Last Chance U

Hey Scott,

With my ‘Barefoot family’, I am totally into your Money Movement Manifesto. I am also an assistant principal at one of the 10 lowest socio-economic community primary schools in NSW — with 96% parent unemployment. One thing I’d like to see added to the Manifesto is an action for the parent community to commit to. Teachers are awesome and are capable of facilitating behavioural change of epic proportions, but we can’t teach when their home experience of money is that it is gambled, drunk, non-existent, received only by government payment, or accessed through the pawn shop. Would you consider adding something for parent and community groups and, perhaps, local business groups or councils to also take action into your Manifesto ... then I’d gladly sign it!

Kelly

Hi Kelly,

I find it hard to believe that 96% of your parents are unemployed.

Still, I’m picking up what you’re putting down: the parents at your school are really struggling.

Well, here’s the good news.

I piloted my program — and held parent nights — in low socio-economic schools, and what I found was these parents tended to be the most committed to my cause: they’ve lived the reality of generational poverty and they want something better for their kids.

And I totally agree that kids learn first and foremost from watching their parents. That’s why my motto is ‘teach the kids, help the parents, change the nation’. And the program centres around the kids teaching their parents how to do pocket money.

Do I think it’ll work with every parent?

Obviously not.

Yet if your students’ home life is as bad as you’re saying, surely that’s even more reason to try and help them.

After all, that’s what being a teacher is about!

Scott.

The Money Movement Manifesto

Over the past few years, I’ve been on a bit of a journey, and today I’d like to talk to you about it.

To be blunt, I see a lot of trouble brewing:

The rich are getting much richer … while the young, and the poor … are mostly not getting anywhere.

And I say that as a rich guy.

Yet I also say it as a volunteer financial counsellor. I regularly find myself sitting across from hardworking people helping them create budgets that round down to the dollar (as in we literally talk about $3 purchases).

The guts of it is this: the current zero interest rate policy favours the rich who own assets, and it penalises the poor … and young couples trying to save for their first home. They’re falling behind. And it’s only getting worse.

I’ve been thinking about this a lot.

Now, I’m not some do-gooder. And I’m not the smartest guy. And I certainly don’t have all the answers. Yet it seems to me that one of the most practical ways to at least try and balance out the scales of inequality is to teach kids the rules of the game.

How do you do that?

Well, not by theory, droning on to kids about stuff that isn’t relevant to their life right now. Which is why I created programs that got kids to roll up their sleeves and experience something, whether it be going home and teaching their parents about pocket money (in primary school), or landing a part-time job and saving up for something on their bucket list (in high school).

I didn’t get it right all the time. In truth, I stuffed it up many times (and thankfully I had a documentary crew capturing them). Yet in the back of my mind was the idea that many young people will have the financial odds stacked against them, so they need to know how the financial game is played — or it will be played against them.

That’s what the Money Movement is about. Based on my experiences in schools around the country, I’ve put together a manifesto which I plan to present to state governments around Australia.

So this week, I’m interrupting normal programming to ask a favour of you.

Have a read below and, if you agree, it would mean a lot to me if you’d digitally sign my petition.

The Money Movement Manifesto

Our kids will be tested on money skills every single day of their lives.

Yet most of us had to learn these skills the hard way, because we were never taught them in school.

We need to do more.

Here are the five core aims of the Money Movement:

1. Implement a practical 4-to-6-week Money Challenge every year
   
   When literacy rates were falling, the Premier’s Reading Challenge was set up to challenge kids to read — and it worked! In the same way I’m calling on state governments to get behind a Money Challenge — not just another requirement in an already overcrowded curriculum, but something exciting that schools take up because it’s important, and fun!
   

2. Show primary schoolers the power of working, saving, spending and giving
   
   Get kids excited and it’s amazing what can happen. During a pilot Money Challenge at a school in Hervey Bay (one of the poorer regions in the nation), the six-year-olds came up with the idea of using their class ‘Give’ money to feed homeless people in their community. It was a life-changing experience for them — and for their community.
   

3. Show high schoolers how to get a job and set up their savings ‘buckets’
   
   You remember being a teenager in class thinking “How will I ever use this in the real world?” Well, at a pilot Money Challenge, I saw teenagers who were the first people in their family to get a job and set up their savings buckets. Think what your life would be like if someone had helped you do that on your first payday. I want that for every Australian kid. Let’s set them up to win.
   

4. Commit to professional development financial education for teachers
   
   Teachers aren’t in the job just for the money: it’s a vocation. Still, it’s hard to stand up in front of a crowd of year 9s and talk about the dangers of credit cards when you have credit card debt yourself. Bottom line: to raise financial fit kids, we need financially fit teachers.
   

5. Kick the banks out of our schools
   
   Having banks teach our kids about money is like having Ronald McDonald teach them about nutrition. Our children’s financial education is too important to outsource. The government financial regulator (ASIC) is independent of commercial interests and should be the one to deliver the program.

This is something I truly believe in, and I’ve been working on it — and piloting it in schools — for years. But now it’s time to take the next step and get your state government to take it on board.

I want every Aussie kid to learn this. If you do too, then I’d like to ask a favour:

Please visit change.org/money-movement and join the movement.

It’s free. It will take 30 seconds. I don’t want your money, just your signature.

Together we can teach the kids … help the parents … and change the nation.

Tread Your Own Path!

Scott.

P.S. For the record, I’m committed to working with any government that agrees to take this on — and I’ll offer my time and expertise for free.

P.P.S. I only need your signature NOT your money (Change.org may ask you for money to promote the petition, but that is not needed. Just say 'no').

Again that website is:

change.org/money-movement

Thank you.

Call the Cops

Hi Scott, 

After reading your book, I called the police, locked my abusive ex-partner out of the house, and got out of massive debt (more than $350,000!). Now I have over $100,000 in savings, and a new lease on life. I have even had credit card cutting-up parties at my house for friends I have guided out of financial pickles. Now I would like to help other people like me who may be thinking there is nothing left to live for. It is a horribly dark place to find yourself in. What should I do to help? Should I go and study finance? Can I volunteer for you?

Thanks, Ella

Hi Ella

You have what we call in the game ‘lived experience’: you’ve stared down an abusive partner, dealt with the cops, and not only begun again, but thrived. You’ll not only have empathy for people that find themselves in that situation, but you’ll be an inspiration to them as well.

So what are your options?

Well, you could quit your job and study a Diploma of Financial Counselling full time. Though there’s a chance you might end up regretting doing that. It’s a big commitment to take a year off work and invest $6,000+ in a course. And after all that you may struggle to get a job immediately.

Reason being that over the past few years there have been more graduate financial counsellors than there have been jobs. However with adequate, sustainable funding I expect this will all level out eventually. 

In the meantime, you may want to keep your job, and volunteer at a local community organisation, or better yet, apply for paid positions with them!

Well done. You Got This!

Scott.

Fifty Years of Abuse?

Hi Scott,

My parents are in their 70s and have always had separate accounts. Now that Mum has retired and Dad refuses to, Mum is forced to live way below the poverty line. They own their own home and Dad pays the household bills because he is still working, but it leaves Mum with pretty much nothing. I am afraid this is going to end in divorce, and we know the frightening statistics on elderly homeless women these days. Who can assist them?

Linda

Hi Linda,

Keep an open mind.

Okay, so it could be that your dad is a controlling bastard. If that’s the case your mum won’t end up homeless: she has a claim on the property and any other assets, and a loving daughter to help her.

On the other hand, your father may have contracted ‘chrometophobia’.

A chrome-wha?

It’s a $10 word that basically means ‘having a fear of spending money’.

It’s a condition that affects many older people who are in the process of turning off their income taps for good … and I’ve seen it happen to very wealthy retirees too. So what I’m saying is, don’t write your old man off yet: it may be he’s understandably freaking out about this major life transition.

So what can you do?

I’d encourage your parents to sit down with a financial planner. They can map out their post-retirement investing and spending plan, which will give your father the assurance that he’ll be okay.

Scott.

Rental Rewards

Being a renter must suck right now.

After all, you’re sitting on the property sidelines watching house prices go up, up, up.

If only there was a reward for renters.

Well, it turns out there is. It’s a fast-growing scheme called ‘Rental Rewards’, which many of Australia’s leading real estate agencies have signed up to.

Here’s how it works: real estate agents outsource their rent-collecting to Rental Rewards, who charge renters a fee to pay their rent, and reward them with Qantas Frequent Flyer points.

On their website the company describes their service as “revolutionary”, “convenient” and “rewarding”.

Yet on the popular ProductReview website, customers of Rental Rewards describe it as: “Absolutely terrible”, “So bad I can’t believe it exists” and “Avoid! Avoid! Avoid!”

(And, in the interests of fairness, I’m not cherrypicking the data: Rental Rewards has 31 one-star reviews and they are all universally terrible.)

Mandy, a reader, wrote to me explaining how it affects her:

“I used to pay my rent by direct transfer for free. But my property manager just informed me I am being migrated over to this third-party platform, Rental Rewards, that charges a fee. I chose the cheapest option —$78 a year — but some of the credit card options work out to be $312 a year, on top of rent. And their ‘fee-free’ option? Personal cheque! Which my bank charges for, and the rental office is over an hour away.”

WOW!

In most states in Australia the Rental Code requires that real estate agents provide at least one fee-free way of paying rent. Rental Rewards gets around it by accepting cheques. Yet the only person I know who still has a chequebook is my uncle Bob, a cocky from Walpeup, and even he’s thinking it might be time to call stumps on the bark and biro!

So let’s unpack this for a moment.

First up, Rental Rewards encourages often vulnerable low-income renters to pay their rent with a CREDIT CARD, in order to utilise their ‘interest-free days’.

And if you think my eye is twitching right now, and that I am POUNDING THE KEYBOARD, you are right!

Yet let me simmer down for a moment, because their website promises renters will earn “1,000 Qantas Frequent Flyer points every year when you pay by card”.

Given I famously don’t have a credit card, and don’t play the points game, the truth is I had no idea whether this was a good deal or not. So I jumped on to the Qantas Rewards Store to see what I could buy with a year’s worth of Rental Rewards points.

I wanted to buy something practical, like, say, hair removal. Alas, it wasn’t even a close shave: the fancy Philips shaver cost 69,000 points ... taking 69 years of paying rent to earn enough with Rental Rewards. Again, I’m not cherry-picking the data: there was NOTHING on the Qantas Store for sale for 1,000 points.

Enough already.

Look, as a financial counsellor I’m regularly in the trenches with vulnerable people.

Think about a young mum with three school-aged kids who has escaped family violence. She struggles to pay her $350 a week in rent. One day her property manager tells her that from now on she’ll be hit with a 1.45% processing fee for Rental Rewards (the standard fee they have on their website). That’s an extra $264 a year she’ll have to pay.

Now, for you and me $264 may be a nice dinner out with friends. For her it’s a year’s worth of second-hand school uniforms and shoes for the kids.

It’s a lot of money.

Worse, she’s powerless in this situation because she doesn’t want to upset her rental manager and risk them not renewing her lease.

One last thing: the Qantas Store shows that a Bunnings $100 gift card costs 23,170 points. Which suggests the value of a Qantas point is currently around $0.004 cents. In other words, those 1,000 rewards points that cost our single mum $263 a year are worth a measly $4 bucks.

Look, can you do me a favour?

There are a lot of smart people who read this column. If you’re a property investor (or you know someone who is), I want you to ring up your real estate agent and ask whether they are signed up to Rental Rewards. And if they are, ditch them. Take your business to somebody who respects the person who’s paying off your asset.

Rental Rewards have been approached for comment.

Tread Your Own Path!

My Fear of Phones

Scott,

I suffer from a strange disorder — a fear of talking on the phone. I am an email, text, Messenger type of person. But this was costing me money, because our home loan rate was above 3% and negotiating it down would require me to call the bank. Well, after reading your column recently, I finally found the courage to pick up that phone! I was prepared to follow your script but chickened out and just said, “Hey, I’m looking at my home loan rate, I don’t think it’s competitive, could it be reduced at all?” A few minutes on hold (while I was prepping myself to be a bit tougher) and they agreed to drop it to 2.19%. Almost a whole percent off what I would have continued to pay if I didn’t just ask!

Thank you, Chris

Hi Chris

Far out, that’s the softest negotiation I’ve ever heard of! (Us Barefooters must be wearing them down.)

Now Chris, I’m sorry to burst your bubble, but your fear of phones is not unique:

I used to employ a couple of highly educated Millennials who were ABSOLUTELY TERRIFIED of making calls.

I’d get charged too much for something and I’d say, “Ring ’em up and dispute it!”

“Can’t I just email?” they’d plead.

No! Good things happen when you connect with a human.

Scott.

Our Friends Are Rich from Online Marketing

Scott,

What are your thoughts on online marketing? A friend has introduced me to what is called ‘high ticket affiliate marketing’. She and her husband have quit their 9 to 5 jobs to spend more quality time with their children while working at their own pace, and have travelled extensively. This has got me thinking — should I take a leap of faith and sign up?

Gemma

Hi Gemma,

So this sounds a little like … a pyramid scheme.

Now, affiliate marketing is selling other people’s products to your customers and getting paid a commission.

And do you know what some of the most lucrative ‘high ticket’ affiliate marketing products are?

Expensive courses on ‘how to make millions doing affiliate marketing!’

My tip: buy a $30 book, not a $3,000 course, and go from there.

My view?

Trying your hand at this is a little like buying a pair of Air Jordans then sauntering up to the Chicago Bulls and saying “I hear you guys make a lot of dough doing this dribbling thing. I think I’ll give it a go.”

If you do, prepare to be dunked!

My Husband’s Secret

Dear Scott,

I’m a 48-year-old pharmacist. I have three children and a wonderful husband. All was rosy, or so I thought. My husband, who works in the finance game, has always taken care of our money. The day before his 50th birthday last week, he dropped a bombshell. Unbeknown to me, he had several credit cards and had not paid our taxes since 2017! The tax bill is now being determined by our new accountant (I fired the old one). And, thanks to our Mojo, we’ve knocked over the credit cards. But it has left me feeling angry and betrayed. My husband is extremely remorseful — he honestly thought he could handle the situation and didn’t want to worry me. Any advice?

Claudia

Hi Claudia,

I have a couple of thoughts.

First, check to see where the money has been going — has he been gambling?

(Don’t take his word for it. Check the statements yourself. If he has been, he has an illness, and you need to talk to Gambling Help pronto on 1800 858 858.)

As far as the tax debt goes, you’ll be able to enter a payment plan without too much trouble. (You can even do it online via MyGov. Your new accountant can help with this.)

Finally, will you be able to trust him with your money again?

Well, only you can answer that.

However, bear in mind that I doubt he did this to intentionally hurt you … it just got away from him.

And he’s obviously been living with the stress of this for a long time, hoping to get back in the black.

One way to rebuild trust is to do monthly Barefoot Date Nights, and another is to share the same transaction account.

These two things help Liz and I stay on the same page financially (while drinking wine and eating garlic bread no less!). It works for us, it may work for you.

Good luck!

Scott.

Here’s what I’m listening to right now

It’s been a helluva week.

We’re in lockdown. We’re homeschooling. All six of us have really bad bronchitis, which in a pandemic makes us about as welcome as a wet dog in a clean house. Oh, and the baby is teething.

So on Tuesday my wife announced she’d booked me in for a telehealth doctor appointment.

The doctor’s first comment surprised me: “You don’t sound like your normal self.”

“But … you’ve never met me before. How would you know?” I asked.

“Oh, I’m listening to your audiobook at the moment … it’s actually very engaging.”

Right.

If I’d had a voice, I would have screamed, “Just give me some antibiotics so I can hide under my blanket for the next week!” Yet I could only manage to squeak out a feeble “thank you”.

Still, the good doctor gave me an idea: after bingeing on my usual diet of podcasts, I decided to get more beef by tucking into some audiobooks. Here are three that got me through my week from hell.

Billion Dollar Loser, by Reeves Wiedeman

This is the story of Adam Neumann, a young, egotistical entrepreneur who thought he was the Jesus of business.

It explains how he convinced some of the largest investors in the world to worship his creation. What was it? Well, he called it “a tech-enabled physical social network”. Otherwise known as WeWork, a company that takes large office buildings and rents out desks to freelancers.

In 2019 WeWork was hemorrhaging cash, with annual losses of $US1.9 billion per year. Neumann and his Wall Street bankers tried to sell it to the general public (via a stock market listing) for a ridiculous $US47 billion. Just six weeks later it would be fending off bankruptcy. Billion Dollar Loser is a beautifully bonkers business story.

Business Adventures, by John Brooks

Bill Gates says this is the best business book he’s ever read. (Okay, so Bill has been in the weeds lately, yet, as long as he’s not recommending romance books, I’m in.) This audio actually felt like a podcast, in that it tells 12 fascinating business stories. While the book was first published in 1969, the brilliance is they could have been written today. My favourite? “When Piggly Wiggly Tried to Stick it to the Short-sellers on Wall Street.”

Indistractible, by Nir Eyal

Nir Eyal wrote the ‘Bible’ for Silicon Valley — Hooked: How to Build Habit-Forming Products. Perhaps he was looking for a shot of redemption, but he followed it up with an equally powerful book that I’ve been listening to this week: Indistractable: How to Control Your Attention and Choose Your Life.

He argues that people have always been distracted: once it was television rotting our brains, and before that parents were worried their kids were glued to the gramophone. In other words, it’s not the device but your own internal hardwiring that needs to be mastered. The ability to stay focused is a competitive advantage, and the book lays out a framework for being — as he calls it — indistractible.

Oh, and for the kids, the audiobook of Tashi has been in high rotation. Tashi goes on epic adventures and overcomes all sorts of foes (but nothing like facing off against four bored, sick kids in lockdown.)

Tread Your Own Path!

Our $2 Million Battle

Hi Scott,

Last year I cared for a very close family member, who sadly passed away in December. I’ve been included in his will and expect to inherit approximately $2 million! Besides the grieving, we’re trying to deal with the fact that other very close family members were NOT included in the will. We are a tight-knit family and I would like to share some of this inheritance with them. Where on earth do I start, not only setting my little family up for life but also possibly helping other family members financially?

Janice

Hi Janice,

Let me start by saying that you didn’t receive this money by mistake: it was clearly what they wanted.

Case closed, right?

Well, maybe not.

In these situations the will may (read: probably will be) contested by close family members who got doughnuts.

There’s a six-month window to challenge a will — after that, they can only do so with a court’s permission.

If I were in your shoes I’d apply for probate as soon as possible (which basically means proving the will is valid and the executor can distribute the estate to the beneficiaries), and then mark the date on your calendar.

Only then would I start thinking about what to do with the money.

The first meeting should be with your accountant, to see how much capital gains tax the assets could be up for.

As for dishing out the dough: I’d follow the Barefoot Steps so that your own family is cared for and financially secure, and then think about what to do with the rest.

Good luck!

Scott.

How to earn 3% on your savings

Hi Scott

There’s a new app called Blossom that just has popped up. It’s still in the testing phase, but my fiancé has been invited to test it out. It’s targeting 3% returns on savings, and you can deposit and withdraw money at any time without any fees. It’s apparently a fixed-income investment without the restrictions of being locked in long term, like with other investments, and it’s backed by JP Morgan. It almost feels like an external high-interest-earning savings account. In the current climate of very little interest earnings on other normally high-interest-earning savings accounts, this all sounds very appealing for parking your savings in. So ... what’s the catch?

Cheers, Belle

Hi Belle,

I took a look at Blossom and it has a very Gwyneth Paltrow candle-like vibe to it:

“Plant the seeds and watch your savings Blossom each day”, whispers the pastel-coloured website.

In fact, the only thing I think you’ve planted, Belle, is this question.

Level with me: you work for Blossom right?

After all, what sort of reader says “it almost sounds like an external high-interest-earning savings account”?

Anyway, the catch with Blossom is that you are not protected by the Government deposit guarantee (of up to $250,000). In other words: if things go bad, you could lose your money.

Will they go bad? I have no idea. Generally, fixed-income investments are quite secure.

Still, the fact is that you’re taking on more risk, which is why they’re targeting a higher rate of return.

And that’s the rub: while they’re targeting a 3% return (after their fees) — that’s not guaranteed.

So the question you need to ask yourself is a simple but important one:

“Am I willing to take the extra risk to earn at best an extra 1.5% per annum?”

Personally, I’m not. It’s just not enough of a return to justify leaving the warm embrace of the Government.

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.

Timeshare Win!

Dear Scott

I am reaching out to you after reading your question from a reader last week on our timeshare club. There may be some confusion here as to how our club operates, as we never intentionally wish to cause distress to any one of our members and always try to assist where possible. I would like to contact the people who wrote to you (Julie and David) so I can personally help resolve their concerns.

Sharon, Accor Vacation Club

Hi Sharon,

Julie and David admit they got cornered by the hard-sell at your timeshare seminar in 1997.

However, they’re not shirkers: David admitted to me “it’s our bloody fault!”

Yes, I said to David, you got pressured into making a bad financial decision that cost you $22,000 upfront.

Yet to be locked into paying a grand each year for something you won’t use, you can’t afford and you can’t get out of seems kind of … well … outrageous to me.

So much so that I decided to take this case on myself.

It seemed like an easy case for the Australian Financial Complaints Authority (AFCA): Julie and David were pressured into an unfair contract. They’re now pensioners, selling off assets to make these payments they can’t afford.

However, I’m appreciative that Accor Vacation Club has decided to let Julie and David exit the club and not be liable for any further payments.

Having an extra $1,000 a year will have a huge and meaningful impact on their lives.

Thank you.

Scott.

My Saturday night date with Lindsay Lohan

On Saturday night I was watching Herbie: Fully Loaded with the kids.

That’s the one starring Lindsay Lohan, when she was still sweet and innocent and doing Disney.

It’s a terrible movie.

So, while the kids munched on popcorn, I fired up my laptop and began looking through reader questions.

A new email pinged ... with the subject line ‘SOS - help me Scott’

Scott,

I should have listened, I read your articles about crypto and I sold mine before the rise. Then I got FOMO and invested $18,000. Now it has dropped ... MASSIVELY. I’m down $10,000. What do I do? I want to sell but I don’t want to lose my money. Seriously. I’m 22 and just quit my job!

Ben

Hang on a minute.

Of all the things a 22-year-old bloke could (or perhaps should) be doing on a Saturday night ... he’s sending a daggy dad a question on crypto?

Herbie goes bananas!

Still, Saturday night was a knife fight for crypto: some coins were slashed by half.

(However — and this is important — it was simply a marker in time. Since Ben sent the email, Bitcoin has rallied 25%, and Etherium 50%, so maybe he made his money back?)

In any event, I do have some advice for you, Ben:

STOP WASTING YOUR TIME.

The money you’ll make in crypto is chickenfeed compared to the life-changing gains you can make if you get serious.

You might think I’m talking about investing — and I am.

But it’s more than that.

See, Ben, you’ve got two things most people don’t have enough of:

Time … and energy.

Now you can waste that time betting on things you have no control over (like crypto) … or you can invest it in skills and habits that will compound for the rest of your life.

That could be finding a mentor, starting a side business, getting fit, or even just reading some good books (my pick: Extraordinary Popular Delusions and the Madness of Crowds — no talk of crypto, though, it was published in 1841).

In other words, anything that you master now will compound over your life and make things exponentially better.

When you’re 22, you think you’ll always be young and that you’ve got plenty of time to get around to all that stuff.

However, I reckon you have just 10, maybe 15, years to really focus on the hustle.

After that, your time and a lot of your energy will likely be diverted by a partner, kids, a mortgage.

I don’t want to scare you, Ben, but one day you’re going to wake up. You’ll have three kids on your lap, popcorn in your pants ... and you'll be watching Lindsay Lohan pretending to talk to a car.

Beep, beep!

Tread Your Own Path!

The Big Short

Investment legend Michael Burry met his wife on a dating website.

His profile read as follows:

“I’m a medical student with only one eye, an awkward social manner, and 145 thousand dollars in student loans.”

She wrote back: “You’re just what I’ve been looking for!”

(In other words, she was looking for honesty.)

Burry was profiled in the book, and later movie, The Big Short, where he predicted the US housing meltdown before anyone else, and made himself a hundred million bucks in the process.

My favourite scene:

Goldman Sachs: “You want to bet against the housing market?”

Burry: “Yes.”

Goldman Sachs: “Why? Those bonds only fail if millions of Americans don’t pay their mortgages. That’s never happened in history. If you’ll forgive me, Dr Burry, it seems like a foolish investment.”

Burry: “Well, based on prevailing sentiment, the market, the banks and popular culture, yes, it’s a foolish investment. But everyone’s wrong.”

Fast-forward to today, and Burry is back making three more ‘foolish’ bets:

First, he’s wagered a massive $680 million bet against Tesla.

Tesla’s share price rocketed 743% in 2020, making founder Elon Musk one of the richest people on earth.

Yet just as the share price was roaring towards its peak last year, Burry said it was ‘ridiculous’ and started shorting the stock (which means that if Tesla’s share price falls then Burry can sell his Tesla shares for a profit). It seems his bet is already paying off: Tesla shares have fallen 40% from their all-time high.

Second, he’s said that he thinks Bitcoin is in a speculative bubble.

(Duck for cover!)

Third, and most alarmingly, he believes that the massive money printing experiment the US is currently doing will lead to hyperinflation and economic catastrophe.

Here’s the point: while the stock market hits daily record highs, Burry is betting on doom ahead.

So, is he right?

Well if you’ve been following me for any time you’ll know how I feel about short-term predictions. Studies have repeatedly shown that they mostly come down to luck. No-one has a crystal ball.

Yet what’s interesting to me is Burry’s psychology: he’s proven that he’s willing to look past the ‘herd mentality’ that grips markets to make his own judgments, even if it makes him look stupid at the time.

In other words, he’s a wolf, not a sheep.

Speaking of which, I met a few young rams the other day … apprentice tradies who were flipping crypto on their smoko. These blokes, and just about everyone I talk to lately, are convinced that making money is quick and easy.

Now, I honestly don’t know if Burry will come out on top, or come a cropper.

But there’s one I do know: making money (and keeping it) is never easy. And making it quickly is even harder.

Tread Your Own Path!

Timeshare Tragedy

Dear Scott,

My husband and I are in our sixties and on the pension. In 2007 we went to an Accor timeshare seminar and signed up to their deal. We paid $22,000 upfront, plus an annual maintenance fee. We’ve only used the hotel three times (it’s always booked out). Yet we’ve been paying these annual fees ever since. Our bill this year was $990, and it goes up every year. We’ve been told we can’t get out of these annual payments unless we declare bankruptcy, or die. We’ve had to sell a lot of our assets to live. Help!

Julie and David

Hi guys

This is outrageous.

You were robbed — with a pen — by a $12 billion-dollar publicly listed company!

At least with an old-fashioned hold-up it’s done and dusted in a few minutes. These robbers are holding a gun to your head till the day you die!

(Consumer group CHOICE found that timeshares can “lock you into contracts that run from 60 to 99 years, and can cost you as much as $450,000 over the long run”).

If I were in your shoes — pensioners on a low income — I wouldn’t pay them another cent.

After all, they’ve already made their money twenty-fold from you.

Fair cop!

However, if you do this they may play hardball and sic their debt collectors onto you, and even try and bankrupt you.

So it seems to me you have two choices:

You can keep paying them till the day you die.

Or you can call the (financial) cops on these robbers. Give me a call during the week (when I have my financial counsellor hat on) and I’ll help you lodge a complaint with AFCA, the Australian Financial Complaints Authority.

Scott.

What the Flip?

Hey Scott

I just read your recent column and I have one question: how the flip do you not carry a phone? I’m quite interested in the logistics of such a daring lifestyle choice in this day and age.

Ben

Hi Ben,

I’m the first to admit my life choices aren’t for everyone, or even most.

I went cold turkey last year and ditched my number, which had served me for 20 years.

Today I have an Apple Watch that serves as a tracking device for my wife, family and close friends.

In addition, it has an eSIM which allows me to make and receive calls (with AirPods), send voice-to-text messages, listen to podcasts, get directions via maps, order an Uber, and pay for things.

I also carry around a notebook and pen, and can often be seen writing things down, or staring blankly into space.

It started out as an experiment ... but I don’t think I’ll go back.

(Besides, I can always use my wife’s phone. Right, Liz?)

Scott.

Fingers in the Jam Jar

Hi Scott,

When kid #1 was born, I put $10,000 into an index fund for him. Kid #2 is now due and I’ve done the same. I have not set up the money in a trust, though. I DO NOT want to hand over the Jam Jar when they turn 18, unless the funds would help them with a home, business, etc. So do I have to sign them over at 18 to avoid capital gains tax? Or can I sign them over at 25, 30 or whatever?

Simon

Hi Simon,

Yes, if you bought them via a share broker, they’ll automatically transfer to your kids when they turn 18, and they’ll be free to cash them in and head off on a bender to Bali.

(An alternative to this is to purchase your index funds either in a family trust or via an investment bond, which allows you to nominate the age your kids can inherit the money.)

So you’ve just created a trust fund kid, right?

Wrong!

Here’s how I’m doing it with my kids.

Don’t hide the fact that you’ve invested money for them: it’s an awesome opportunity to show them how compound interest works.

But do let them know there will be NO handouts (and no Dad-sponsored Bali benders).

Instead, set up what I call the ‘Barefoot Ladder’:

Use the money to match them, dollar for dollar, for something they’re saving for: a car, a small business, a house deposit, plastic surgery (well, maybe not). Either way, you choose what it is — and they work for it. And the harder they save, the more they get.

Scott.

Night-Night, Barefoot

Hi Scott,

I have been a proud Barefooter for years. Last night my three-year-old son requested ‘The Doggie Book’ for his bedtime story. Thank you for being such a positive influence in our household.

Megan

Hey Megan,

That’s awesome! Take that, Bluey!

Scott.

The Greatest Investor You’ve Never Heard of

Let me tell you about one of the greatest investors you’ve never heard of.

His name is David Swensen.

Swensen was responsible for investing Yale University’s endowment (the money it uses to fund its education).

Over his career, he grew that pot from $US1 billion … to a staggering $US31 billion.

His returns were so impressive that Bloomberg said, “there’s David Swensen, Warren Buffett … and everyone else”.

With his track record, Swensen could have become one of the richest men on Wall Street.

And, early in his career, Swensen had countless opportunities to quit managing money for Yale and start his own hedge fund. If he had, he would likely have become a billionaire many times over. Rich enough to own an island, a fleet of jets, and mansions all over the world.

Yet here’s the really strange thing about David Swensen:

He didn’t.

Instead, he continued working for relatively low pay (by Wall Street standards) managing money for Yale.

Unlike most Wall Street fund managers, who get their significance from the investment fees they skim off the top, Swensen was driven by the fact that his investment gains helped the institution change young people’s lives.

Even better: while other ‘masters of the universe’ fund managers had plush offices and chauffeurs … Swensen helped out the university by turning up in front of a chalkboard to teach an investing course to students.

Tragically, Swensen died last week, way too early at the age of 67.

There was a lot written about his investing genius. (Interestingly, Swensen, like Buffett, was a vocal critic of expensive actively managed fund managers and argued that most people, including large pension and super funds, should invest in index funds.)

Yet there has been much more written about what author David Brooks calls his ‘eulogy virtues’:

The time and effort he put into mentoring the young investors he worked with. The encouraging letters he sent to his students. And the fact that he was still teaching that investing class just a few days before his death.

Now, you don’t have to be an investment genius to gain the secret to Swensen’s true wealth. Simply put down your phone and spend a few minutes thinking about your own funeral.

Many people (men in particular) spend much of their lives pursuing things that look impressive on their résumé:

Fancy titles. Money. Power. Respect. Status trophies.

Yet the person delivering your eulogy won’t talk about the car you drive, the title you attained, the balance of your bank account … or any of the other things that society has you chasing.

Instead, they’ll talk about the kind things you did. The courage you showed. The difference you made.

David Swensen understood this. And his legacy lives on in the hundreds of students whose lives he changed.

Rest in peace, David Swensen.

Tread Your Own Path!

This is How to Get a Job

Hi Scott,

Something to brighten your day. My almost 15-year-old recently applied for (and got) her first job at a local ice-cream store. She based her application on your example in The Barefoot Investor for Families. Now my 11-year-old believes she should also be allowed to get a job at the ice-cream store. She even wrote an application letter following your book’s example. Let me quote you a few lines: “I want to work at Gelatissimo because I love ice-cream, and I want to bring the joy of sweetness to others. I am able to work at any time, any day, any hour. My biggest strength in the ice-cream business is eating ice cream.” This gave us a good laugh and we love her enthusiasm, though we won’t be letting her loose on the workforce just yet.

God bless, Janice

Hi Janice

Congratulations on your teen getting her first job!

As for your 11-year-old …

She had me right up until the part where she hinted that she’d be getting high on the boss’s supply.

Other than that … I’d hire her!

No brain-freeze for that girl … she’s not going to have a problem getting a job when she gets a bit older.

Now, for those of you following along at home, let me explain what Janice is talking about.

Most employers — regardless of whether its Macca’s, KFC or an ice-cream store — essentially ask these five questions:

Why do you want to work for us?

When can you work?

Why should I employ you?

Are you going to work hard?

Who can vouch for you?

So in my book I boiled down the answers to these five questions into a double-page, plug-and-play resume template teens can complete in one evening. However, it’s more than just a resume, because in the process of putting it together teens get two benefits:

First, they get a pre-written ‘cheat sheet’ they can take along and use for their interview.

Second — and more importantly — they learn empowering stories that will change the way they see themselves.

It’s an absolute killer … just not for 11-year-olds!

Scott.