Hell’s Kitchen

Hi Scott,

My wife and I are in our early 30s and are both nurses. She has decided she wants to put our money into starting a restaurant. I think it is a terrible idea, considering our lack of experience and the low success rate of restaurants. Please help me change her mind!

Gary

Hi Gary,

Order up!

I suppose your wife could argue that she’s being “greedy when other people are fearful”, as Warren Buffett says.

Though I couldn’t see Buffett investing his money into a start-up restaurant right now.

After all, figures from Treasury estimate that 441,000 jobs will be lost in the hospitality sector, and the industry’s peak body is warning that 20% of restaurants could go down the gurgler.

In reality, the industry was already struggling before the pandemic, as a result of fair work compliance off the back of high-profile wage theft cases. Most small business people buy themselves a job. Many restaurateurs discover they’ve been served up a shank sandwich.

My thoughts?

You’re both in one of the few pandemic-proof positions — nursing — so I wouldn’t be leaving it.

However, if she’s determined, why not suggest she work evenings in a restaurant for the next 12 months? She can think of it as a paid internship. It’ll give her an entree to the industry, and she’ll get to see just how hot it is in the kitchen. I’d say it’s the best way to work in a restaurant and come out ahead over the next 12 months.

Scott

Issue a Retraction, Now!

Hi Scott,

Firstly, love your work. You’ve changed our financial lives in a significant and very positive manner. But secondly, and more importantly, I hate to tell you but your article about weighted blankets is actually very risky. Weighted blankets are something that typically are only prescribed by occupational therapists and are not to be used while sleeping.

There have been many cases of people (particularly children) suffocating when these have been left on. As an occupational therapist myself, I would never recommend using one for sleep (it can be used as an aid to fall asleep but MUST be removed). Additionally, the weight should not be more than 10% of your body weight. So if a small person (or child) is given a 10 kg blanket, as suggested last week, the risk of suffocation is much higher.

May I kindly suggest retracting your column, or sending an additional disclaimer!

Yours in safety,

Ruth

Strewth, Ruth!

It’s bad enough that each week my finance column has to be vetted by lawyers (for disclaimers and defamation).

Now you’re telling me I have to worry about giving blanket statements … on blankets?!

In my defence, I was writing about my own experience as an adult and not suggesting you give them to your kids.

(Then again, with three kids under the age of seven, maybe tying them down a little so they don’t always end up in our bed doesn’t seem like such a bad idea …)

“Strike out that last line!” warned the lawyers.

“It was written in jest!” I pleaded.

Yet point taken, Ruth. You need to be careful with these blankets, especially if you’re a kid (or a supermodel).

Seriously, though, fair suck of the sav: surely no one takes my advice in the bedroom, right?

Scott

The people who are really getting screwed in this downturn (it's not who you think)

My editor emailed me with a request on Thursday:

“Can you do a piece on the Treasurer’s economic update to the nation?”

My answer?

Sure, and I can do it in one line:

“The Treasurer is throwing the kitchen sink at COVID like there’s no tomorrow.”

The rub, of course, is that for most voters there aren’t that too many more tomorrows left … especially those who read the newspaper!

So today I thought we’d talk about the people who are really getting screwed right now.

People like 17-year-old Louise, who sent me this question:

Hi Scott, I've been reading The Barefoot Investor as I am interested in kick-starting my financial freedom. However, I am only 17, and about to graduate, so I don't have a strong income. I am slowly working towards setting up the different bank accounts but I am having trouble with the advised percentages for each. Any advice on how to get ahead?

Yes, Louise is still a kid. She’s not old enough to vote, but she’s young enough to spend the rest of her working life paying off the multi-billion-dollar promises our politicians are making today.

Thankfully, the concept of shouldering an unfair amount of future government debt isn’t high on her priority list.

Louise is more focused on the here and now — and with good reason: her age group has been the worst hit in this crisis, with a staggering 44% of the jobs lost this year belonging to 15-to-24-year-olds.

Now, Louise, here’s the thing: our lives are shaped by our experiences, right?

My generation’s experience has been 29 years of non-stop economic growth, falling interest rates, and rising house prices.

Yours will be different. 

As you grow up and get the keys to the (err) Uber, you’ll be starting your working life at the bottom rung of the employment ladder, leaning up against the worst economic downturn in a century. 

Fact is, every generation must play the hand they’re dealt, and you just got a Joker (Donald Trump).

Contrast this to your parents and grandparents, who’ve enjoyed the greatest economic boom in history.

Lucky buggers, right?

Well, maybe. However, the irony is that this long boom has softened people up. It’s allowed them (well, many of them) to paper over their financial mistakes. And, as a result, many older Aussies have never had to learn much about managing their money.

You will, though.

You won’t have a choice.

Yet thankfully you’re two steps ahead of most people — you’re asking the right questions while you’re still a teenager. So don’t fret about the percentages; you’re already on the right track by setting up your savings buckets. What that tells me is that they’re going to fill up. It’s only a matter of time — and you’ve got plenty of that.

And if all this doom and gloom is getting you down, know this: the last generation that encountered genuinely tough times was that of your great-grandparents, who lived through the Depression. The tough times hardened them into one of the greatest generations in history.

Tread Your Own Path!

He’ll Be Okay

Scott,

You recently wrote about a father who was having problems with his son’s attitude. Sounds familiar. My youngest did average at school, played at uni for one semester, then sat back on his 10-hour-a-week checkout job. Despite lectures on my part, nothing changed — and I kept bailing him out. My husband and I wanted a different life, so we sold the big acreage house and bought a beautiful penthouse by the sea. We love it. My son had to move out, and he was livid for quite a while. But guess what? He is now 21, has a full-time job, rents a room in a share house, pays his own bills, is paying me back the money he ‘borrowed’, and has plans for his future. Now he shouts me lunch.

Juliet

Hi Juliet,

I actually had a lot of parents write to me this week sharing similar stories. It taught me a few things:

First, most kids learn more by fending for themselves than they do from well-meaning lectures.

Second, tough love may not feel good at the time (my parents threatened to change the locks after I moved out), but 20 years on they’ll thank you for it.

Finally, as a parent, you’re only ever as happy as your unhappiest kid.

Scott

Should I Get a Marginal Loan?

Hey Scott,

There is a lot of uncertainty at the moment and share prices (particularly for the banks) are very low. So I thought of getting a marginal loan for $100,000 and dropping an even spread across the Big 4. It seems a good idea to me, but you warn against it — so is there never a good time to get a marginal loan?

Xavier

Hey Xavier,

A ‘marginal loan’ could be very … marginal.

What you mean is a margin loan, where you borrow to buy shares, using your share portfolio as collateral.

But beware. If the shares go down in value, you’ll get a ‘margin call’ from the lender demanding that you put up more money … or they’ll sell your shares from under you, leaving you with potentially large losses.

Granted, in March as the stock market hit its lows, in this column I urged people to keep buying shares (which the Daily Mail ripped off and ran with the headline: “The Barefoot Investor’s warning on why young people should buy shares NOW”).

Since then, the share market has risen significantly, while — in my view — the economic conditions have got much, much worse.

Bottom line?

I would not be borrowing to invest in this market.

If you do, get ready for some sleepless nights that not even a weighted blanket can help you with.

Scott

Help! My Boyfriend is a Swinger

Hi Scott,

My boyfriend is interested in ‘swing trading’. He saw it on Facebook. He says you give them $100 and then you get $1,000 back in seven days. I think it is a scam and not a healthy way to manifest income. However, I have this bias because I hate get-rich-quick schemes. Would you please explain what it is and whether it is worth it.

Belinda

Hi Belinda, I’m with you — it’s a scam.

However, if he’s not going to listen to you then I think it’s worth encouraging him to go through with it.

Think of it this way: your boyfriend will get a real-world, lifelong lesson in greed and stupidity.

And all it’s going to cost him is $100?

Sounds like a good deal to me. Just let him know that I think he’ll probably lose a lot more than $100.

Why?

Well, firstly, because he is GIVING MONEY TO A CRIMINAL.

And, secondly, because the scammers fishing on Facebook may bait their hooks with $100, but their real aim is to reel in thousands of dollars from their victims ... and they’ll use whatever psychological tricks they can to extract more money. They may let him nibble on a bit of shrimp, but he’ll end up in a deep fryer eventually.

Sounds like a swinging good time, right?

Scott

I’m Angry With You, Barefoot

Hi Scott,

Being a Barefooter, I am pretty disappointed with how you treated 22-year-old Tina with her question last week about her boyfriend investing $1,000 on her behalf. You basically ridiculed her. The fact that she took the time to ask for your help speaks volumes, but your reply did not offer one bit of advice on what she should do instead. Hopefully she has not lost her investment so far and may be able to put it into something better, should you advise her what that might be!

Justine

Hi Justine,

A recap: Tina wanted to give her boyfriend a grand of her own dough to invest because “he’d made $1,500 in 24 hours”. Yes, I used her question to make a broader point, namely that the stock market has lately become just another place for many young men to gamble.

However, I’m also sure Tina got the message loud and clear that her boyfriend’s day trading would end up in tears — and, Justine, I think that’s valuable advice (heck, I may have even saved their relationship!).

Okay, given the trouble that got me into, let’s double down and deal with another boyfriend question ...

Scott

The NutriBullet of the Bedroom?

Today I’m going to talk to you about something really weird: investing in sleep.

Here’s the thing: you probably spend, at best, two hours a day in your car, but eight hours a day in the sack … yet you’re likely still sleeping on the equivalent of a Datsun 180B, right?

Honk! Honk!

Seriously, when was the last time you upgraded your ride, Captain Snooze?

Look, I’ve got form on this: in my bestseller I wrote about investing in the Rolls-Royce of pillows, the Dunlopillo, so you could “sleep like a billionaire”. (And yes, I’m the only finance guy who moonlights as a bedroom furnishing advisor. Put that in your pipe and smoke it, Alan Kohler!)

Well, today, I have an update for you. It all started a few months ago when a friend recommended I try sleeping with a new type of blanket.

“It’s the new thing … they’re called weighted blankets … they weigh, like, 10 kilos … and they’re scientifically proven to release endorphins and help you sleep”, she gushed.

And I thought to myself: “You are crazy.”

Then, a few weeks ago, another friend was raving about hers.

So I went online and found thousands of glowing reviews, and decided to try one myself.

(To be fair there’s also a bunch of pseudoscience written about the benefits of weighted blankets, which left me very skeptical.)

And so I ordered the cheapest one I could find, fully prepared for it to be the NutriBullet of the bedroom (i.e. destined to end up in the back of a cupboard and eventually thrown out in 2032).

BUT OH MY GOD.

True dinks, the very first night I used it … I slept like it was 2012 (pre-kids, post-marriage).

So how does it work?

Well, it’s pretty simple really: it’s just a standard blanket with 10 kilos of small beads sewn into it. It weighs you down — but in a good, calming way, and I quickly nod off.

Well, that’s my description (and how it works for me). My father would probably describe it as “sleeping with a hessian bag full of sand on you”. And he’s kind of right: it makes absolutely no sense … but it’s helping me sleep soundly in these trying times, so for me it’s a great investment.

Tread Your Own Path!

We Hit the Jackpot!

Hi Scott,

This month, my husband and I will finally be debt free! We owe nothing (though we also own nothing). My hubby used to have an addiction to gambling and a $120,000 debt on credit cards. We have spent the past five years paying every last cent off, while having three children under five, and I’ve also been studying at uni. My question is: moving forward, how can we make the best decisions to create wealth, and is trading shares just a form of gambling?

Kylie

Hi Kylie,

What a truly amazing all-of-family feat.

The fact that you guys bunkered down and paid off all your debts tells me a lot about the people you really are.

Know this: done right, investing isn’t the same as gambling.

You’re saving so you can provide for your family’s long-term security.

That is the polar opposite of gambling.

My advice?

Invest — but do it via your boring-as-hell low-cost super fund. Do it via a regular, automatic direct debit. Never look at the balance. Only check it once a year when your statement comes in the post.

And keep repeating to yourself: I’m not gambling … I’m providing a better future for my family.

You Got This!

Scott

The Hangover

Hi Scott,

My daughter lives with her partner and three children in a property that I own. They have many bills and are unable to pay rent. Her partner is wasting his money on gambling and will not change — he has even stated that he wants to keep his head in the sand. How do I get him to grow up? I have given him your book and my daughter is trying hard and has since started part-time work. However, they have three car loans and have debt collectors visiting frequently. Help! I feel powerless.

Jenny

Hi Jenny

It must be horrible to see your daughter go through this.

Now I know you’re coming at it from a place of love, but giving her partner my book won’t help one bit.

Why?

Because it sounds like he’s in the grips of a gambling addiction. And, if that’s the case, giving him my book is like giving an alcoholic a Panadol for a hangover.

So, what can you do?

A couple of things:

First, as hard as this sounds, drop the judgement.

I’ve learnt to view people with gambling addictions the same way I view anyone with a serious illness.

“When will you grow up?!” is like asking someone with a mental illness “When will you be happy?!”

Him telling you that he “wants to keep his head in the sand” sounds like a reaction to feeling judged.

Trust me, he knows how bad it is.

Second, encourage both him and your daughter to see a financial counsellor. Ideally, it would be a specialist gambling financial counsellor (call Gamblers Help on 1800 858 858 for a referral).

However, if he’s not ready to get help, encourage your daughter to go on her own. Reason being, the debt collectors will not let up, but a financial counsellor will sort them out and stop the calls.

Finally, you’re doing an amazing job providing them with a roof over their head. Make sure they keep getting the basics: food, power and schoolbooks.

You say you feel powerless. Just remember, that’s probably how your son-in-law feels too.

Scott

My Son has a Problem

Hi Scott,

My 18-year-old son has no value for money and thinks I am a human ATM! I still pay for his phone and his car insurance. He completed the VCE but did not want to pursue university. He is working part time at the moment and is also receiving Youth Allowance. However, every week without fail he will ask for a loan of cash on an IOU basis. He still believes it is my responsibility to pay his living expenses, and I cannot get through to him on this. 

Gary

Hi Gary,

I’m sorry but I think you’re wrong.

Your son doesn’t have a problem: he lives rent free in a nice joint, all his bills are paid, he’s getting a bit of money from Centrelink and a part-time job, and when that runs out he has access to cash whenever he wishes.

If I were to sit down with your son, I think he’d tell me his life is pretty sweet. No problems!

Gary, it’s you who has the problem.

So my question isn’t directed at him — he’s set himself up very nicely — it’s to you:

What are you going to do about this caterpillar?

You’ve got a slug munching away your food, and your wallet. The cocoon you’ve made for him sure is comfy!

Here’s the deal: he won’t find his life’s purpose sitting on your couch, eating your food, and spending your money.

If you want him to become a butterfly, he needs to spread his wings and fly off to a low-rent share house that has two-minute noodles as a staple meal.

(Yes, I’ve spent way too much of these holidays reading The Hungry Caterpillar.)

Given he’s still young, let him know that he’s welcome to fly back at any stage, on the proviso that he presents you with a solid plan (study, a trade, or a full-time job).

Good luck!

Scott

My Boyfriend Is Into The Stocks

Holy smokes!

I take two weeks off for the school holidays and my Barefoot inbox goes … to the craps.

Yes, it seems everyone wants to take a seat at the casino that is today’s share market.

And for those who don’t know their stocks from their jocks? Well they ask me … or their boyfriend.

Here’s a question I received last week from 22-year-old “Tina”:

Hi Scott, 

I was wondering who the best companies are to invest in during this pandemic. My boyfriend is into the stocks and has made $1,500 in the last 24 hours, so I have given him some of my own money ($1,000) to invest. But I was wondering what companies you would recommend.

Tina

Tina’s boyfriend is “into the stocks”, and you can bet he’s got a swagger like Jagger over his … 24-hour track record.

“Hey girl, I’m going to make you rich.”

To be fair, for many people shares are just another way to gamble.

And to be even fairer, this is a worldwide phenomenon.

In the US, the three biggest brokers signed up over 1.5 million brand-new customers in the March quarter alone.

In China, trading apps are struggling to keep up as millions of traders “race to seek a quick buck in a surging market”, according to Bloomberg.

And in Australia the number of new investors has increased by more than threefold.

For me, these are worrying signs.

We are in the midst of a deadly pandemic that shows no sign of slowing, and it’s causing real and lasting economic damage.

We are entering into a deep and sustained global recession.

And yet Tina’s boyfriend is making bank, baby!

So, how long will his luck last?

Well, author Matthew Hale Smith wrote in his timely book Bulls and Bears of New York:

“Speculators do not make money, except by a turn as rare as good luck at a gambling table … Of the countless thousands who throng Wall Street from year to year, the great mass of speculators are ruined. Every broker on Wall Street has an entirely new set of customers once in three years.”

Wise words … written 146 years ago.

Tread Your Own Path!

Well Done, Chappy!

Hi Scott,

Thanks to your advice my friends have paid off their mortgage. They are a young family with four children. He is a school chaplain who earns very little but is dedicated to his job and his community. I would be so grateful if you could flick them a quick email of congratulations — it would mean so much to them. His name is David and his wife is Emily.

Wendy

Hi Wendy,

I can do better than that — I can celebrate it with a few million of my fellow Barefooters, right here.

You bloody ripper!

Well done, David and Emily. You’ve achieved a goal that will change your family’s life in more ways than you know.

You’re now on to Barefoot Step 8: ‘Nail your Retirement Number’, which is so much easier when you have the banker off your back. It means you’re able to focus on my favourite step of all, Step 9: ‘Leave a Legacy’. That’s when you know you’re really wealthy. 

Scott

Should I Obey God … or Barefoot?

Hi Scott,

I am halfway through your book (my wife made me read it … thank God). We have $46,252 of high-interest credit card debt and no assets. For the first time I see a glimmer of hope of getting out from this noose of debt. We are following your book and I am going to trust it works, because I cannot see any other way out. The thing is, we go to church and are encouraged to give away 10% of our income. Should we use that 10% to get out of debt instead?

Greg

Hi Greg,

I guess this is the Barefoot confessional!

If you are really committed to tithing and believe in what you’re doing, why are you writing to me about it?

I’m not going to get in between you and your God, or between your bedsheets and your balance sheets.

Some people have criticised me for not being prescriptive enough … but I’m not the sort of person who likes someone telling me what to do.

So you do what’s right for you, your marriage and your God.

I’ll just say this:

Let’s say you’re both earning $60,000 a year. Combined that works out to be $8,000 a month in the hand, and $800 in the Sunday tip jar.

If you paused your tithing and put the money against your debt, it would save you $120,585 in interest, according to the ASIC MoneySmart credit card calculator, and get you out of debt in a few years.

And then you’d be in an even stronger position to do God’s work.

Scott

Help a Stripper Out!

Dear Scott,

Hoping you can help a stripper out! My name is Emmy (stage name Charlotte), I am a 25-year-old stripper from Byron Bay, and I have just read your highly entertaining book. I would love your advice on budgeting. In my line of work, I can never estimate how much money I am going to make each week — some weekends it’s $3,000+, some weekends it’s less than $500. How do I manage this?

Emmy

Hi Emmy

I know what you’re doing … trying to get my attention with that opening line.

And you know what?

It worked.

My first thought is that being a stripper would be the ultimate cash business.

I mean, your clients literally throw money at you!

Then again, you’ll still face the same financial issues as any self-employed person.

My book sets out how I personally manage my own money … I’m self-employed, and it works for me!

That said, you need to do three things:

First, set up a separate bank account and deposit all the cash you receive.

The ATO data-matches billions of transactions, and they target people working in professions where cash is received. Report your tips in your tax return (usually at Item 2: ‘Allowances, earnings, tips and director’s fees’) and claim any legitimate work-related deductions (lingerie and the like), as with any job.

Second, transfer 35% of whatever you earn into a separate tax account so you’ll never be caught out at tax time.

Finally, work out the absolute minimum you need in your ‘Daily Expenses’ bucket and set up your other buckets by following the plan in my book. Any extra you earn after that should be applied to working through the Barefoot Steps, which will keep you growing a little wealthier each day.

People keep telling me that my ‘three jam jars’ system for kids doesn’t work because nobody uses cash anymore … maybe they need to come and see you at work!

Scott

How to Honour Him

Hi Scott,

I am in my early thirties and feel hopeless. Recently I lost my brother to a very long and hard battle with cancer, and in his will he left me $10,000. I was thinking about spending it on a holiday or a nice piece of jewellery to remember him by, but I also have a $20,000 credit card debt that I have struggled to pay off for the past 10 years. Would you put it towards the debt or go on a nice holiday to get away from all the painful memories?

Bec

Hi Bec,

I’m sorry for your loss.

Here’s what I think: I think that losing your brother is a tragic, heartbreaking reminder that life is precious.

Bec, life is far too short to spend it being a slave to a bank.

And make no mistake: while you’re paying them $3,600 a year in interest, you’re effectively a financial slave.

If you keep on paying the minimum, it’ll take you 54 years to be free (and that’s if you stop spending on it today).

I think you should honour your brother, cut up your credit card right now, and live the rich life that he can’t.

Make him proud.

Scott

Should I Buy Shares in a Cruise Liner?

Hi Scott,

I am about to receive money back from Princess Cruises, due to a cancelled cruise. The owner of Princess Cruises,  Carnival Corporation, has just seen its share price hit a record low. With this in mind, I am considering purchasing 10 Carnival shares. This will benefit us, as shareholders get $250 on-board credit for every future sailing of over 13 nights. We are already platinum status members and plan on continuing to build our loyalty. Is it a good idea to buy now?

Dorothy

Hi Dorothy,

So you’re talking about the tub that kicked off the coronavirus in Australia, right?

Just making sure.

Let’s be honest — your motivation for making this investment starts and ends at the minibar. You’re thinking of buying some shares simply to get the shareholder discount.

And I’m perfectly okay with that, so let’s sail:At pre-corona levels, 10 shares in Carnival Corp cost around $850 Aussie.

Today those 10 shares are going to set you back around $280, and you get a $250 credit!

And the more cruises you take, the more shareholder credits you can spend!

Then, when you’ve worn out your sea legs (or hips), you can sell your shares, hopefully at a profit.

Really, the only downside is if the company goes broke. And if there’s a second wave of infection, Carnival Corp could very well sink: the company burned through $US12.9 billion of expenses in 2019 … and post a capital raising they’ve only got $US7.6 billion in cash on their balance sheet.

Yet let’s be honest: if contracting a highly infectious and potentially fatal disease doesn’t bother you, losing a few hundred bucks is the least of your worries. That being the case, if I were in your boat shoes I’d take the punt and buy the shares.

Bon voyage!

Scott

Pardon My French

Hello Scott,

I would like to know if a French version of your books exist please?

Genevieve

Bonjour mademoiselle,

Non!

Cordialement, Barefoot

Scott

I Want to Hit My Dad … Does Barefoot Agree?

Howdy Scott,

My dad and I are just about coming to blows! He has a mate, an investment manager, who is managing his $700,000 in superannuation. The portfolio currently has 15 holdings, all ETFs and LICs, and his ‘mate’ is slugging him $330 a quarter to manage this rubbish. I said I could do this for free, or spend a day explaining the basics so he could do it himself. His response: “I’m happy with how much I am making, plus you don’t know what you are talking about.” Haha! How can I get the message through to him that passive investing will take a whole 10 minutes out of his year to organise? Or should I just let him be?

Pete

Hi Pete,

I actually agree with your old man, for a couple of reasons:

At $330 a quarter ($1,320 a year), it represents around 0.18% per annum cost to his portfolio.

And, so long as he’s invested in decent, low-cost products (no expensive actively managed funds), he’ll be fine.

More importantly, if his ‘mate’ can stop him from freaking out and jumping off the stock market rollercoaster as we do the occasional loop-the-loop, then he will have more than earnt his money.

Don’t feel bad.

My old man talks to me about stocks all the time, but then when he wants ‘real’ advice he talks to my analyst Mike (who then says the same thing as me). It must be something about the fact that they’ve had to wipe our bottoms at one point in our lives.

Then again, their turn will come someday soon. Circle of life.

Scott

Kids Say the Darndest Things

Dear Scott,

My wife and I have been doing the Jam Jars with our two girls for a bit over a year now. I just wanted to let you in on a conversation I overheard this morning:

Wife: “Why don’t you have more money in your Give Jar?”

Six-year-old: “I give it to the people.”

Wife: “Which people?”

Six-year-old: “The people in the tuckshop I get my Icy Pole from.”

Wife: “That’s not what your Give Jar is for, darling.”

Six-year-old: “But I give them money for my Icy Pole!”

Nick

Hey Nick,

You, my friend, have won question of the year. I got a real laugh from this one.

Let’s hope your daughter doesn’t become a lawyer!

Scott