You Alarmed Me!

Hey Scott,

A bit confused about your column ‘Financial Markets Are a Dog’s Breakfast’. Are you saying the stock market is a farce and will fail due to all the extra money printing and zero interest rates? I am a big-time Barefooter who is heavily investing in stocks right now, so would you please explain what you mean?

Harriet

Hi Harriet,

Let me say this right up front: I’m still invested in the share market, and I don’t plan on ever selling.

What I was referring to last week was the frothy end of the market — like Dogecoin. The fact is that money-printing and low interest rates are driving up the prices of everything, and some of that is spilling over to crazy stuff like Dogecoin.

Look, there’s a lot of easy money being made right now (which explains why almost every 22-year-old kid I meet these days seems to be an investment guru.)

Yet history tells me these things don’t last.

So what should you do?

Well, you could follow my lead and do nothing.

As I explain in my book, you should think of your share portfolio like a little apple tree. You’ve planted it. There’s no need to move it, or worry about it. Just leave it to do its thing. And in 20 or 30 years’ time, just like an apple tree, it will produce amazing apples that will feed you and your grandkids.

Finally, to your question: the stock market is not a farce. Over the long term the riskiest thing you can do with the share market … is to not invest in it.

Because at the end of the day, Harriet, she’ll be apples!

Scott.

Scooting Away

Hi Scott

I would like to thank you for your Barefoot Investor for Families guide. I have two girls — almost four and almost six — and we have implemented your ‘3 jam jars, 3 jobs, 3 minutes’ regime. It is amazing how much can be achieved with a spray bottle and cloth. My eldest daughter just bought her first scooter with her saved money. Her pride in her achievement is priceless.

Regards, Maxine

Hi Maxine,

You nailed it:

It’s amazing how much can be achieved with a spray bottle and cloth.

Here’s the thing: every parent tries pocket money at least once, and it generally fizzles out after a while.

Yet if you’re reading this, just have a look at Maxine’s daughter’s eyes … and tell me it’s not worth an hour of your time on a Sunday to wrangle your kids to get them to do their jobs.

Something amazing happens to a kid when they work hard, save up, and buy something on their own.

Congratulations, and tell your daughter that’s the coolest scooter I’ve seen in a long while!

Scott.

Barefoot Valentine’s Day

Hello Scott,

Our relationship began in an online Barefoot group about two years ago — and we just got married last month! We are hard-working teachers who enjoy being thrifty. We have an ETF share portfolio and an investment property, and we are enjoying the financial freedom of following the Barefoot Steps.

To be together we have had to contend with personal tragedy, extended border restrictions that separated us for months, and a two-week quarantine. We have also had some unexpected medical expenses in this bizarre year. But the whole time we repeated “We’ve got this!” Our wedding was small, uncomplicated and focused, with the same happiness observed as at weddings that cost 10 times what we spent.

Thanks again, Simon and Michelle

Hi guys,

You made my day.

When I started writing this column, I had no idea it would turn into a community.

Yet, over the past 17 years, thousands of Barefooters from all around the country have read along with the questions in these pages each week. Sometimes they thump the table … shake their head … and ask “how the hell did they get themselves into this mess?”

But every now and again a question pops up that has everybody cheering. And, today, yours is it.

Happy Valentine’s Day!

Scott.

First Home Hell

Barefoot,

I have been saving as much as I can. By mid-year we should have a deposit and could start looking at buying rather than renting. I know your normal advice is to buy a house when you can afford it. But does that still apply when these inflated house prices seem like a bit of a false economy?

Doug

Hi Doug,

I feel for you.

Property prices are getting juiced because of low interest rates.

And the Reserve Bank has said they’ll keep rates at (basically) zero for at least the next three years.

Here’s how this is playing out in the real world.

Greater Bank has a one-year fixed home loan rate of just 1.69%!

The lowest on record.

At the same time, the average rate on a bank savings account, according to Mozo is just 0.18%!

Also the lowest on record.

In other words, right now property prices are at record highs and are rising faster than most people can save. Which is great for people like me who own property, shares or other assets. Yet it’s absolutely horrific for anyone starting from scratch, trying to save and scrounge up a first home deposit.

So, what to do?

Well, there’s all kinds of advice people will try to give you:

Ranging from the practical (save a 20% deposit, take a long view) ...

To the patronising (buy out in Woop Woop and sit on milk crates for a few years) ...

To the pathetic (“I’m 23 and own 75 rental properties, it ain’t that hard if you have a system”).

Yet there are no easy answers.

So instead I want to leave you with this thought:

Interest rates are only going one way from here … up.

I don’t know when. But if you’re taking out a 25-year mortgage, well, chances are you’ll see hikes.

And that’s why I’ve consistently advised people to stick with what works …

Save up a 20% deposit, find a home you’re happy to live in for 10 years, buy it.

Forget about what the market is doing.

Scott.

Fire Alert

Hi Scott

My beautiful friends, who have three children under eight, were caught in the Gidgegannup fires yesterday. They escaped with the clothes they were wearing, their cats and their toothbrushes. They lost their home and all other possessions. If there is any advice or assistance you could suggest to them, it would be ever so appreciated. I know I am being rather presumptuous but I thought asking you may be my best way to help them.

Deb

Hi Deb,

I called your friends this week and offered them a hand.

Anyone struggling with money can call the National Debt Helpline on 1800 007 007, or the Small Business Support Line on 1800 413 828, and speak to a financial counsellor like me.

Your question really hit home because this weekend marks the 7th anniversary of Liz and I losing practically everything we owned in a bushfire.

Like your friends, we didn’t think it was going to happen to us.

So, here’s a five-minute peace of mind booster.

Pull out your phone and call your insurance company and ask them how much you’re covered for, and what events you can claim for. Bonus points: while you’re on hold, take a video of your house and all your possessions. (And, as an extra bonus, your conversation will be recorded, which you can call on if you ever have to make a claim.)

Scott.

A dog of an investment (that is rocketing)

Hayley thinks I’m a genius.

The young mum wrote to me this week after reading my Barefoot Investor for Families book.

She’d gotten to the part where I mentioned an investment that has rocketed 1,500% this year.

What was the investment?

Dogecoin.

Here’s what I wrote:

“Maybe you’ve picked this book up at the Romsey Op Shop in the year 2040. Maybe that guy on Twitter was right and the global currency is now Dogecoins. (Maybe not.)”

I was joking, of course.

Then again, so was the Aussie who invented Dogecoin, Jackson Palmer.

He and a mate typed up the cryptocurrency code when they were bored one afternoon in 2013.

“It was a piss-take”, he told the Wall Street Journal earlier this month.

Palmer created Dogecoin as a parody of all the scammy cryptocurrencies that were being launched in 2013. (The text on the Dogecoin logo reads “wow much coin how money so crypto plz mine v rich very currency … wow”.)

Yet that was then … and this is now.

And after a series of tweets from Elon Musk and Snoop Dog, and a riotous ramp by Reddit day traders, today the value of all the Dogecoins is … wait for it … $US10 billion.

Palmer, who gave away all his Dogecoins years ago, clearly wants nothing to do with the mongrel he created:

“It doesn’t make sense. It’s super absurd. The coin design was absurd.”

Woof! Woof!

Look, I kicked off my career twenty years ago at the height of the dot.com boom, and I can tell you it has nothing on the craziness that’s happening today.

Then again, back at the turn of the millennium the world’s central banks weren’t barking mad.

Today the US Federal Reserve has its printing press on overdrive and is flooding the world with trillions of freshly minted dollars. At the same time, interest rates are set at (basically) zero and will remain there for the foreseeable future.

With so much money sloshing around the world trying to find a home, is it any wonder some of it goes to the dogs?

“We are now living through the greatest disconnect between financial markets and the real economy that we have ever seen”, says billionaire and investment expert Mohamed El-Erian.

He’s right.

Financial markets are a dog’s breakfast.

I have no idea when it will end, but I have absolutely no doubt how it will end:

Badly.

Mark my words, there’s a punchline coming.

And it’s only when the joke lands that we’ll work out who finds themselves is in the doghouse.

Tread Your Own Path!

ING Makes Life Difficult

Hi Scott,

Today I received an email from ING (I am sure you did too) saying that in March 2021 there would be an extra criterion to meet to get the best interest rates for the Savings Maximiser — at the end of the month your balance has to be more than what it was at the start of the month.

What annoyed me was that it was framed as a great opportunity for customers to save, even though it is clear the bank wants to make more money and pay less interest! I called ING to give my feedback and was told it is what all the banks are doing. Is that true?

Full disclosure: I am someone who will be disadvantaged by this for a time as I will be going on maternity leave. We have saved hard into our ‘Fire Extinguisher’ account to cover the period I won’t be working. We won’t be able to save more during this time, meaning we won’t qualify for the best interest rate. Maybe I am getting more worked up over this than I need to be, but I would appreciate your perspective!

Bec

Hi Bec,

This move by ING reminds me of a girl I once dated at uni.

When we began dating, things were simple, open and transparent.

Yet it got way more complicated as time went by ...

“Are you going to the pub to avoid me?”

“Don’t you dare pat my cat like that.”

And my favourite: “What do you mean when you say ‘good morning’?”

In the end, there were so many emotional hoops to jump through, it all became too freaking hard.

ING is fast becoming like my ex-girlfriend.

I was attracted to them because of the simplicity: they paid a leading interest rate, with no fees.

Unlike other offerings, they didn’t play those teaser rate and ‘bait and switch’ games.

Well, until now.

Their marketing guys have obviously decided they’ve got enough customers, so from March 1 they can afford to burn off a few, and trust the majority will stick.

So, Bec, I called up ING and spoke to them on your behalf.

They told me they plan on paying a higher rate of interest than they are now (though they wouldn’t confirm how much it would be).

They also said, “You know, Scott, technically you could transfer a single dollar and still get the interest”.

Yet that just gave me flashbacks to my uni dating days.

I mean, why make us jump through hoops? We’re already going steady!
So, Bec, what to do?

Well, many people may be better off with ING’s higher rate. But in your situation, you’re probably better off with UBank, Up, or even ME Bank, who don’t (yet) play these silly games.

Scott.

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.

Break Neck Barefoot

Hi Scott,

Just over three years ago I read your book, and took action. As my husband runs his own company, the first thing we did (after setting up our buckets) was to put aside three months of Mojo. To celebrate our daughter turning four we visited a water park, but it ended in tragedy with my husband breaking his neck. This resulted in a week in the spinal unit and three months in a neck brace, unable to work. The only thing that got us through was having our Mojo to fall back on. Since then he has also been attacked by a dog at work and suffered from a case of the shingles, and each time our Mojo got us through. Who would have known that a $25 book would have helped and saved us so much!

Yours in health, Wendy

Hey Wendy,

Fair dinkum, I thought I’d had it rough in 2020, but your husband wins the COVID cup!

What I took out of last year was an appreciation of just how risky the world really is.

My advice?

Keep your Mojo close (and don’t pat a growling dog).

Scott.

Making Babies on the Stock Market

Hey Barefoot ...

New Year’s resolution number one for 2021 — invest in shares.

HELP!

There are so many options and so much conflicting information out there. Superhero, CommSec, Vanguard ... EFT, index fund, AFIC, Raiz ... It is doing my head in. I have read the ins and outs on most websites but still have no idea where to start or what features I really need.

Superhero offers $5 trades, and it seems to be marketed directly to me — a millennial starting out in the share game — but is it too good to be true?

I just want to pay low or no fees (I do listen to you sometimes!) and be able to sit back and watch my money make babies.

I would LOVE a simple, no-fuss, Barefoot-style guide to getting into shares before I’m an old lady regretting not following through on my 30-year-old New Year’s resolution.

Thanks for helping me kill the finance game thus far. In the last five years I have bought a house and paid off a pesky credit card ... now I am ready to take the next step!

Nat

Hi Nat,

The share market is so hot right now.

It’s like TikTok.

In fact, there are a lot of young gurus giving trading tips to millennials on social media.

I may be getting old in the toe, but there’s a lot of stupid stuff happening in the market right now, and a lot of it is being targeted at young, inexperienced traders.

Mark my words: this will not end well.

Yet you are killing it.

You say you want a Barefoot-style guide to investing before you end up a regretful old lady?

Well, here it is:

You’re already through the fourth Barefoot Step (Buy Your Home), and now you’re onto Step 5 (Increase Your Super to 15%).

That is your next step. Do it, and you’ll be investing in the share market, compounding your returns over the (very) long term, and getting a tax deduction to boot.

Tik. Tok.

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.

“I Don’t Need Your Help but Wish to Criticise You …”

I don’t need your help but wish to criticise your answer to “Should I Pay My HELP Debt?” Your first response should have been “of course”, but you treated the subject as most recipients do, with a dismissive attitude on how to avoid it. As an older Australian, I need to tell you: it’s a loan and recipients have a responsibility to pay it back. Emphasising that it dies with you also indicates your attitude. Poor form for a self-proclaimed responsible purveyor of advice.

Gordon

Hi Gordon,

Thank you for your criticism.

So your basic premise is this: ‘If you owe a debt, it’s your duty to pay it off as soon as possible.’

However, that is not the premise of the Government.

They have set HECS-HELP up without a commercial interest rate, and with repayments based on your income.

And they’ve discontinued the discount for repaying early.

It’s almost as if they don’t want you to repay early!

These bloody kids get a good deal, right?

Maybe. But, Gordon, remember that as an older Australian you had free university. And you also had affordable housing.

Young people today have neither.

Scott

Barefoot, where the bloody hell are you?

I’m back!

Let’s kick off the New Year with the #1 question people have been asking me over the past few weeks:

“Barefoot, where the bloody hell are you?”

Answer: I took the school holidays off.

My thinking?

Well, I only have 18 summers with my kids, and I want to make each and every one count.

Yet with COVID, our options were a little ... limited.

So I came up with the ultimate trip: camping at a remote national park, some 500 km away.

“Are you crazy?” asked my wife (who wisely stayed home, having just given birth to our fourth child).

“No doubt”, I said, as I bundled my two eldest boys into the ute and set off on our grand adventure.

My thinking was this: last year taught them to wash their hands for 20 seconds, to sneeze into their elbows, and to socially distance. So this year I wanted to give the boys the gift of good old-fashioned grubbiness.

And grubby we got!

We didn’t shower for a week. We did our business in the bushes. We ate off a rusty communal campfire hotplate that hadn’t been sterilised with antiseptic wipes. We slept shoulder-to-shoulder in a tent.

At the crack of dawn our flimsy tent would start getting lighter, hotter, and smellier ... nature's signal it was time to get up and spend the day together, swimming, bushwalking, and playing board games by the fire at night.

Rinse (in the ocean), and repeat.

Sounds delightful, right?

Okay, so let’s take off the rose-tinted glasses:

It was a rewarding holiday, but it sure wasn’t relaxing.

The trip took us eight hours (that’s 56 hours in preschooler time).

Seriously, 20 minutes in, I heard from the back: “Daaad, how much longer?”

And when we got there, we had to set up camp, and sleep three-deep in a stinking hot tent.

And, unlike a resort or a beach house, there was nowhere to hide away from each other.

And no mobile reception, so nowhere for us to hide away from each other mentally either.

And no restaurant cooking us a hot meal … instead we lugged food and drinking water hundreds of kilometres into the bush (and Dad’s cooking skills are already a little, shall we say, agricultural).

Still, it didn’t matter.

See, I’m in the memory-making business, and that holiday is one that none of us will ever forget.

After the year we’ve had, we all need to be reminded of how little it costs to make memories.

After all, think back to your most precious memories: I’ll bet they didn’t cost you a cent.

Tread Your Own Path!

From Average to Awesome

Hi Scott,

I wanted to share a story with you. Two years ago our young family of five employed a money method that many other families use: everything on the credit card, big limit, and spend, spend, spend! Then pay the bill, except not in full every month, with the snowball effect equaling a biggish ($30k) bill every few years that then has to be paid by rolling it into a larger debt like the mortgage. It was not a good picture.

Then we read your book, and implemented it.

In June my husband was made redundant, with no payout and no jobkeeper! Yet we were fine. And why was that? Because of you. Because we thought to buy a book for $25 and read it and learnt. My parents taught me nothing about money other than spending it, my husband didn’t learn much either. Yet we had our mojo ready to go, and in the end, we haven’t touched it because the husband got a new job and started today.

Five months of no employment, and now it’s over. It was awful and stressful but not nearly as bad as it would have been if we had gone into it with our old plan of big, rolling credit card debt. So Scott, I salute you. Thank you from the bottom of our hearts for showing us the right way to manage money and saving us from what could have been a lot worse.

Jenny

Hi Jenny,

Congratulations, you win the award for the longest question I think I’ve ever published!

Your story gives everyone a great insight into how many families with huge mortgages get by: living day-to-day on credit, and then burying the big bill in their mortgage every couple of years. They go to bed each night worrying ... hoping that life could be different. Then they repent and repeat.

Yet it doesn’t have to be that way.

If there’s one gift you could give your family this Christmas, it would be to finally be in total financial control.

Most families that are conditioned to live on credit would scoff at such a suggestion.

Yet you and I know that the feeling of financial control comes before you’ve paid off even a cent of debt.

Rather, it happens when you have a proven plan – a series of steps – that you know will work.

You faced your financial fire and you were able to say “I’ve got this”.

Congratulations, and have a Merry Christmas!

Scott

Barefoot and NOT Pregnant

Dear Scott,

For a decade every penny we have saved has been a prisoner to building financial security for our kids. But, as it turns out, there will not be any kids. One in six couples struggles with infertility – and we are now part of that ‘one’. Being childless has turned all our plans upside-down. We earn a combined $350,000 a year and own a family-sized home in the ‘burbs far from the city where we work. Do we sell our large house? Or rent and buy investment properties? Or buy a penthouse and have a huge mortgage because ‘YOLO’?

Marnie

Hi Marnie,

You may not be having children, but you have achieved financial security for your family.

Here’s my thinking:

Even though you describe the last 10 years as a ‘prison’, trying for kids gave you both a single, clarifying purpose.

Now you’re facing what psychologists call ‘the paradox of choice’, where too much choice can sometimes prove to be overwhelming, and debilitating.

And with a paid off home, $350,000 a year coming in, and no kids to spend it on, you have plenty of choices!

There are three ways to overcome the paradox:

First, give yourself the gift of time – don’t rush into making decisions.

Second, keep a diary on your bedside called ‘choose your own adventure’ and write down plans that come into your head (s) over the next 12-months.

Finally, once you’ve made a joint decision on where you want to live and what you want to do, go all in.

Scott

Pregnant and Petrified

Dear Scott,

My husband and I have now split our finances because he wants more spending money for himself. The truth is, he has not been making enough to split the bills 50/50, and he always has an excuse to not work full time – headache, toothache, anxiety. I am six months pregnant and due to go on maternity leave, meaning my income will not cover our bills. We have a personal loan in my name for $11,000 and no other debt, but I have no idea what to do anymore to keep myself above water. I’m petrified! What do I do?

Steph

Hi Steph,

I can help you with this.

See, my wife is about to give birth too. However this isn’t our first rodeo … it’s actually our fourth.

And through trial and (many) errors we’ve worked out what we need to do ahead of the baby coming.

It’s actually not unlike preparing for fire season: we know there’s going to be many flare ups over the next 12-months, so it’s important to plan things out before the ‘heat’ of a crying baby, sleep deprivation, and a messy house, come to bear.

For you guys it’s focussing on financial preparation: I want you to sit down together and write out a 12-month budget. If he’s resistant to that, call 1 800 007 007 and get a referral to sit down with a free financial counsellor (they may in turn refer you to someone in the agency who is an expert in budgeting).

Factor in spending at least $3,000 or more setting things up for the baby (though you should get creative and see what you can get as hand-me-downs, or second hand). And work through all your expenses over the next year, and see what you can cut -- and what your partner can add to the equation.

Here’s the truth: When the baby comes out you’ll give it all your emotional energy. The last thing you want to do is add the additional stress of fighting with your partner about money.

So, get this sorted pronto, and buckle up for the ride of your life. You got this!

Scott

The 87 year investment

When I first began the Barefoot Investor, I wasn’t married. I didn’t even have a girlfriend.

Today, I have three kids … and in a couple of weeks we’ll be welcoming our fourth.
So, on this my final column for the year, let me tell you how I’m planning for their* future.

(*While we haven’t found out the sex, I’m totally convinced it’s a boy.)

There are three steps:

First, on the day my son is born I’ll buy a newspaper.

While I’m sitting at the hospital, I’ll get a red pen and circle all the terrible, and scary things that are happening in the world right now. And there’s a lot of them: the second (or third?) wave of the pandemic is sweeping the planet, governments are going deep in debt, and we have a fragile global economy. Then there’s the Donald Trump reality show, which is yet to be cancelled.

Second, I’ll invest $1,000 into an international shares index fund, which holds the largest companies in the world (think Apple, Amazon, Berkshire Hathaway, Nestle … and 1,540 large businesses from around the world), and another $1,000 in an Aussie index fund.

Finally, in 21 years’ time, when newspapers are a relic, I’ll pull it out and let him leaf through it.

He’ll be struck at how insanely cheap the prices of things in the ads are.

(‘Hey Dad! Here’s an ad for an iPhone. I haven’t seen one of those things in years!’)

He’ll marvel at how young his old man looks in his column photo.

Yet most of all he’ll understand that all the scary headlines were a sideshow to the real story of human progress.
I encourage anyone who has kids or grandkids to do the same:

It’s a real life lesson on the power of compound interest.

Tread Your Own Path!

Here’s what could happen in 2021

Let’s discuss what could go wrong in 2021, and what you can do about it.

Of course newspapers are chock-full of experts making predictions about “what’s in store for the next year”, so, before I throw my hat in the ring, let me shake the sauce bottle:

How many smart sausages this time last year wrote, “We predict that a pandemic will sweep the planet and lock many of us down in our homes. Our recommendation: stockpile toilet paper in February.”

That’s the err, rub, right?

Well, for what it’s worth, my view is that the next few years could be financially brutal for many businesses, for those workers who are laid off or underemployed, and for retirees who have had their investment income slashed.

However, it’s because of all this misery that things in 2021 could actually get a little … loose.

Here’s the two-hander:

The Reserve Bank has set rates at (effectively) zero to stop you from saving and encourage you to borrow up BIG.

The Government is even attempting to scrap responsible lending laws to get the party in full swing.

Heck, the RBA has given us a timeframe, having all but promised donut rates for the next three years.

What could possibly go wrong?!

Well, lots actually.

Like it or not, we’re living through a giant financial experiment: never has the world had so much debt. Never have interest rates been this low (they’re at thousand-year lows, according to Merrill Lynch).

And so the lesson I’m taking out of 2020, our annus horribilis, is this:

Life is unpredictable.

The truth is we spend most of our lives stressing about things that never happen. And then one day a bat flies the wrong way, and the next day people are going the biff over bog roll.

Think about it: the riskiest things — the ones that knock you on your backside — are often a bolt out of the blue.

For my family it was a fire that burned basically everything we owned.

For others it could be a relationship breakdown. Or an illness. Or an economic meltdown. Or a global pandemic.

So how can you and I prepare for them?

By asking yourself the following questions, today.

Barefoot’s Top Five Questions For 2021

1) “Is my money safe?”

Here’s the bolt out of the blue: you need to access your money quickly, but all your investments have tanked.

If you have money that you need to draw on in the next five years invested in anything other than a bank savings account or term deposit,you may well lose a chunk of it.

Like what?

Like property funds that offer a high rate of interest, or the share market, or cryptocurrency, or any other type of managed investment.

(The share market is not a safe place to hold your money in the next five years. However, it’s arguably the safest place to invest your money over decades, as it will outrun inflation.)

Here’s what you can do about it:

Keep any money you’ll need to spend in the next few years in a bank account (or term deposit) that is covered by the government deposit guarantee (up to $250,000).

Yes, that may sound like overkill, especially with interest rates this low. However, it’s not about the interest you earn (which is pitiful), it’s the sleep-easy factor of knowing you’ve got a backstop. That’s worth more to me and my mental health than any gain I could make in the market.

2) “How long could I last if I lost my job?”

Here’s the bolt out of the blue: your boss calls you into his (virtual Zoom) office on Friday … you’re being laid off.

It’ll never happen to you, right?

Well, I believe the lasting legacy of COVID is to radically change the concept of what we call work.

Think about it: employers have been thrown in the deep-end of the productivity pool this year. Many have had to deal with a reduced workforce who are working from home.

And, now things are getting back to normal, I wonder how many will look at last year and think to themselves:

“Maybe I don’t need all the staff I once had. And, even if I do, if they’re all working remotely … maybe I can hire cheaper workers somewhere else in the world?”

And yet one in five of us Aussies has less than $1,000, according to ME Bank’s latest biannual Household Comfort Report.

Here’s what you can do about it:

Follow the Barefoot Steps; after you’ve set up your buckets, domino-ed your debts and bought your first home (but not yet paid it off), the next Barefoot Step is to boost your Mojo savings to three months of living expenses.

I had a woman write to me in September telling me she thought having three months of Mojo was a total overkill. Yet, when they both lost their jobs, she said, “It was the most important thing in our world. It allowed us to breathe.”

3) “Am I covered?”

Here’s the bolt out of the blue: your house burns down, and you’re not fully covered.

Statistically, if you’re a normal little vegemite you will be underinsured. And the moment you’ll find out is after the fire, or the car accident, or the illness, or … the rats.

(Yes, one of the downsides to living on a farm is rodents. They somehow managed to get into both our cars and eat through $35,000 of interior and electrical work).

Here’s what you can do about it:

Dig out your insurance policies and check what you’re covered for you may need to increase it. If you’re unsure, call your insurer and ask them to review your policy. Life is full of dirty rats, so just make sure you’re fully covered for anything.

4) “Is my partner on the same financial page?”

Here’s the bolt out of the blue: your partner walks out on you.

Relationships Australia tells us the number one reason for relationship breakdowns is fights about money.

Here’s what you can do about it:

The monthly Barefoot Date Night is the cornerstone of my entire plan.

Making a monthly ritual of getting on the same financial page as your partner — and working through the Barefoot Steps — is the most powerful thing you can do to ensure you don’t end up losing half your assets.

If you don’t schedule it, you won’t do it. (We have ours on the first Tuesday of every month, which coincides with the monthly Reserve Bank meeting: how hot is that?)

And remember, money talk goes better with a wine (or taco) in your hand.

5) “If I got hit by a bus, would my family be able to put everything together?”

Here’s the bolt out of the blue: you leave your loved ones with a financial Rubik’s cube of frustration.

Picture your partner (or parents) sitting alone, distraught and grieving, trying to piece together your financial life.

They have no idea how to access your bank accounts, the password to your email and social media, your funeral wishes or even where your will is.

Here’s what you can do about it:

Spend an afternoon getting everything in one place.

At Barefoot we call it the Fearless Folder, and once it’s done you lock it away in a secure safe.

The feedback I get from people who have done it is that it’s Marie Kondo-cathartic to have it all sorted.

What’s more, it’s the final way you’ll say “I love you” to your loved ones.

And there you have it.

Each and every week, I show up and answer your questions.

Yet to really prepare for 2021 you need to ask yourself the right questions, and get the right answers for you.

Tread Your Own Path!

Demolition Debt

Hi Scott

My husband and I run a demolition business with seven full-time employees. Unfortunately, one of them got into financial difficulty and some sharks called Panthera Finance bought his debt. They now have a garnishee order on his wages and harass me (as office manager) to pay the instalments — or they ‘reserve the right’ to order me to pay the entire $25,000. The employee has had a rough trot the last few years, and I have taken less per week from his pay than they are asking for, to keep them at bay without pushing him to breaking point. Is there any advice you can give me regarding garnishee orders or this delightful Panthera Finance crew?

Jane

Hi Jane,

Tell them to bugger off with their bully-boy tactics.

There is no way they can “reserve their right” to order you to “pay the entire $25,000”.

That is total bollocks!

Now, you are required to pay the amount set by the court. However, each state sets limits on how much a debtor can take from someone’s salary, which is known as the ‘protected earnings rate’. In Victoria it’s 20% after taxes.

Why?

Because, while people need to repay their debts, they also need to eat.

Panthera Finance has a reputation of being super-aggressive: in March this year the Federal Court whacked them with a $500,000 fine for undue harassment.

And if they’re getting under your skin, can you imagine what sort of pressure they’re putting on your employee?

The bottom line is this: it’s time to hit them with a wrecking ball. Make a complaint to the Australian Financial Complaints Authority (ACFA) on 1800 931 678. And I suggest your employee call the National Debt Helpline on 1800 007 007 so he has a professional in his corner to help sort out his mess.

Scott

Safe as Houses

Hi Scott,

I followed your advice and bought the Bunnings portable safe that you wrote about in your column a couple of weeks ago. However, when we were faced with our fire I was so panicked I forgot to grab it… however it was the only thing that survived in that room! And because it survived I now have everything I have been asked to produce for insurance, quotes, and house plans. Thankyou for your old-fashioned good advice to this generation.

Jenny

Hi Jenny,

Goodness gracious, great balls of fire!

Still, having all your docs will make the often painful insurance process that much easier (and if you have ‘before’ pics on your phone of your house, that’ll help too).

And, while you’re the perfect case study for the importance of having a safe, I view our safe just as much as a communication device: if something should happen to me, my wife knows that the keys to our financial life (or at least the copies of our keys) are all set out in one place.

Truth be told, I got a huge reaction to my column (especially from the mysterious safe-cracker, who didn’t like me joking that he could come back and open my safe). In fact, many parents wrote to me saying that they plan to buy a cheap, fireproof safe for a Christmas present for their adult kids (though it appears Bunnings has now sold out of the $69 version!). Now that is a practical present … you could even put some gold chocolate coins in them … and a copy of my books.

Scott

I’ve been waiting to write this piece for years

I’ve been waiting to write this piece for years.

No, really.

My very first Barefoot Investor column 16 years ago campaigned for practical financial education to be taught in schools.

And that’s why the Victorian Government’s decision to ban school banking, and replace it with practical, independent school-led programs, is a massive step forward.

See, for far too long schools have outsourced teaching this essential life skill to banks.

And what have they done?

Well, they’ve mostly used it as an advertising play: signing up students as customers, and putting them into their sophisticated marketing database that spits out credit cards when the kid turns 18.

(And that’s when the real education begins!)

Let me be clear: having banks teach our kids about money is like having Ronald McDonald teach them about food nutrition.

Moreover, the result is that our young people finish school scoring an ‘F’ for finances.

And, as a result of that, they often go on to make really poor financial decisions. (ASIC research tells us that some of the most financially illiterate people in Australia are young people who have just left school.)

If I had a dollar for every deep-in-debt twenty-something who told me they ‘sucked at money’ or ‘weren’t good with numbers’, I’d have enough money to buy shoes for my bare feet.

Now, here’s the thing: you and I know that once your financial confidence is shot it’s bloody hard to change. And once that belief takes hold, it ends up colouring your entire life.

In my work, I sit across the table from people who have made a lot of money mistakes.

And often there’s a frightened little kid that comes along with them.

And that is why the announcement from the Victorian State Government — to teach truly independent financial education in our schools — is so freaking important.

This is a very good day for every Victorian kid. Every Victorian parent. Every Victorian taxpayer.

After all, we all have a dog in this fight.

Creating financially confident young people will have positive long-term effects on our society, and our economy. Let’s hope the rest of the states are watching this, and taking notes ...

Barefoot’s Favourite Things

Last week we discussed what to buy kids for Christmas, so this week let’s deal with the oldies.

See, years ago, I cracked the Christmas code: I buy people books.

Gifting a book says, “I think you’re smart”. And it’s a smart deal for me too: books cost under $30, they don’t require a separate card (I simply scribble a Merry Christmas message on the inside cover), and my local bookstore will even gift-wrap them for me.

Job done!

So, here are the books I’ve got in my Santa sack this year:

The Obstacle is the Way

Has life knocked the stuffing out of you?

That’s good!

The obstacles you’re facing provide an opportunity for you to become tougher, calmer and more successful.

This ain’t a new-agey self-help book. Author Ryan Holiday draws on the ancient wisdom of the Stoics and shows you how to turn your trials into triumph.

This is a great present for anyone who’s been upended by 2020, particularly struggling small business owners and young people looking out for their first job in a recession.

The Deficit Myth

Are you concerned about all the money-printing that’s happening around the world right now?

Don’t be, says Stephanie Kelton in her bestseller The Deficit Myth.

The book serves as an introduction to Modern Monetary Theory (MMT), which is the hottest argument in economics right now. Essentially it argues that governments should embrace huge debt in order to grow the economy.

Seriously, how sexy a theory is that?

Especially for politicians who love spending other people’s money and winning votes!

While I loved the book, I don’t agree with the theory. Instead, I see MMT as a justification for the situation we find ourselves in, and a free pass for the monetary madness that will come because of it.

Still, it’s a fascinating read, and a great present for anyone interested in the future.

Ben Hogan’s Five Lessons

Have you ever tried your hand at golf and failed miserably?

Me too.

Golf pro Ben Hogan wrote this book in the 1950s, and since then it has taken on an almost reverential regard.

Self-help guru Tim Ferris described it as “the most perfect how-to book I’ve ever read”.

Maybe. Or maybe I’m a middle-aged white guy ... so, well … golf.

A great present for anyone in your life who wants to crack 80.

And finally ...

You guessed it. I’ll be giving away a serve of double happiness: The Barefoot Investor: The Only Money Guide You’ll Ever Need and The Barefoot Investor for Families: How to Teach Your Kids the Value of a Buck.

The bulk of my sales come from people gifting it to their family and friends. Why? Because the Barefoot Steps work, and they keep you safe. And that’s a pretty cool Christmas present to give, right?

Tread Your Own Path!

Underage Drinking

Hi Scott,

I am a 16-year-old boy, and I love your work!

Recently, after browsing Investopedia, I was targeted by an advertisement promising a guaranteed 8% return on a $10,000 investment. The investment opportunity is in whisky and is being offered by Coburns Distillery.

This investment is being offered with no risk, allowing for an 8% return for each year plus cost price after 5–7 years. It is also being marketed as ‘SMSF approved’, which suggests to me that unsuspecting middle-aged superannuation investors are being viciously targeted.

These unsuspecting investors are likely to be enticed by the mention of valuer Knight Frank suggesting that exclusive whisky has seen a 580% return — which will most certainly not be occurring with this non-exclusive whisky from Burrawang, New South Wales. Would seriously love to see a piece by you on this. The wider public needs to be aware!

Regards, Brett

Hi Brett,

You’re my type of teen. At an age where many kids would be working out how to raid their parents’ liquor cabinet, you’re warning oldies about the potential financial hangover from these (lubricated) investment schemes!

I agree, it sounds too good to be true. In fact, it sounds a lot like another outfit, Nant Whisky, that I uncovered a few years ago. They too were touting high returns and encouraging SMSFs to ‘invest’ in barrels of whisky which (they promised) they would buy back after the maturation period.

The problem wasn’t with the whisky — it was awarded as one of the world’s best — but that they sold more barrels than they’d actually created.

ABC News stated:

“The ensuing scandal of Nant’s collapse would wipe out small investors who ploughed in up to $20 million. It would spark the largest fraud investigation in Tasmanian history.”

Will Coburns Distillery suffer the same fate?

I have no idea.

Whisky aficionados give things a good hard sniff before they imbibe. That sounds like wise advice to me.

Finally, the fact that a 16-year-old wrote this warning warms the cockles of my heart ... like a fine old aged whisky.

Scott