You’re Talking Out of Your Backside, Barefoot

Hi Scott,

I enjoy your columns, but I was a little concerned about last week and the ‘cold stethoscope to your nether regions’. A stethoscope is a listening device, and for the life of me I can’t think of a reason to listen to one’s crotch. Bowel sounds, yes, but that’s as far south as it should go. I think your doctor might be taking advantage of you.

Ryan

Hi Ryan,

I think you may be on to something (I’m not even going to tell you how he checks my prostate). Anyway, by all accounts last week’s column on getting a better deal on health insurance managed to temporarily crash the government website privatehealth.gov.au. I feel better now!

Scott.

Budget Warning

Hi Scott,

I’ve just watched the Budget, and I reckon people need to be warned about these 5% deposit government schemes. I am old enough to remember the 1960s and early 70s when I was working in conveyancing. The state government had ‘vendor’s contract’ setps where people purchased homes under a contract of sale, with the title not transferred into their names until it was paid off. These were an absolute disaster as most people could never have paid off the contract, with interest rates too high and repayments too low. Many of them had to walk away as they owed more than the original purchase price of the property. Beware of governments bearing gifts!

Nancy

Hi Nancy,

You’re right, it’s potentially a taxpayer-funded trap for 50,000 families.

Let me explain:

In the Budget, the Government increased the Home Guarantee Scheme to 50,000 places.

The scheme allows first home buyers on low incomes to buy a home with just a 5% deposit. And for single parents it’s even less … all they need to scrounge up is a piddly 2% deposit.

Yet hang on a minute … isn’t this entire Budget about the rising cost of living?

So why is the Government encouraging low-income earners to load up on debt at a time when interest rates are rising?

Answer: for the very same reason that Labor has made this dud policy part of its election pitch:

They want your vote.

Strike me handsome! Giving people extra money to buy a home just filters through the market and makes all houses more expensive. When interest rates rise and house prices fall, many of these people will be underwater. And it’s you and me – taxpayers – who’ll be on the hook for the losses.

Luckily, I don’t need your vote, so I’ll tell it to you straight: avoid this scheme.

Scott.

30-year-old Girl has No Interest

Hi Scott,

I’m a 30-year-old married Muslim woman living in Sydney. Being Muslim makes it very challenging to buy a first home. I am sure you are aware that Muslims are prohibited from dealing with interest. I am ready to take all the Barefoot Steps but I don’t know how I can do so without dealing with interest. My family came to Australia in 1991 – and 31 years on they are still renting because they haven’t been able to save $1 million in cash. Many Australian Muslims are in the same boat. I want to be able to own a home and provide safety for my children and not be in the same situation that my parents are in 30 years from now. What can I do?

Rina

Hi Rina,

What an interesting question!

There are a number of institutions that do Islamic finance.

NAB, for instance, has a product that they claim meets Islamic law requirements by structuring the loan as a lease and charging ‘rent’ instead of interest. (It’s a bit like my kids telling me they’re eating fruit … while digging into a bowl of Froot Loops).

Anyway, I asked my favourite Muslim, Nazeem Hussain, about Islamic finance, and he gave me the following fatwa:

“I think it’s like halal meat. The animal is the same but it’s how it’s slaughtered that matters.”

Touché!

When you’re dealing with any banker, the trick is making sure you’re not the one getting skinned.

I reviewed some rates of Sharia-compliant home loans and they tended to be quite a bit more expensive than the cheapest standard variable loans. However, I still think it might be a good deal for you. Reason being, Rina, it’s almost impossible for a working-class couple to save up cash and buy a house in Sydney. It’s like chasing a moving train.

Toot! Toot!

Scott.

Dirty Money

On Sunday nights my wife and I have a ritual.

We turn on the telly and begin searching for something we both want to watch.

Problem.

My wife refuses to watch anything that’s violent, or sad, or scary … or too ‘finance-y’.

I refuse to watch romantic comedies.

So, even though there are a thousand shows to watch, I inevitably end up reading a book while my wife scrolls Instagram.

Yet in a fantasy world, far far away, where I rule the remote, here’s what I’d click on:

Money For Nothing: Inside the Federal Reserve (YouTube)

This is the story of some of the most powerful people in the world.

If ordinary Americans understood the mistakes the US Federal Reserve has made, they’d be outraged: by keeping interest rates at zero, and printing money, they’ve driven record wealth inequality in the US … and around the world.

This documentary is now 10 years old … but it hasn’t dated one bit. It paints a picture of a Federal Reserve that is arrogant, out of touch, and enslaved to Wall Street interests. And, a decade on, things are even worse. Rates are still at basically zero, and when Covid hit the Fed printed 300 years’ worth of money in just a few months. You’re going to hear a lot about the Federal Reserve in the next few years. This doco is a good primer.

Dirty Money: Payday (Netflix)

Okay, so there’s a theme here: most good finance shows involve greed and stupidity (or both) … like a thinking person’s MAFS.

I love the Dirty Money series on Netflix, and my favourite episode is ‘Payday’, which tells the story of Scott Tucker, an amateur race car driver turned loan shark. He was a financial predator who created payday loans that charged huge interest rates and big fees (with deliberately confusing terms that skirted legislation), trapping millions of Americans. And if you think this isn’t happening in Australia, you’re wrong.

Principles for Dealing with the New World Order (YouTube)

This is an animated presentation by Ray Dalio, who runs the biggest hedge fund in the world. His basic theme is that we are on the cusp of a ‘changing of the new world order’, with the decline of the US as a superpower and the rise of China to top spot. Personally, I’m not sure the Chinese Communist Party (CCP) can continue its reign over the long term. Still, Dalio is a smart guy who has gone back over 500 years of history to study the big economic cycles … and he explains it pretty succinctly in 20 minutes or so.

In truth, Liz is never going to watch any of these.

However, there are a couple of saucy finance series coming out that I might just be able to tempt her with: On Disney+ there’s The Dropout, which details Elizabeth Holmes’s fraud at Theranos. And on Apple TV there’s WeCrashed, which looks at how the co-working space dropped $US40 billion in less than a year.

And if all that fails, the third season of Apple TV’s Ted Lasso is soon to arrive to save our Sundays.

Tread Your Own Path!

I Loaned My Friend $500,000 … He Hasn’t Paid It Back

Hi Scott,

About four years ago I trusted a long-time friend enough to lend them over $500,000 to renovate and sell his house. After renovating, he and his partner had a contract signed to sell the house, but it fell through. They couldn’t afford to relist the house, and ended up signing over the house to his brother in return for having a bridging loan paid off. Since then I have had a negligible amount of the money paid back to me. At the time I loaned this money I was in a bad way emotionally and not thinking clearly, so the only evidence I have is my bank statements. I’m still in regular contact with this ‘friend’, and he says he’s intending to pay me back soon, but I’m not seeing any hard evidence. My psychologist suggested I write to you to see what you recommend – so do I try to get my money back?

Michael

Hi Michael,

What a horrible situation to be in!

You must feel a bit taken advantage of … and perhaps a bit powerless.

If I were in your shoes, I’d stop talking to your friend and start talking to a lawyer.

Your lawyer will want evidence of the money transfers (you sending money to him, and the small repayments you’ve received), together with any email or text conversations you’ve had regarding the loan. They may also want a supporting letter from your psychologist.

Then they’ll send them what’s known as a letter of demand, which is exactly what it sounds like: “Pay back the money by a certain date or we will commence legal proceedings.” Ideally, you’d hope to be able to settle this via mediation before going down the costly court route.

Either way, until the money is repaid in full, I’d strongly suggest you do not speak to this person.

Scott.

My Aussie Boyfriend Should Pay For Everything

Dear Moneybags,

I have a boyfriend of a few months who is Australian (I’m Indian) and in my culture it is customary for the man to pay for dinner, or at least ‘do the dance’ and insist that he pays. I am financially stable and can afford dinner but I would at least like the offer. It’s not like he doesn’t pay sometimes, it’s just that when I reach for my phone he doesn’t protest. What should I do to explain that doing the dance is polite where I come from?

Shiraz

Hi Shiraz,

Come on.

It’s just you and me.

You don’t need to play the games with old Barefoot.

It’s not really about the money, is it Shiraz?

It’s that you believe that a man proves that he cares about you by spending his money on you and treating you like a princess.

I’m not saying that’s wrong. It’s just what you believe.

Yet what is wrong is that you’re telling me about it … and not the poor bloke!

He’s wandering around the parking lot looking for a co-share Uber thinking he’s giving you respect and equality … but you’re waiting for the horse-drawn carriage!

When my wife and I began dating, we did this merry-go-round … but in reverse.

I thought I was being chivalrous by wanting to pay for everything.

Yet, as an independent woman, she thought I was a backward country boy (and still does, actually).

We sorted it out, though. We had to. After all, no relationship can thrive if you’re on the wrong bus.

What did we do?

We set up a monthly Barefoot Date Night.

So, Shiraz, if you are serious about this bloke, you need to tell him that’s how you expect love and validation to be shown. Don’t blame it on your culture – and don’t feel shame. Just tell him.

Good luck.

Scott.

Revenge of the Maths Nerd

Hi Barefoot,

Following the steps of the Barefoot Investor, I have turned a crippling financial anxiety into a point of personal strength. I was a pure mathematics undergraduate who could integrate the most obscure of orthogonal projections, but I seemingly couldn’t change the trajectory of a $12,000 credit card debt. You made me realise that CommBank’s ‘present’ of a credit card on my 18th birthday was the worst thing I could have received. It’s now blended! In all seriousness, thank you.

Simon

Hi Simon,

Thank you, thank you, thank you.

Often when I’m talking to educators about getting money taught in schools, I get cornered by the ‘Maths Mafia’ who assure me that financial literacy is their bag.

And when they do, my heart sinks a little.

That’s because I firmly believe that managing your money successfully is more about literacy than it is about numeracy. Money is a language, and if you don’t know how to speak it you won’t understand it … and you’ll be manipulated by fast-talking behavioural marketers who do.

Your story proves it.

Scott.

Someone call the doctor

I opened my mail, and felt a cold stethoscope to my nether regions:

My health fund was giving me a tickle. It happens every year. Over the past decade consumer prices have grown 20% … but health insurers have jacked up their premiums by 54%.

Oh, that’s cold!

If you pay for private health insurance you know that around this time each year your fund sends you out their ‘drop your dacks and hold your acorns’ letter. Spoiler alert: next week they’re going to jack up your annual premiums – with some funds hiking by as much as 5%!

So let’s talk about what you can do about it.

First, if you can afford it, most funds allow you to pre-pay your premium and lock in the old rate.

Yet let’s be honest: health insurance is bloody expensive, so it’s worth your while to spend an hour or so checking to see if you’re getting the best deal … or if you even need it (if you’re under the age of 31, or you’re earning under $90,000 a year as an individual or $180,000 as a family, you may not need it).

So here’s what I do for my family:

First, I purchase top-level comprehensive private hospital insurance.

Second, I don’t purchase extras or combined healthcare cover. Reason being, most extras policies cost you hundreds of bucks extra per year … whether you claim or not. Don’t believe me? Ring your fund and request an annual claim statement. Then ask, “If I switched to a comparable hospital-only policy, how much would I save each year?”

Third, I do my research on privatehealth.gov.au. That’s the government website and it’s weirdly good. It allows you to compare your current policy against others. Most importantly, it compares every fund on offer – unlike those comparison sites (like iSelect and Comparethemarket) which only list funds that pay kickbacks.

So this week it’s time to turn the tables on your fund, and get them to bend over and show you how flexible they really are.

Tread Your Own Path!

My Parents Have NO IDEA

Dear Scott,

All my life I was under the impression my parents were wealthy. My father was a partner in a law firm, and there were always extravagant annual overseas trips, fancy cars, beautiful houses, antique furniture, etc. They are now 70, retired, have no super left, are on the pension, and have $120,000 of debt ($80,000 credit card, $40,000 car loan). They used up almost every last bit of their savings, and all of their super, to buy their current home outright once my dad retired.

Yet they keep spending! They don’t seem to realise the severity of their situation. Mum still goes to the beauty salon to have all sorts of expensive procedures done, they still have two cars (one of them a Lexus SUV) despite only needing one, and now they’re going to get a reverse mortgage to release some equity from their home, just so that they can afford to live! I’m so shocked and frustrated, but I don’t know how to help them, because my dad is too proud to listen to me, and my mum is too embarrassed.

As I said, they’re only 70, and I’m afraid they’re going to end up homeless with nothing but debt that they have no way of paying off. I’m also concerned they will be coming to me for money if they have big medical bills down the track. While I love them and want them to be OK, I would resent throwing money at people who have always lived beyond their means while my husband and I are super-careful with our money. What should I do?

Worried Daughter

Hello Worried Daughter,

What should you do?

I think you should follow my lead: I see people doing stupid things with money all the time … it’s like I have a sixth sense for financial stupidity. Yet I have learned to resist the reflex action of going all Judge Judy on them.

Why?

Because they’re not asking for my advice, and it’s none of my goddamn business.

If people do ask for advice, I mostly tell them how great it feels to be in control, and how surprisingly easy it is to build momentum after you have a few dedicated Date Nights.

Just know this: deep-seated behavioural change is hard, especially since your parents have been doing dumb financial stuff their entire lives. Yet for some reason my approach has worked with hundreds of thousands of people, even people like your parents.

So that’s where I’d start: encourage them to read my book, or listen to it on a long car trip.

Will it work?

I don’t know.

Yet the one thing I know for sure is that finger-waving and shaming won’t work. Don’t let money jeopardise the most important relationships you have.

Scott.

My Kid has NO IDEA

Hi Scott,

In 2008 I purchased a photo shop, and my parents redrew their mortgage so I could do this. It was initially $65,000, but then over a few years it built up to $120,000. I ran it successfully for a few years but, as digital media grew and prints became less popular, the business slowly went down the gurgler, and closed in 2016. Since then I have been chipping away at the debt and it is down to $61,000, but the strain on my relationship with my dad is not great. He gets so upset if he sees me or my partner spending money on pleasure because he thinks we should just focus on the debt. I do want the debt gone but I also don’t want to miss out on precious time to make memories with my kids. How do I get it paid quickly but still enjoy life?

Kelly

Hi Kelly

Oh god.

So this was a terrible idea to start off with, and now it’s a festering sore.

If I were in your shoes I’d want to get rid of the loan from your father as soon as humanly possible.

Can you refinance it with a traditional lender?

In your situation I’d be willing to pay a higher interest rate if it meant I could save the relationship with my father.

Take this as a lesson (one your dad has probably learned by now): if you can afford it, give money away to your family with no strings attached, but don’t ever lend to (or go guarantor for) people you love.

Scott.

Making Hay

Hi Scott,

I just want to say I’m glad you’re writing a book for kids. I have this amazing young man called Jarrah (13 years old) who works for me. He comes once a week to help around my property, cleaning paddocks, cleaning water troughs and filling hay nets. He has worked for me a year now and it’s just an hour a week, but when I advertised the job he told me about his savings accounts. One account is for his car, one for his house and one for spending. Plus, if he invests money in the investment account his mum set up for him she matches what he’s put in. I’m blown away by the solid head on young Jarrah’s shoulders! His mum is a Barefoot follower (like me) and she has educated him well. When your book is published, I’ll buy him a copy.

Jan

Hi Jan,

What an amazing young bloke!

He’s exactly the kind of Barefoot kid that I want to feature in my new book.

So please go to www.barefootinvestor.com/kids

Scott.

I’m setting up a caravan park

My boys had cornered me.

“Dad, we’d like to talk to you about a business idea we’ve come up with”, they said in unison.

“We’re calling it … Pape Point Campground”, announced my eight-year-old.

“We could rent out the top paddock to caravanners for, say, $40 a night!”, added the six-year-old.

“Oh”, I said, trying my best to remain noncommittal.

They stood there eyeballing me expectantly.

I must have twitched, because they were off like a flash. They spent the next couple of hours huddled in their room coming up with a detailed plan for their caravan park: job titles, hours of operation, even a logo design (which they outsourced to their three-year-old sister — very sparkly).

Then they reappeared for round two of the pitch … this time with upsells:

“We could provide a rustic breakfast for $10.” (“Oh, that’s a great idea, mate!”)

“And sell them campfire wood and marshmallows, for $15.” (“Nice!”)

“And you can also give them some financial advice, Dad, for, say, $20?” (“Oh, now hang on a minute!”)

Pape Point Campground may be confined to family and friends … but still I was impressed. Not only was their creativity in full flight, but they were full of excitement. As a parent, I’m under no illusions: these are the good old days.

And it’s something that’s been on my mind, because I’m currently writing my next book, and it’s all about kids.

When I pitched my publisher the idea they loved it, especially when I told them the main idea: “It’s kids teaching kids.”

And that’s where I need your help … or, specifically, your kids’ help.

I’m looking for kids to feature in my book and inspire the kids of Australia.

So, if you’ve got a Barefoot Kid who:

Has their own little business …

Set up a stall …

Created a product …

Or enthusiastically done their Jam Jars at home …

Then I want to hear from you!

For the kids I choose, I’ll interview them, set them challenges, even help them learn about the share market.

(And of course also feature them in my new book.)

I’m on a tight deadline, so — parents, guardians, friends and grandparents — please go here to apply by this Tuesday 22nd March, 5:00 pm:

barefootinvestor.com/kids

Tread Your Own Path!

The Coming Property Crash

Hi Scott,

With all the craziness of Russia invading Ukraine and China looming in the background, I had a sudden worrying thought today. What would happen financially in Australia if there was a third world war? My partner and I are in our early forties and are about to purchase a third property. It is a significant spend, so is the possibility of a world war something we should add into the equation? I guess I expect the usual stock market crash, but should we also be concerned about a possible crash in the housing market?

Tania

Hi Tania,

Well, I am.

However, it’s got nothing to do with Russia or China or any other geopolitical risk — which I know very little about, and cannot predict.

Instead, what I am focused on is the impact of rising interest rates. The last time the Reserve Bank increased rates was November 2010 … and at that time the cash rate was 4.75%. Today it’s at 0.10%.

The housing market has gone a little crazy since Covid (as has the share market), as a result of basically zero interest rates. Nationally, house prices jumped by 22% over the past year, according to CoreLogic. I’m certainly not predicting it, but it wouldn’t surprise me if house prices (and the share market) came off a bit from here. That said, I have no plans to sell any of my own property. And if you can afford the investment, and you plan on holding it for decades, you should be fine.

Scott.

I got scammed

So this is kind of humiliating, but I have a confession:

A few weeks ago I got scammed … and it ended up costing me $5,000.

The toughest part to swallow?

It was kind of my own fault.

See, I have a longstanding rule of never reading anything that’s written about me. I don’t Google myself. I’m almost never on social media. Heck, I don’t even manage to read all my emails (luckily I have my long-suffering editor to help go through them).

In other words, I was a sitting duck just waiting to get scammed.

Here’s what happened:

A bloke set up a Barefoot Investor beginners Facebook group – that I knew nothing about – and it quickly grew to almost 100,000 people.

This group served as his primary marketing database.

Then he set up a website called Barefoot Budgets that looked and felt like my own Barefoot website.

He charged people $120 a year to access it.

Yet, more worryingly, he was recommending that his ‘Barefoot Beginners’ speculate on risky crypto and foreign exchange apps, because he was getting kickbacks from them.

Shockingly, this was going on for a couple of YEARS.

So, while old Scotty Boy was happily bouncing along on the tractor slashing grass, this dude was making hay while the sun shined!

The first I heard about it was when someone told me they wanted a refund.

“For what?!” I grunted.

Then I Googled ‘Barefoot Budgets’.

What the slash?!

The first thing I did was pay for a membership to Barefoot Budgets. (When the sign-up form asked me “How did you hear about Barefoot Investor?” I replied, “Because I bloody wrote it!”).

The second thing I did was call my lawyer.

Here’s you: “Okay, Barefoot, it sucks to be you, but surely this doesn’t really apply to me.”

Here’s me: “Oh yes it does.”

If you’re reading this you are, statistically, one of the wealthiest people on the planet … and to 90% of the world you’re rich, and a juicy target.

That explains why self-reported losses from cybercrime hit more than $33 billion last year. And also why calls to the Government’s Australian Cyber Security Hotline (1300 292 371) surged 300% last year.

So, here’s what you should do:

First, turn on ‘multi-factor authentication’ for all your accounts. (Google it.)

Second, use a password manager. (I use Dashlane to securely store my passwords.)

Third, pay for a virtual private network (VPN). (I use ExpressVPN — for $100 a year it’s good insurance.)

Finally, learn the lesson from me: keep your eyes open, especially when it comes to your identity. And if someone is pitching you an investment opportunity online claiming to be me … it’s not me.

The wash-up was that it cost me $5,000 in legal fees to put a ‘cease and desist’ on this guy.

Or, as I like to think of it, the cost of a good tractor slasher.

Tread Your Own Path!

Flooded

Hi Scott,

My parents were recently evacuated in the early hours of the morning and taken to temporary accommodation. Their property is flooded and the farm has sustained major damage. They are still reeling but I want to support them, and I know there is about to be a lot of paperwork. What’s your advice?

Kate

Hi Kate,

This takes me back to the bushfires of 2020.

I was sitting on a makeshift card table in the local town hall helping survivors.

The two things I learnt from that experience was:

It’s natural to be overwhelmed at the enormity of what’s hit you, and what you have ahead of you.

And, in the first few weeks of a natural disaster it’s chaos. The Government is still formulating its plans, and the insurance companies are … lawyering up. So my advice to your parents — and you, if you’re helping them — is to hold tight on the finance front for a few weeks. Don’t sign anything, don’t agree to anything — and if you do, remember there’s a cooling-off period.

However, there is something you can do: hook your parents up with a rural financial counsellor (1800 007 007). The counsellor will be able to take down your parents’ details, read through their insurance policies, and investigate what grants are available – or might become available in the weeks and months ahead.
Finally, after such a traumatic event, being with them is probably the best thing you can do right now. Good luck.

Scott.

A Mother’s Tragedy

Scott

My son tragically took his life earlier this year and I need help sorting out his estate. Nick was 30 and was fighting for custody of his two children, aged seven and three, as their mother is an ice addict (as is her new partner). Her mother is now fighting her own daughter for custody! My grandkids have not only lost their dad but also have been traumatised by neglect and abuse from their mother and the new partner. I am still grieving but I am having to sort out some sort of investment for the children for their future. I have nearly half a million dollars from Nick’s estate, and my ex-husband and I are the beneficiaries. How do I set up an investment, and what should I do?

Nicole

Hi Nicole,

My heart breaks for you, and your grandchildren.

So I think you need to go and see a lawyer, pronto.

There are two issues:

First, to see if you can get custody of your grandkids.

Second, to protect the half a million bucks and ensure that it benefits your son’s kids.

My Barefoot lawyer, Dr Brett Davies, tells me that the rules are complex and different in each state. But, typically, one-third of a deceased person’s legacy would go to their spouse and two-thirds to their children. So you may want to talk to your lawyer about bringing an action so that 100% of the money goes to the kids, to be held in trust by the grandparents.

As for where you’d invest the money, it depends on who gets custody (also another thing to get legal help with), and what the day-to-day costs would be to look after the kids. Once you’ve worked this out, you could invest a portion of the money long term for their future, probably via a low-cost high-growth share fund from the likes of Vanguard.

Good luck.

Scott.

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

My Husband Took a Secret to His Grave

Hi Scott,

When my husband died in 2007 I was left with nothing, because he had gambled everything away secretly. Since then I’ve managed to raise our three children and keep a roof over our heads, even though I’ve had to rent. I don’t expect you to reply, but just know this: I have always classed myself as a moron with money, but you made me feel like a superhero. That’s the most important thing I got out of your book. It was simple and you made me feel confident and happy.

Tracey

Hi Tracey,

It’s way past bedtime at the Pape household and I’m sitting here at the end of my daughter’s bed, reading your question on my laptop. My daughter sat upright in bed and asked me why I looked so sad. I explained that I was actually happy, because I’d just read a lovely letter from an amazing woman. Thank you for sharing.

You Got This, Tracey.

Scott.

Money Meals

Hi Scott,

I recently sent a thankyou email to your team for the amount you’ve helped my family save on our life/income/TPD insurance. We saved $132,690 up to the age of 65! So then we phoned our home insurance. We swapped providers and will save $2,286.24 per year with a better package. Then energy, a 25% discount per year. Then gas … 13% less per bottle. Yesterday we had our second Money Meal with the kids. THANK YOU from us all.

Leonie

Hey Leonie

That’s awesome — you’ve saved a lifetime’s worth of fees in a few nights. Oh, and good work on the Money Meals with the kids … with your savings it’s Magnums for dessert!

Scott.

I just called … to say … I WANT ALL YOUR MONEY

Hi Scott,

I got a random call from a financial advisor that I have never dealt with before. I have been meaning to get some advice for a while now, so the timing was great. He projects to add $500,000 to $1 million in compounding interest by the time I retire in 22 years, plus savings on my life insurances and income — for an $8,000 set-up fee, plus a 3.5% ongoing annual management fee on my super. How do I work out if it’s legit?

Belinda

Hi Belinda,

You had me at “random call from a financial advisor that I have never dealt with before”.

What would you do if a random bloke called and began chatting you up – talking about candlelight dinners, long walks on the beach, and getting financially frisky. What would you say to him?

You’d tell the creep to bugger off!

Well, this salesperson is trying to sweet-talk himself into your financial pants, Belinda!

Instead, I’d suggest you call your super fund (hopefully a not-for-profit industry fund) and book an appointment with one of their fee-for-service financial advisors. As a general rule the first hour is free, and there’s no smutty talk.

Scott.

Our Kids Don’t Know How Broke We Are

Hi Scott,

My family is in a highly stressful situation. Currently our children all go to private schools that cost us a combined $35,000 a year, yet we are struggling because I am the only one working, as my husband has been out of work for over six months. I can’t tell my children that they will need to leave their school because we can’t afford it! However, we have absolutely no money to spare. We are desperate. We have paid for the first term, but the new bill will be issued in April. We are extremely stressed. What can we do?

Pari

Hi Pari,

Oh boy, what a stressful situation.

It’s all wrapped up in the emotions of guilt and shame and the desire to provide for your kids.

So the make-or-break factor is your husband getting work … any work, even if it’s not in his area of expertise. You just need money coming in the door.

And you’re not the first parents who have been in this situation. The key with all creditors is communication: let the school know what’s going on and ask for their help.

Yet you’ve probably already tried that.

So here’s another way to think about it.

Politicians often say you should never waste a good crisis – and it’s actually good advice. Pari, you’re in a crisis right now, so it’s a good idea to put everything on the table and look at your options.

And the bottom line is this: if you can’t afford it … you can’t afford it.

Putting your kids into a decent public school won’t damage them. In fact, if they’re old enough, talking to them straight about the realities of your financial situation could be one of the great learning lessons of their life.

Scott.