase a copy for each of them. When I gave them the books, they high-fived each other and said “This is going to change our lives!” I have cleaned out one Big W store and am making my way round the others. Thank you!

Kim

Hi Kim,

Teenagers? High fiving each other, about something other than a student free day?

You’re using the force, sister!

Without knowing it, you’ve just completed the money class I’m trialling in schools:

Step 1: Is to teach the teachers, so they can lift their own financial confidence. (It’d be pretty hard to talk to a bunch of kids about the dangers of credit cards when you have credit card debt yourself!)

Step 2: Is to teach the kids.

Step 3: Is to encourage the kids go home and share what they’ve learnt with their parents.

My motto is: if you help the kids, you help the parents. And if you help the parents, you change the nation.

Thanks for your support!

Scott

25 days of disappointment

Let me tell you about how, a few years ago, I created a family Christmas tradition …

… which has caused me nothing but stress, and given my kids 25 days of disappointment.

It began one day in Aldi, as disappointment often does.

I had the choice between buying an advent calendar for $12, or 25 small ‘stockings on a string’ for $5.

Guess which one the Barefoot Investor chose?

Now, given stockings on a string aren’t as intuitive as opening a calendar each day, I concocted a complicated backstory that involved elves coming to the farm each night and leaving a gift in a little numbered stocking to help the kids count down to Christmas.

Father of the year, right?

Wrong.

There’s always at least one night I forget, meaning I have to explain to our lip-quivering kids the next morning why the elves didn’t come. Slightly better, one morning I bolted upright in bed as I heard the kids stirring, raced down the hall, and stuffed something in the stocking:

“Dad, the elves gave us … a AAA battery?”

“They’re smart, those elves. You never know when you’ll need a battery … like for the TV remote”, said the worst father in the world.

Ho! Ho! D’Oh!

Christmas may be known as the time for ‘giving’, but to most school-aged kids it’s really a time for ‘getting’:

A survey by News Limited earlier this month found that an overwhelming majority of parents (76%) say their kids have higher expectations of what Christmas presents they’ll receive compared to when they were kids.

Yet expectation is one reindeer down from entitlement.

So while ‘25 days of disappointment’ is a family Christmas tradition I’ve created, it’s not the only one.

Throughout the year my kids follow the Barefoot ‘3, 3, 3’ rule of pocket money. (Three weekly jobs, dished into three jam jars marked ‘Splurge’, ‘Smile’ and ‘Give’, checked off each Sunday night in three minutes.)

And the most important money jar at this time of the year — when we’re being undermined by fat men in red suits, and bombarded with advertising — is the Give Jar.

This simple little pocket money system has helped us create a new family legend: our family helps people in our community who are doing it tough at Christmas. That’s what we do … that’s who we are. We’re givers and it feels great.

Now that is a Christmas family tradition that will breed happiness and kindness.

Tread Your Own Path!

The Most Moving Message I Received in 2018

Throughout the year, I’ve received thousands of messages from Barefooters.

This is the one that moved me the most:

Dear Scott,

Five years ago our middle child was diagnosed with brain cancer, at five years old. We had to move to the city for his treatment, and my husband had to commute for work as much as our situation allowed. This meant we had to find funds for rent as well as mortgage and bills, all while living off a very limited wage. We didn’t even qualify for a credit card, though after reading your book I’m so glad we didn’t get one.

After our son passed away, we spent years trying to claw our way back from financial ruin, and it was near on impossible — until I was told about your book eight months ago. I thought I would struggle to read it (that the financial terms would go over my head), but you had me laughing, crying and captivated to the end.We honestly thought we were in for a lifetime of debt, but thanks to you we are already breathing easier. We are in a far better position than we were, and the improvements we’re making are noticeable. And with your new ‘Families’ book our children are learning to be smart with their money too. We’ve started the jam jars with our little ones, and our teens have both got jobs and set up their bank accounts to include savings. I am so proud of them and completely loving that I have been able to give them the headstart I never had.

I can honestly say that if not for your advice we would never have reached a position of financial freedom. So from the bottom of my broken heart, thank you.

Jennie

Thank you for writing, Jennie.

I’ve chosen your letter to end my column on for 2018 because you epitomise what Barefooters around the country are doggedly working towards: looking after their family, and gaining financial control.

That you’ve soldiered on through your heartbreak is a testament to your strength.

You Got This.

And to you ‒ the person reading this ‒ thank you for helping me spread my message to people like Jennie.

This wraps up my columns for the year. I’m taking the school holidays off to hang out with the family, and will be back ready and raring to go in 2019.

Tread Your Own Path!

Scott

A super fund option with ZERO fees?

If you’ve been reading my stuff for a while, you’ll know I bang on – a lot – about minimising your super fees.

Well, today I’m going to tell you about a super fund that has zero fees. As in a donut.

From the get-go of my career, I’ve advocated that people should invest in low-cost index funds for their super. (An index fund simply tracks the market by automatically investing in, say, the top 300 companies on the market).

And I have put it on record that I invest my super with Australia’s lowest cost index super fund, the Hostplus Index Balanced Fund.

This has opened me up to criticism that I’m biased towards Hostplus, yet my answer has always been the same:

I have no axe to grind, it’s simply about getting the lowest fees.

The long-term evidence is clear:

If you’re investing in anything other than a low-cost index fund, you’re likely to be a loser.

Ratings agency Standard and Poor’s (S&P) has tracked over one thousand managed funds and ranked them against a simple, low-fee index fund over a 15-year period.

Almost nine in ten (87 per cent) international share funds failed to beat a simple low-cost index fund.

Almost eight in ten (77 per cent) Aussie share funds underperformed a simple low-cost index fund.

Faced with this overwhelming evidence, investors the world over have embraced index funds.

It’s not even debated any more … except here in Australia.

We’re like the flat-earthers of the finance world, openly questioning the ‘lower fees equal higher returns’ argument.

And the result is … last year Aussie super funds swiped $32 billion in fees, which over the long term robs future retirees of hundreds of thousands of dollars from their nest eggs.

ASIC has been trying to force fee-gouging super funds to give investors more transparency on the fees we pay, yet this week it was delayed again … thus far it’s dragged on for almost six years!

(No surprise there: Warren Buffett has sagely warned, “Remember, your fees are their income”.)

Anyway, of the thousands of super funds on offer, only a surprising few offer low-cost index funds, like Hostplus does. And I’ve always said that the day another low-cost index fund came onto the market, I’d let you know about it too.

Well, today is that day.

This week REST Super launched a suite of index funds that have 0 per cent fees:

• Australian Shares Index Fund – which tracks the 300 biggest companies in Australia (think the banks, Woolies, CSL, Sydney Airport).

• Overseas Shares Index Fund – which tracks 1,576 of the biggest companies in the world (think Amazon, Alphabet (Google), Berkshire Hathaway, and Toyota … though no tobacco stocks, which this fund has chosen to strip out). Dividends are reinvested in Aussie dollars.

• Balanced Index Fund, which consists of 30 per cent Australian shares, 45 per cent overseas shares, 20 per cent bonds and 5 per cent cash.

(Technical point: REST is using Macquarie Bank’s True Index funds, which use derivatives to manage their portfolio. REST say they have done their due diligence and are comfortable with the risk.)

Let’s be fair dinkum though … nothing is free (except my wife’s apricot chicken casserole … and that has its own risk profile).

So how can this fund be free?

The answer is, it’s not. The investment fee is zero, that’s true.

However, REST also charges an administration fee, which is $67.60 per year plus 0.10 per cent of your super balance per year (capped at $800 per annum).

Still, it’s very cheap.

Of course, before you switch to this (or any other) fund, I’d suggest you speak to a professional and get personal advice. Just make sure you’re speaking to an advisor who puts your interests first, and advocates low-cost investing.

Tread Your Own Path!

Reminder: I first wrote about this years ago and highlighted the low fees. Today there are cheaper index super funds on offer. How do I know? Because my readers constantly email me about them! So before you do anything, go to YourSuper.gov.au and compare super funds first.

Spreading the Love

Dear Scott,

I am the Team Manager for Domestic and Family Violence Programs for Mercy Community. I am not asking for anything ‒ I just wanted to let you know that I am applying for a grant as part of Queensland Women’s Week to put together financial packs for women in refuges to help them with their financial literacy post-separation. The grant is for $3,000 and I am aiming to buy 100 of your Barefoot Investor for Families book for the packs, along with supporting information. If you object to this, please get in touch.

Carmel

Hi Carmel,

I object! You shouldn’t have to pay a cent for those books!

Supporting some of the most vulnerable people in society — abused women and their kids — is critically important work. So I’ll send you 100 copies of my old book, The Barefoot Investor, and 100 copies of my new book, The Barefoot Investor for Families. Thanks for what you do.

Scott

Could We Lose All Our Money?

My husband and I are working through your book, but we are stuck at the superannuation chapter. We both work for the Queensland Government and have our super in the QSuper Lifetime Aspire fund. The fee is 0.9%, which is just above your recommended 0.85%. QSuper feels ‘safe’. If we changed to another fund, can we be sure we are guaranteed by the Government? Could we lose all our money?Thanks,

Merryn

Hi Merryn,

Let me clear this up: you are not guaranteed by the Government if you lose all your money in super. (That only happens with money you have in the bank -- see the question above.)

Instead, your superannuation fund is a trust, and the trustees of the fund are legally obliged to act in your best interests (as the Royal Commission has shown, some do a better job of this than others). QSuper appears to be doing a good job: they’re a not-for-profit industry fund that charges competitive fees, and they have a decent track record.My advice would be to call up the fund and request to sit down with one of their advisors, and have them help you select the most appropriate asset mix within your current QSuper fund. Why? Well, a Vanguard study showed that 90% of your returns comes from the asset allocation you choose. Make that your focus.

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.

Bailing Out My Boyfriend

Hi, I’m a huge fan!

My boyfriend is currently working overseas, and we plan to ‘go Barefoot’ when he gets back so we can tackle our debts. My accountant suggested we first pay off the personal loan my boyfriend got, which he consolidated his credit card debt into -- a loan that was only possible with my name on it. The accountant suggested using my inheritance, which I currently have in our joint offset account. Trouble is, my boyfriend now has another credit card and I worry I would be bailing him out again! What should I do?

Mel

Hi Mel

Your accountant is just looking at the digits:

The interest on the personal loan is costing you more than the offset, so you could save money by extinguishing that debt. And given you’ve already contracted an STD (Sexually Transmitted Debt) -- that is, you’re now both jointly and severally liable for repaying the loan -- it makes total sense financially.

However, if I were in your situation, I wouldn’t repay the loan.

(Actually, I wouldn’t have co-signed the personal loan in the first place, but I’m a little Judge Judy like that.)

First, because you don’t want to set up the expectation that you’ll reward his dumb behaviour.

And second, because you’re already giving him a helping hand. By keeping your inheritance parked in your joint offset account, you’re already effectively lowering your mortgage repayments, giving him a fantastic opportunity to ditch the credit card and domino his debts.

I’d sell it this way: this is an excellent way to show his commitment to both the Barefoot plan, and you!

Scott

The Best Thing I Ever Saved For

Dear Mr Pape,

I bought your book while in severe financial difficulty — I actually had to save money for six weeks just to buy it! Anyway, I am 10 months in and will never look back, having managed to pay off $25,574.23 worth of debt. I still have a fair way to go, but I am churning through it. Thanks heaps!

Callum

Hi Callum,

Dude, you could have loaned it from the library!

What I love about your email (okay, testimonial), is how detailed you are with your digits:

You haven’t just paid back ‘twenty five grand’, you’ve calculated it down to the cent!

A report this week by NAB found that 20% of Aussies said they don’t have even a cracker saved up.

Don’t let that be you.

If you’re following my plan, you should have nailed the first step: open your separate Mojo account, with an initial $2000 deposit. And if you don’t have a spare $2000, look around your house and see what you can flog on Gumtree.

Scott

The Giving Game

Hi Scott,

My daughter would like to donate the contents of her money box to a charity. I really want to take her to one in person, rather than doing it online, so she can be a part of the process. But I am finding it increasingly challenging to find information on where we can do this ‒ none of them seem to want to interact in person. Any ideas?

Jill

Hi Jill,

I think there are more meaningful ways to teach giving than handing over cash.

Instead, my experience is that food is the perfect way to teach your kids about giving.

Reason being, every kid knows what it’s like to be hungry: you can’t concentrate, and you’re irritable until you eat.

So, you can explain that on a typical day roughly three kids in her class will arrive at school hungry or without having eaten breakfast, according to Foodbank. (This explains why approximately 1,750 schools across the country have Breakfast Clubs, to ensure kids are getting their most important meal of the day. They’re in poor areas. They’re in wealthy areas. They’re in my home town.)You can also explain that just because you can’t see their tummies rumbling doesn’t mean they’re not hungry.Not only is food a powerful metaphor for kids, even better, your kid has the chance to do something about it.

Last year charities across Australia had to turn away 65,000 hungry people each month because there wasn’t enough food to go around.

However, there’s no need to start feeding the masses bread and fish like a motivated messiah.

Instead, when you’re next walking around the supermarket, ask your kids, “What can we buy for hungry people?”

You can donate things like canned foods, spreads, coffee, flour, sugar and baby food. Have your kids bring along some money from their Give Jar so they can buy food with their own money, and then on the way home you can drop it off at the local Foodbank warehouse, or your local community charity that distributes food in your area (you can find their contact details from your local council).

Scott

The Dollarmite Rebel

Hi Scott,

I purchased your latest book, The Barefoot Investor for Families, and gave it to my nine-year-old son, who has taken to it like a duck to water. He is enthusiastically helping with cooking, and has set up his three jam jars. He has a presentation at school coming up and, due to inspiration from your book, he wants to do his talk on why his school should give Commbank the flick. I don’t want to discourage him, as I too believe in the cause -- but is it something best left for parents to bring up with the school?

Barry

Hi Barry

What do I reckon?I reckon this sounds like a life lesson he’ll remember for years to come.Here are a few things I’d talk through with your son:

Explain that a credit card is a very expensive loan from a bank. Young people often get themselves in a lot of trouble with credit cards by borrowing too much. Credit cards tend to make everything you buy much more expensive. For most people -- especially young people -- the best credit card is no credit card.And perhaps he could ask:

Why does Commbank’s Start Smart Program teach kids -- in grade three -- about the benefits of credit cards?

Then he could ask his teachers:

Have you ever got in trouble with a credit card?When we get older, should we get one?

A big part of financial education is to be skeptical about what banks (and advertisers in general) offer up.

You’re teaching your son to be an independent thinker and to intelligently and respectfully question authority.

In this case, he’s got truth on his side: there is no justification for allowing a bank to spend millions of dollars for the exclusive right to teach our kids this core life skill, much less for rolling out a marketing program that is worth, according to one analyst, as much as $10 billion!

Let me know how he goes!

Scott

The 3 books I’m giving for Christmas this year

Christmas shopping sucks, right?

Not for me.

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

Although I must confess, last year it didn’t work out so well.

I bought my mother-in-law Marie Kondo’s The Life-Changing Magic of Tidying Up.

She opened the present, scanned the title, and the look on her face said it all.

“Oh, I’m not saying you’re a hoarder … it’s just … a really good book. Merry … Christmas”, I added.

Silence.

Anyway, you’re not going to be that stupid, so here are the books I’ve got in my Santa sack this year:

Factfulness: Ten Reasons We’re Wrong About the World — and Why Things Are Better Than You Think

Bill Gates says this is one of the most important books he’s ever read.

Author Hans Rosling systematically unpacks fake news, sensationalist clickbait, and doom-and-gloom headlines with cold hard facts: actually, in almost every way, the world is getting much better.

While the media reports obsessively on the latest drama of the moment, the upward movement of human progress marches on with little fanfare. This book shows you how to look at the world in a rational, fact-based way.

A perfect gift for your manic-depressive, we’re-going-to-hell-in-a handbasket, MAGA-hat-wearing brother-in-law.

Where Are The Customers’ Yachts?

This year we’ve watched — gobs agape — at the sheer rat cunning of financial institutions: charging dead people for advice, ripping off the mentally disabled, and billing for advice they never gave.

Has it always been this bad?

Hell, yes!

Almost 80 years ago Fred Schwed wrote the book Where Are The Customers’ Yachts?

The title of the book comes from a legendary story about a visitor to New York who stands admiring the expensive yachts of the Wall Street brokers. He naively asks, “Where are all the customers yachts?”

Of course, there were none. As every bank CEO knows intuitively, the really big money is made in providing financial advice, rather than receiving it. This book will make you laugh and cry.

A great book for anyone who is reviewing their super fund fees over the holidays.

How to Break Up with Your Phone

Our phones (and the apps on them) are designed to be highly addictive. They manipulate our brains, suck up ever increasing amounts of our attention, and capture the one true resource we can never replace: our precious time.

Author Catherine Price explains how phones are changing our brains, and provides a four-week program that shows you how to break up with your phone and form a healthier relationship with your screen.
A great gift for … me.

And yes, you guessed it, I’ll also be gifting my book, The Barefoot Investor for Families.

I’ll confess: while I originally wrote the book for parents and grandparents, a huge surprise for me has been how successful the book has been with kids. I’m pitching it as a perfect stocking-filler. After all, the skills the book teaches will set their kids up for life. And that’s a pretty cool Christmas present to give, right?

Tread Your Own Path!