I’m Dying to Leave

Hi Scott,

My sister was unfortunately diagnosed with a terminal illness three years ago – added to that, she now wants out of her marriage. Suffice to say it is not a healthy environment for her to be in. Her three children are all at university and have part-time jobs, but my sister (who was a nurse) really can’t do much anymore. She would leave her husband but is worried that he would string out selling the house for 12 months, and she wants to travel while she can. She has a lot of superannuation but has been told she can’t access it until she has 24 months to live. Seriously, how does anyone know this without a crystal ball? What can she do to get some of her super, as it is her money?

Nicola

Hi Nicola,

What a heartbreaking situation.

Your sister is battling a life-threatening illness, a divorce and financial issues, all at the same time.

For her the clock is ticking, and she understandably wants to get out and live while she still can.

So you should encourage her to see a family lawyer immediately. You could go along to the meeting with her, and consider offering to be her Enduring Power of Attorney (POA). That way you can deal with the boring details while she gets on with living her best life.

She should also consider updating her will to bypass her husband, if she chooses to leave him. It’s usually a 12-month journey to get a divorce, but the property settlement can be done at any time. Again, see a lawyer: they can provide advice, while you can provide love and support to see her through.

Good luck.

Scott.

Out of the Cesspool

Hi Scott

Two years ago, my wife and I had five credit cards topping $70,000 and seemingly no way out. After following the Barefoot Steps we have not only paid this cesspool completely off, we now have $100,000 in the bank. Right now we are on a Gold Coast holiday for five nights with the kids and are pinching ourselves that we got here!

So it’s time for the next step. I’m a builder and my wife and I want to buy land and then build in 12 months’ time. I pay my wife a wage for her work in the business, but not me. We are not sure how to approach a bank. Any suggestions?

Nick

Hi Nick,

You went from seventy grand in the hole to a hundred bones in the bank in just two years?

Congratulations, you two are on fire!

As far as getting a home loan is concerned, it’s worth chatting to your accountant to make sure your business and personal finances are sorted and clearly separated. Once that’s done, it’s time to go see a bank. The big thing a bank is looking for is that you have the ability to build your savings and pay down your debts – and you have been doing both.

You Got This!

Scott.

Tarzan Feeds Six People

Hi Scott,

My 58-year-old husband is the sole breadwinner, and we have six adults at home. We have a beautiful new house built on the site of our old home and a mortgage of about $350,000, which is currently interest only and consequently never seems to reduce. Given that everyone has started running around like headless chooks yelling “inflation!”, and my hubby’s super has plummeted again, should he stop putting the extra $750 a month into super and instead put an extra $500–$600 onto the mortgage? Obviously – God willing and no World War Three – the funds will pick up again, but we would really like to own our home fully while he’s still able to work. It seems like a reasonable strategy to us, but we’d really appreciate your advice.

Jane

Hi Jane,

There’s a lot to unpack here.

First, if you’ve elected to pay interest only on your home loan, you’re not actually paying off the principal, only the interest. If you want to pay down the debt, you’ll need to reconfigure your loan.

Now let’s talk about the monkey in the jungle:

Jane, you said there are six adults living in your house, and just one Tarzan providing for them all?

Talk about swinging from the branches! I’d suggest you hold a meeting around the campfire and get everyone to start pitching in to help pay down that debt.

Scott.

Here’s How Much You Should Have in Super Right Now

“You look different in real life than you do on the cover of your book”, said the waitress.

“You’ve lost a lot of weight.”

It’s true, over the past few months I’ve dropped roughly 13 kilos.

How did I do it?

Liposuction! Just kidding. I banished biscuits from the house and set up a gym in the shearing shed.

That’s the thing about being tubby: you can’t hide it (especially if your mug is printed on millions of books). Yet when it comes to wealth it’s the opposite. Plenty of people are hiding their financial flab in a leased Lexus.

So, for a moment, let’s you and I get naked and compare our financial bits. Here’s a table from the Association of Superannuation Funds of Australia (ASFA) that breaks down how much the men and women have in super on average by age.

So ask yourself: “Am I flabby or fit?”

Remember, it’s just an average.

It depends on how much you earn, and how long you take off to raise kids. That being said, if you’re following the Barefoot Steps long term, you’ll almost certainly end up with more than the average.

As I say in Barefoot Step 5, once you’ve bought a home (though not yet paid it off), boosting your pre-tax super contributions from 10% to 15% will make a hell of a difference. As will switching to a growth investment option if you’re under the age of 45. And lowering your fees will give you a huge boost at any age (remember, you’ll pay the majority of your fees after you retire, because that’s when your balance is the biggest).

Don’t be flabby … be financially fit!

Tread Your Own Path!

Getting Out of Here

Hi Scott,

With borders now open and people enjoying the luxury of travel again, what do you think is the best option for money access overseas? Should I get a prepaid foreign currency card, and if so is there one you recommend? Or should I just use my Australian account and take the fees and exchange rate as they come?

Thanks, Sandiego

Hi Sandiego,

This is the first travel money question I’ve received in years!

Personally, I think travel money cards that the banks and currency operators offer are as dated as travellers’ cheques and thumbing through a four-inch-thick Lonely Planet guide to Bali.

These days most decent transaction accounts offer free international transactions, and they don’t mark up the wholesale interest rates offered by Visa or Mastercard. So that means you can use your own account without getting legged.

The only thing to watch out for is when you’re overseas and the machine gives you the option of paying in AUD. Always click “NO” and pay in the local currency, or you’ll be ripped off with a higher currency conversion than the rate your bank will charge you.

Scott.

Thirty Years of Marriage Ended in One Minute

Scott,

My husband of 30 years left me in February this year with a one-minute phone call. Throughout our marriage I have been the main income-earner, supporting him through his small business and paying the mortgage and all living expenses. He would give me money here and there. The home is in my name but the mortgage is in both, though he has never paid a cent to it. The house is worth $200,000 with a $150,000 mortgage, and I have other debts that I took out to support him. His parents’ estate was settled in January and he was due to receive over $600,000 in inheritance. It was delayed for a month so that I couldn’t make a claim on it. I’m not being greedy, I just want the mortgage paid out. Do I have a claim?

Carol

Hi Carol,

Your marriage may have ended in one minute, but it sounds like your ex spent many hours planning his departure.

Now you could go to the Family Court about this.

However, a word of warning if you do: the Family Court is a little like a mother at the end of her tether trying to sort out a fight between her kids … everyone gets a clip around the ear!

The Court could look at your husband’s trick of delaying probate on his parents’ estate and order him to give a chunk of it to you. Or, it could order you to pay off the mortgage and transfer the property to him. More likely it will be somewhere in the middle.

So, just like warring siblings, you should do everything you can to avoid being dragged into the fight: because it’s going to be rough … and potentially very, very expensive.

Yet if it does come to that, my advice is the same as rocker Tex Perkins:

“Better get a [family] lawyer son, you better get a real good one.”

Scott.

Bullying the Banks

Hi Scott,

With more equity in the house this year, I built up the courage to contact our bank, CBA, and request a better deal. With little hassle they dropped their rate by 0.15%. I mentioned a much more appealing rate at a rival with a $4,000 cashback offer, yet the best they could do was a further 0.02%.

So we started the refinancing route. After we’d filled out a multitude of forms through a broker, our friends from the CBA were in contact asking why we wanted to discharge our loan. I politely indicated we made them aware of this before deciding to pursue the better offer. The CBA has now offered to reduce our rate below the rival rate and thrown in $2,000 in cash to reward us for being a loyal customer. Thank you for everything you do!

John and Suzie

Hey guys,

Oh, I love, love, love this. You bullied the banks!

And it doesn’t stop there. Putting that $2,000 against your loan is going to have a compounding effect over the years, slashing the time it takes you to become debt-free.

Having said that, I’d be tempted to take at least a few hundred bucks and have a fancy-pants dinner. You deserve it!

Scott.

Financial Planner Please!

Hey Scott,

Can the National Debt Helpline assist people who have no debt but need to work out what to do with their dwindling resources in retirement? I’m an accountant who knows a lot of people that really need some help understanding and figuring out their finances (legally I can’t give advice). If they can’t help, is there someone who can?

Thanks, Garry

G’day Garry,

Yes, there is.

Tell your clients to call Centrelink on 132 300 and arrange a face-to-face meeting with one of their Financial Information Service Officers (FISOs). They can help people sort out their Centrelink entitlements and will give unbiased general retirement planning advice that lays out their options, without the hard sell. It’s a free service, and I wish more pensioners knew about it.

Scott.

Barefoot, How Do I Get a Book Deal?

Scott,

I have written a book that aims to help people through the process of getting fired, because I think there is a lack of material out there on this topic and I have unique knowledge on it. I’ve been fired myself, and I’ve fired countless others in my career … so I have experience on both sides.

My book helps people deal with the shame of getting fired, but it also covers practical steps of what to do in the immediate aftermath to secure short-term and long-term income, including how to get your next job and what to say about what has happened. I also cover steps to avoid being fired in the first place if you suspect you might be, or if you’re on a PIP (performance improvement plan).

I’ve reached out to literary agents and publishers I found on the internet, but I suspect I’m not getting anywhere because I’m a nobody. But I passionately believe that the message in my book will help others. A smidgen of help or advice, or an introduction to an agent, would be awesome.

Lisa

Hi Lisa,

What a great pitch!

Here’s my advice: don’t start with a book.

A literary agent won’t help you, because publishers don’t want you … yet.

Instead, start a podcast. Then be a guest on other podcasts. Help people and turn them into case studies, and post their stories on your blog. In other words, own the ‘getting fired’ space.

When you do, you’ll have publishers beating down your door.

That’s when you should email me back, and I’ll introduce you to my agent. She’ll cut you a book deal that will play all the publishers off against each other.

Scott.

We’re Hitting The Open Road

Scott,

We want to leave our comfortable life and travel for the next four years. My hubby wants to sell the house and invest that money into an index fund. He says it will be safer than leaving our property with tenants and will be one less worry and cost while we are gone. Also, it’s likely we won’t end up coming back to this part of the country anyways. I am terrified we won’t be able to get back on the property ladder when we settle down again. Is an index fund good enough to keep our money growing for four years, compared to our home?

Laney

Hi Laney,

You should book in and see a financial advisor and ask them your question.

Their answer should be: “I have absolutely no idea where stocks will be trading in four years’ time.”

Laney, the question you’re asking depends on factors outside of your control. Instead, a good financial advisor should look at things you can control – like your goals, and your fears.

And if you’re “terrified” that you won’t be able to get back on the property ladder then you might at least consider renting out your home while you’re away.

Reason being, the Tax Office allows you to rent out your home for up to six years without subjecting it to capital gains tax (CGT), meaning you could get the income while you’re away travelling and sell it tax free when you return.

Scott.

I Tried CommBank’s New App

A mate of mine is a fireman … so his kids get to ride in his fire engine and even get to blast the siren.

I’m a finance guy, so my kids get to … beta-test the new Commonwealth Bank app for kids.

“Nee-Naw-Nee-Naw, our dad has the most boring job on the planet!”

(Yes, kids, but it pays the bills!)

Seriously, though, last week I received an invitation to venture deep into enemy territory — CommBank HQ! I think it’s fair to say that we haven’t seen eye to eye in the past (and I may have had a bit to do with culling their 90-year-old school banking program, the Dollarmites). Yet they still invited me for a sneak peek of their new pocketmoney app.

They’re calling it KIT, which stands for Keep In Touch (with your money). KIT is basically CommBank’s answer to the NAB-backed Spriggy. Yet there’s one really important difference: whereas Spriggy is designed for parents, KIT is designed for kids. (In fact, there is no ‘parent wallet’, other than a secret code for parents to pay their kids’ money.) I think this is actually really smart.

Do I think apps like this are going to change the pocketmoney game?

Maybe.

Then again, we still mainly use jam jars with our kids. After all, kids are visual … and I don’t have to remember any passwords or pay expensive annual fees for kid apps.

Still, I’ve committed to having the kids be part of the beta test and give their thoughts. I think they’ll enjoy it … if only because they rarely get to play on a screen. (I reckon I could load up a CommBank Annual Report on an iPad and they’d sit there swiping at it for hours.)

Stay tuned.

Tread Your Own Path!

You Prick, Barefoot

Hi Scott,

So for the last 10 years all I have heard is ‘Barefoot this, Barefoot that’. (Not that I have minded, as we have just hit net zero debt thanks to Barefoot — having no debt is amazing!) But while cooking the barbecue the other night my wife and I had an argument on whether to prick the sausages or not. So I said, that’s it — I’m asking Barefoot!

Clinton

Hi Clinton

I’ll refer you on to The Wiggles, who sing:

“Ten fat sausages sizzling in the pan … one went pop, and the other went BANG.”

It pays to prick.

Scott.

After Midnight We’re Going to Let it All Hang Out

Scott,

I have owned a small coffee shop for eight years, but since Covid started I just haven’t been able to catch up. I’ve been taking on credit cards to keep suppliers off my back, and also for wages. Now I’m desperate and so embarrassed and ashamed of my situation. Can you PLEASE answer my question as I can’t speak to anyone on the phone, as I don’t want my partner or my employees to hear what’s going on?

Helen

Hi Helen

So I went looking in my inbox to see if you’d given me more info, and I saw that you sent your email at 1:08am. I get a lot of questions coming through after midnight when people can’t sleep. I’d like to help you get some sleep again, so here’s what I want you to do.

The Small Business Debt Helpline (sbdh.org.au) has a web chat feature on its homepage where you can chat discreetly with a qualified financial counsellor – someone like me. They are experts in helping small business people in exactly your situation. They are government-funded and free from any conflicts (and they do amazing, life-changing work).

I often say that financial counselling is the best-kept secret of the finance industry. Well, both the Small Business Debt Helpline and the National Debt Helpline (ndh.org.au) have this chat feature. It’s a great first step to help you get the support you need.

Scott.

Your biggest financial worry right now

My long-suffering editor, Wally, loves to joke that you can tell the financial pulse of the nation from a glimpse at my inbox. After all … thousands of people of all ages, from all across the country, write to me about what’s stressing them out.

So, after doing this for almost two decades, I can tell you exactly what worries Australians the most:

Whatever the media is banging on about at that moment.

It’s true. Right now the ‘threat’ of rising interest rates is at fever pitch. It’s been spurred on by some experts predicting that interest rates will hit 3.5% by next year. To put that in context … that would be thirteen additional hikes in almost as many months.

Personally, I find that hard to believe.

However, the surging inflation that is happening around the world will require much higher interest rates going forward … yet I have no idea how high they will go, or when.

My main point is that higher interest rates were entirely predictable — heck, I’ve been talking about them for years! In January 1990 the cash rate was 17.5%, and they limboed it all the way down to 0.1%.

Where did we think they’d go next?!

Now I am not saying that interest rates will get back to 17.5%.

Yet the one takeout from the last few years is that the world is a risky and unpredictable place. Weird stuff happens when you least expect it. Bad stuff happens if you haven’t prepared for it.

So what can you do?

Well, if you’ve been following the Barefoot Steps, the answer is: you’re already doing it! You’re aggressively paying down debt, building up a cash buffer, and investing long term into shares via your low-cost, tax-effective super fund.
In other words, focus on what you can control. More Date Nights, less TV news.

Tread Your Own Path!

Help! The Tax Man is Beating Up My Kid

Hi Scott,

I have a very hardworking 13-year-old who has amassed quite a bit of money: she has saved up $200,000! She would like to purchase a property but as a minor she will have to pay 66% on any income earned from the property. (Clearly she’ll still live at home until she’s old enough!) The goal is to own it outright in a few years and invest in more property, but I’m way out of my depth here. What is the best way for a minor like her to make their money work for them until they turn 18 — in their own name, not mine?

Helen

Hi Helen

Two hundred grand? That’s amazing! You must be very proud (and a fine role model).

You’re right about the penalty rate on kids under the age of 18 – however, this only applies to unearned income, like a bank account, rent or dividends from shares. It does not apply to income from the sweat of their own brow.

I wouldn’t limit your research just to property. It would be a good idea for her to learn about investing in the share market as well. To kick off her portfolio, all you’d need to do is set up an account as trustee for your daughter and purchase a hands-off portfolio of local and international shares. You’ll need to pay tax on the dividends – though franking credits mean it’s not much of an issue. To minimise this, open the account in the lower-earning spouse’s name. Then the shares can be transferred to her when she turns 18.

Finally, I’d give her my book (or audiobook) so she can learn all about investing and how to manage her money, as she seems to have the earning part all worked out!

Scott.

My Son-in-law … Is an Abuser

Hi Scott,

Our daughter has just left an emotionally, verbally and financially abusive relationship. Her husband is busy cashing in their assets and spending or hiding their money. She and the kids were left only in the clothes they were wearing, as he refuses to let her into the house to collect anything. He even took the Christmas gifts the kids had received from family and friends. We have offered her accommodation, but it means leaving the rural area she lives in and she does not want to take the kids away from their dad by moving away. We don’t know what else we can do to support her. We’re worried sick. Any suggestions you could offer would be gratefully received.

Cheryl

Hi Cheryl

I’m so sorry your daughter is in this situation. It must be heartbreaking to watch her and your grandkids go through this.

Let’s call it out:

Your son-in-law is an abuser.

There’s a name for this abuse: it’s called ‘coercive control’, and it’s a crime in other parts of the world (though not yet in Australia).

What would I suggest?

Well, as a first step I’d get your daughter to read the book See What You Made Me Do: Power, Control and Domestic Abuse by Jess Hill. If she’s not much of a reader, it was made into a television show that she can stream on SBS.

It’s a confronting read.

All too often, abused women downplay what’s happening to them. Hopefully your daughter will see her own situation in the book, and it will convince her that she doesn’t need to take his crap. Then she can get the support she needs by calling 1800 RESPECT (1800 737 732). They can help with counselling, accommodation and accessing financial support.

Your daughter is in a better situation than most: she has loving parents who care about her.

Good luck.

Scott.

The Hyperfund

Scott,

Some colleagues at my work are retiring quickly in their thirties and forties after investing money into Hyperverse. They are trying to sign everyone up to it and they are earning anywhere from $150 to $1,500 a day just in the Hyperverse that was originally called the HyperFund. Any help would be muchly appreciated.

Belinda

---

Hi Belinda,

It’s all pretty exciting.

While you’re eating the cake from your co-worker Darren’s retirement send-off, here’s what I’d like you to do:

First, head back to your cubicle.

Then, google “Hyperverse + Hyperfund + Scam”.

Click on the first reputable link, from the Australian Financial Review, entitled: “Collapse of crypto platform a cautionary tale”.

Scan the first paragraph: “Around 200 investors are understood to have lost as much as $10 million in this little corner of the investment world’s Wild West.”

Hmmm, the article talks about the previous business of the Hyperfund founders.

Have another click, this time to an article in the West Australian which talks about their new venture: “The promoters of Hyperfund have created a multi-level marketing scheme that promises big returns … the pitch to investors includes incentives to sign up more people so they can prepare their network for a $300 billion stock market float.”

Holy crypto, Belinda!

On those numbers the Hyperfund could be worth more than BHP and Telstra combined!

My view?

Avoid the hype. If you’re going to get into multi-level marketing, why not just try flogging Amway? That way at least your friends will have bought some laxatives off you, which could help them when the bottom falls out of this investment.

Scott.

Mojo, Baby

Hi Scott

Last Friday night I was driving home with a niggling feeling in my stomach about how I was going to pay our kids’ latest medical bills. You see, they have both been diagnosed with extremely rare cancers and their outpatient scans are not covered by a Medicare subsidy – we pay full price. Then, like a bolt out of the blue, it hit me – we have Mojo!

Many years ago, when I first read your book, I set up an ING Mojo account – and then clean forgot about it! I’ve even been adding $50 a fortnight to it without noticing. Life was easy back then. Fast forward several years and both of our teenagers received dastardly diagnoses, and our business has been slammed first by Covid and now the floods. So my message to readers is that life can turn on a dime. Set yourself up in the good times because the challenges will inevitably arrive. Thanks for your down-to-earth, sensible advice.

Lisa

---

Hi Lisa,

That is every parent’s worst nightmare.

Every so often I have a financial expert suggest that it doesn’t make sense to save money with interest rates being so low. Technically, they’re correct. However, I’ve always viewed savings as a psychological backstop, a safety blanket for times when life comes at you way too fast.

I’m so sorry for your situation, and I hope your kids are okay. Remember, if you need help from a caring financial counsellor you can call the Small Business Debt Helpline on 1800 413 828 or sbdh.org.au.

Scott.

What’s Wrong with My Index Fund?

Hi Barefoot,

I followed all the advice in your book – cleared everything, saved up, paid off my mortgage and invested a lump in a low-cost index fund. And since August 2021 it has gone backwards and I’ve lost $4,000. They are down 2.96%. Is it just my fund or are they all doing badly?

Gutted of Oakleigh

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Hello Gutted of Oakleigh,

Buying an index fund isn’t as simple as grabbing a box of Rice Bubbles.

Let’s think about what’s happened in the last six months since you made your investment:

We’ve had runaway inflation in the US, and in most parts of the world.

We’ve had the threat of rising interest rates in a world awash with debt.

We’ve had the Chinese property market imploding.

We’re still dealing with the pandemic (China is still locking down millions of people).

We’ve had commodity prices surging, and food prices at record highs.

We’ve had ‘once-in-a-century’ floods in NSW and Queensland.

Oh, and then we had the war in Ukraine.

All things considered, I think you’re doing pretty well! I’d suggest you learn to take a longer-term view.

It’s not all snap, crackle and pop, my friend!

Scott.

The luckiest guy around

Today I want to talk to you about a hero of mine.

His name is Steve Edmunson and he’s a famous American fund manager.

He manages the $82 billion Nevada Public Employees Retirement System Fund, which has been in the top 10% of large US super funds over one, three, five, seven and 10 years.

Steve has a unique investing strategy that has allowed him to single-handedly outperform most of the biggest fund managers in the world, who employ an army of analysts.

And today I’m going to share with you his secret.

That’s because last week, on a whim, I googled his funds’ generic help email address and lamely asked if there was a chance I could interview him.

A few hours later I received the following reply:

“Hi Scott,

My calendar is pretty open this week and next. Let me know if you have some times that work

Steve”

No gatekeepers. No personal assistants. Just a dude managing $82 billion with an open calendar.

So I sat down to interview him. My first question was, “What’s your edge?”

“Well, I don’t do a lot”, he deadpans.

He’s not joking.

There are days, months and even years where Steve basically sits on his hands and does nothing.

No frantic buying or selling. Just sitting and holding.

“I think in the world of investing the spotlight goes to the latest hot new strategy, but there isn’t much emphasis on what you don’t do. And if you’ve got a long-term horizon, like we do, the best thing to do … is usually nothing.”

Yet Steve’s real edge comes in the way he thinks about fees:

Every dollar the fund spends is a dollar that can’t go into his retirees’ pockets.

So, when Steve joined the fund 17 years ago, he sacked all the highly paid stock-picking hedge fund managers and replaced them with ultra-low-cost index funds. He has 88% of his portfolio invested in index funds and 12% invested in private equity investments.

“I worked out we couldn’t control the investment returns … but we could control our costs … so we keep ours extremely low. And being a lot cheaper than other funds gives us a big head-start.”

This is important: finance is the only industry in the world where the less you pay, the more you get — and the less you do, the better your returns. (I know it sounds like a Dr Seuss riddle, but Steve’s track record proves it’s true.)

Yet here in Oz that message hasn’t cut through. Australians pay more than $30 billion a year in super fund fees, which, according to CPA Australia, are among the highest in the world.

In contrast, for the past 17 years Steve has worked diligently by himself in a small suburban office, bringing leftovers to work and eating at his desk. He drives a second-hand 2006 Honda and, by his own admission, he and his wife live in a tiny home.

“Enough!” I said. “When you manage $82 billion and you shoot the lights out you’re supposed to be a big swinging d …ude! Has it ever bothered you that you’re stuck with the responsibility for managing billions of dollars, for thousands of people … yet you earn less than a fresh-faced kid straight out of college working at a pension fund?”

“Not at all”, he shot back. “Yes, it’s an enormous responsibility, but it’s that part of the job that makes it so fulfilling. I get to work at a job that helps firefighters, and teachers, and police men and women … good working-class people.

“I’d say I’m the luckiest guy around.”

Tread Your Own Path!