What’s in store for property prices

Let’s take out the crystal ball and see what’s in store for property prices.
 
Nationally, they continue to creep higher – they’re up a very respectable 6.7% this year.
 
Yet it’s also clear that the market is losing steam, especially in the tinsel-towns of Sydney and Melbourne, where there are currently more homes for sale than at any time in the past five years.
 
Why?
 
“Owners struggling with mortgages at the moment are thinking, ‘I’d better get out and take advantage of relatively high prices’,” AMP chief economist Shane Oliver was quoted in the news as saying.
 
I think that makes sense.
 
But hold your handbags!. Another expert, Louis Christopher from SQM Research, predicted this week that prices could boom 10% nationally next year if we get a rate cut (or two) early next year.
 
I also think that makes sense (especially in Perth and Brisbane, where there’s a lack of supply).
 
So the question then becomes: how likely is it that homeowners will get some ‘relief’ from high rates?
 
Well, in January economists were almost unanimous that we’d get a rate cut this year.
 
Didn’t happen.
 
And now they’re equally unanimous that we’ll get rate cuts next year.
 
Tik. Tok.
 
Perhaps that’s why Treasurer Dr Jim Chalmers describes current interest rates as being “stubbornly high”.
 
Interesting. So Jim is suggesting that interest rates are behaving much like my three-year-old does when I won’t buy him a Big M at the local Romsey IGA. He collapses on the floor and starts howling like a wolf, and then goes limp as a jellyfish when I try to pick him up.
 
Now that is stubborn.
 
So, let’s zoom out and take a look at the historical chart.

From this perspective, current rates don’t look ‘stubborn’ – or particularly high –  to me.
 
The truth is that interest rates movements are as unpredictable as my three-year-old. (Just ask the former Reserve Bank Governer Philip Lowe, who famously shanked his ‘lower for longer’ forecast … despite the fact that he was the one who set the rates!).
 
Look, despite the crazy amount of airtime we give economists and experts, history has proven that they’re actually no better at picking the longer-term movements of interest rates than a dart-throwing monkey.
 
So here’s my advice:
 
Don’t be stubborn, and don’t listen to experts (including me!). If you’re making buying or selling decisions, you need to deal with the facts in front of you.
 
And that goes for you too, Jim. I know you’re hanging out for a 10% pop in prices before the election in May, but you can’t count on it!
 
Tread Your Own Path!

Should I Go to Cash?

Hi Scott,
 
Love your emails!
 
I’m sure you'll get a million questions to this effect, but what should we do with our super based on Warren Buffett’s indicator? Do we move our super investments to more conservative options (cash, etc)?
 
Hayley
 
Hi Hayley
 
I can’t tell you what you should do, but I can tell you what I’m doing:
 
Nothing.
 
Here’s the problem with converting to cash ahead of a crash:
 
You have to be right twice.
 
As in, you not only have to pick the right time to sell your shares and move to cash … but you have to pick the right time to buy in again, just before the market recovers.

And, as my wife will tell you, I’m rarely right once … let alone twice!
 
When you look at the long-term track record of the markets, things have turned out exceedingly well if you follow another piece of advice from Buffett:
 
“The trick is, when there is nothing to do, do nothing.”
 
And that’s good enough for me!

-Scott.

Young and Stupid

Hi Scott,

Our Year 12 economics teacher just read out one of your Q&A newsletters in class. An 18-year-old guy had written to you confessing he’d spent $8,000 on a credit card. He said he felt a burden to share it because many Aussie teens fall into the same trap. It dawned on me that I’m now eligible for a credit card too. The $$$ symbols flash before my eyes, just for a moment. It clearly illustrates just how easy it is to fall into stupid mistakes being young, and I really don’t want to be stupid. So I’m simply writing to say thanks. I’ll definitely be getting your book!

Annie
 
Hi Annie
 
You’re right, you can get ahead of most people in life simply by avoiding doing the ‘stupid’ stuff. That’s how people stay in loving relationships, out of jail, away from debt collectors, and with their adult teeth intact.
 
Yet if you really want to thrive, and live an amazing life, you need to go one step further. You need to actively build up the belief that you, Annie, are a really savvy woman with money.
 
How do you do that?
 
You prove it to yourself with the little actions you do, starting today.
 
Yes, you avoid credit cards, but you also open an investing app and start buying index funds. Yes, you avoid Afterpay, but you also set up your buckets and start saving for a house deposit, even if it’s years into the future.
 
I’m a self-serving grubby author, but I’ve always thought my book makes a good graduation present.
  
Good luck!

-Scott.

I Don’t Want to Adult Anymore

Hi Scott,
 
My husband and I are in our twenties. We have just gotten our first mortgage and have had a real shock at how much it costs to be adults, and frankly we don’t like it. After living with my parents for three years, and two kids later, we are finding it tough. Our mortgage is just under 60% of our income, so I don’t know how I can get our expenses to under 60%. We both work full time and our kids are in daycare. My husband is an apprentice plumber and I’m in the public service. He tries to get cash work but it’s hard competition out there. I’m just not sure how we can survive considering we got our mortgage only three months ago so refinancing is not really an option. Any tips?
 
Bindi

Hey Bindi,
 
Yes, being an adult totally sucks.
 
And, just when you think it couldn’t get any suckier, you’ll get hit with your council rates, then house and contents insurance, and the hot water service will go to god … all on the same day.
 
Now I’m assuming you went through the ‘Bank of Mum and Dad’ to help secure the loan, because you wouldn’t have gotten it on your own.
 
In that case, you serve as the ‘after’ mugshot of what happens when you give kid-ults a hand-out disguised as a help-out.
 
You’re reaching for the ripcord three months after you got the loan?!
 
Surely you looked at what your repayments would be before you signed on the dotted line?!
 
Bindi, I’m reaching for a paper bag because I’m hyperventilating at the moment.
 
BREATHE, BAREFOOT!
 
Okay, so my breathing is back under control. Let me put away my paper bag and my passively aggressive double dose of exclamation and question marks and give you some advice.
 
You’re parents now, so it’s time to behave like responsible adults.
 
So I want you to call your bank and tell them you’re in hardship. Show them your budget. They’ll likely allow you to switch to interest only on your home loan – which will reduce your repayments – perhaps until your husband finishes his apprenticeship, and he starts earning some decent coin.
 
Until then, enjoy the baked beans, do your Santa shopping on Gumtree, and sell whatever you can to get at least $2,000 Mojo in the kitty.
 
You will get through this, and it will make you stronger and wiser.
 
Promise.

-Scott.

Haul

When I was a kid we’d drive to the ‘big smoke’ (Mildura) once a year to do our Christmas shopping.
 
For my mum shopping was a social event.
 
She’d meet up with her friends. She’d try things on. And, if the sales assistant did a good job on her, she might even pop it on laybuy (stuff was expensive back then).

And while my mum was having the time of her life, my old man was … standing out the front of the shop. The thought of going into an airconditioned shop for a bit of a ‘looky look’ never crossed his mind. So he either stood in the 40 degree heat reading the newspaper, or made small talk with the other dads that were doing the same thing.
 
Isn’t that outdated with a side serving of sexism?
 
Sure, but that was my childhood.
 
Twenty years later, the internet changed shopping forever.
 
It went from being a real-world social event to a solitary pastime. There is no friction, no waiting, no talking, and an unlimited range of everything. You buy (often with Afterpay), enticed by free shipping, knowing that you can simply send it back if it doesn’t fit. The internet essentially became a giant shopping mall, and there was a sale happening all the time. (Next week: Black Friday … followed by Cyber Monday. Ho, Ho Ho!)
 
Yet in the last few years shopping has gone Tik Tok on us.
 
The fastest growing retailers on the planet right now are Temu and Shein.  
 
Here’s the model: they sell outrageously cheap junk direct from factories in China (essentially they make it on demand) and deliver it to your door in a throwaway plastic bag.
 
And this week Amazon joined the fray by launching their very own copycat service called Haul.
 
“Say hello to crazy low prices: unbelievable finds $20 and under”, the banner says on the Haul app (though Amazon has said that most of their junk – my term – will be priced under $10, and some under $1).
 
And in doing so they have announced a new chapter in retailing:
 
Shopping is now a form of gambling.
 
Yes, gambling.
 
On Temu you can buy three outfits for $20. An entire dinner set for $8. An iPhone charger for $1.25.
 
And when you hit ‘buy’, you’re taking a gamble:
 
You know it’ll likely break, it’ll be dodgy, or the sizing will be way off.
 
Yet if you wear even a couple of items from your haul, that’s a win, right?
 
And because it’s all so incredibly cheap you’re not going to bother sending it back.
 
Anyway, I spent some time on the site, and here’s my shopping review:
 
It’s the shopping equivalent of MAFS.
 
You don’t need anything on this site. You’ll be dumber for buying it. Like MAFS it’s just plastic junk designed to drill your dopamine and leave you unsatisfied.
 
And it’s also terrible for the environment.
 
Here’s the lifecycle:
 
It goes from some factory in China, to your joint, to your cupboard, to your big red bin, and then to the bottom of Sydney Harbour (or wherever those garbo trucks go).
 
Tread Your Own Path!

Social Media is the New Smoking

Scott,
 
Australia made global headlines this week after the Government moved forward with a plan to ban under-16s from accessing social media. I know you’ve been all for this, but, as a mother of three teenagers who are permanently attached to their phones, I wonder how practical it will be in the real world. Would love to hear your thoughts.
 
Zara
 
Hi Zara
 
It sounds like your kids are in the same leaky ship as many others – Mark Zuckerberg’s SS Algorithm – and it has well and truly sailed. And just like the rest of us aboard, they are doing unpaid, stressful, around-the-clock work for a billionaire.
Personally, I think these proposed laws will be about as successful as the age limit for drinking or smoking: the reality is that if kids want to drink or smoke they will. There’s always someone with a fake ID, or a loose parent who’ll buy booze for their underage kids.
 
This is how life happens.
 
Still, I think the Government should be congratulated for kicking big tech in the shins (though I draw the line at their ‘Misinformation and Disinformation Bill’, which seems a little too Orwellian).
 
As they say in the classics, “and so it has begun”:
 
Social media is the new smoking.
 
It’ll take a while to fully catch on, but, make no mistake, that is where we are heading. The problems that social media is causing young people are too big and too important to ignore. Eventually – and hopefully not too many years from now – we’ll collectively turn on them.
 
This is how life happens.

Scott.

HECS Debt is Bad Debt!

Hi Scott,
 
I understand that HECS debts don’t attract a traditional interest rate, but mine goes up like 25% a year, which is way worse. Also, I believe that there was a rule change and HECS debts now no longer die with us, which means our poor kids could be left with nothing.

Sarah
 
Hi Sarah
 
I’m taking it that you didn’t study statistics at uni … your HECS debt has not gone up by 25% in a year!
 
HECS debt is designed to keep up with ‘today’s dollars’ by increasing the debt by whatever the Consumer Price Index (CPI) does each year. No one gave a toss about this until 2023, when a bout of high inflation increased HECS debts by a massive 7.1%.
 
In response to that bill shock, HECS debts will soon be matched to whichever is lower out of the CPI or the Wage Price Index (WPI). And once legislation is passed it will be backdated, which would bring down the 7.1% in 2023 to 3.2%, and the 2024 rate of 4.7% to 4%.
 
The other thing to know is that the wage you need to earn before you start making repayments is increased every year, and there are plans to make the repayments more in line with marginal tax rates.
 
Finally, you do not have to pay off your entire debt when you cark it (and nor do your kids).
 
The executor of your will is required to file all tax returns up to your date of death. If your annual HECS repayment is owing, it’s paid from your estate. Any remaining HECS debt is then written off by the Government.

Scott.

Stoned on Weed Stocks

Hi Scott,
 
Do you know what is happening with the medical cannabis companies? I had shares in AC8 and CGB and both have been delisted. Others are only worth 1/100th what I paid for them! Should I be freaking out?
 
Andrew
 
Hey Andrew,
 
Dude, it sounds like you’ve been well and truly smoked.
 
A few years ago it felt like everyone was getting high on cannabis stocks. I vividly remember a mate of mine – a comedian – trying super-hard to persuade me to have a toke on his favourite pot stock.
 
No joke!
 
Now I don’t doubt for one second that there’s a huge market for medicinal marijuana, as well as for plain old Mary Jane. Case in point: more Americans smoke dope each day than drink alcohol, according to data collected by the National Survey on Drug Use and Health.
 
Still, the reality is that traders blew up the valuations of these start-up businesses way too much. Now the market has come off its high, and there are a lot of marginal businesses that aren’t worth anything like the prices investors paid for them in the boom.
 
Should you be freaking out?
 
I think the time to freak out was a long time ago. I’ll leave the rest to you, Scooby-Doo.

Scott.

Why is the smartest investor in the world ... selling?

Strap yourself in … the Trump trade is on, and everything is going up.
 
The day after Donald won the election, the US stock market surged 1,500 points – the biggest post-election gain in 128 years.
 
Even better, Trump says we should be preparing for a ‘golden age’ of investing returns as he slashes corporate taxes and loosens up those annoying rules and regulations for his billionaire buddies.
 
MAGA!
 
However, there’s another billionaire who’s been doing the exact opposite … he’s been selling down his holdings as share prices climb.
 
Even worse, that billionaire just so happens to be none other than Warren Buffett, the greatest investor in history.
 
What’s going on?
 
Well, Buffett famously doesn’t try to time the market, and he pokes fun at anyone who believes they can. However, he does have a valuation yardstick that lets him know when the market is out of whack.
 
It’s called the ‘Buffett Indicator’, and it takes the total capitalisation of US stocks and divides it by US gross domestic product (GDP). The idea being that if stock prices rise faster than the economy grows then it may be a sign of a bubble.
 
The Buffett Indicator flashes warning signs to investors when it surpasses 100%.
 
As it did at the height of the Dot.Com bubble.
 
… and before the Global Financial Crisis.
 
… and at the beginning of the Covid crash.
 
So where is it sitting today?
 
208%.
 
That’s the highest it’s ever been (“HUGGGE” in Donald Trump language).
 
In other words, the Buffett Indicator is screaming “SELL”.
 
And that’s what Buffett has been doing. He’s been stockpiling record amounts of cash, presumably to allow him to once again be “greedy when other people are fearful” (which is how you become one of the richest people on the planet).
 
Okay, so by now I’ve probably thoroughly confused you.
 
Which billionaire should you believe?
 
Well, I’m inclined to believe both of them … though I think Buffett will win out in the end, if for no other reason than he generally does.
 
Let me be clear: stocks could (and probably will) rise from here.
 
However, in the long run share prices always revert to their long-term averages, which means there’s a possibility that returns over the next 10 years are not as likely to be as good as those of the last decade.
 
Right now, few investors are thinking about what may be lurking around the corner.
 
 Case in point: The share market is not only at record highs, but the latest US Consumer Confidence figures show that investors strongly believe that stocks will continue powering ahead. In fact, investors haven’t been this confident that stocks are a no-brainer since (checks notes) …
 
 … since 1987, when stocks savagely plummeted 25% in a single day.
 
Still, as I said a few weeks ago, history has proven that it doesn’t matter who is in the White House. What matters is that you hold through both the good ride (like today) and the inevitable crash.
 
 Buckle up!
 
 Tread Your Own Path!

The Working Poor

Hi Scott,
 
I'm a single mum of two very active teenagers. I earn a decent full-time wage but I am overwhelmed by debt. Right now, I only have $50 left in my account until the next payday. Their father doesn’t contribute. There isn’t a facet of our lives which is not struggling and scary daily. I’m receiving defaults and letters of demand from debt collectors, and I’m behind on my rent. I’m committed to getting out of this situation and have even started selling items to raise the $2000 for a Mojo account. After escaping an abusive relationship and being homeless, I want more than anything to give my children a stable and worry-free existence. Can you recommend a financial advisor who can help me set up the investment accounts for the kids?
 
Jenny

Jenny
 
There are things your kids need:
 
A loving mum who isn’t totally stressed out and working round the clock. A warm house with food on the table. Eight hours of sleep. Part-time jobs so they can fund their active lifestyles.
 
A stock market trust fund is not one of them.
 
The way you give your kids a stable life is to get stability yourself. Research from Deakin University has found that the financial stress that you’re under feels the same to your brain as physical torture. In other words, you can’t operate like that for too long – it takes a toll on everyone.
 
So I want you to call the National Debt Helpline on 1800 007 007, and talk to a financial counsellor. They’ll sort out who you should pay, and who can bugger the hell off for the time being.
 
Jenny, I want you to know this:
 
 I think you’re doing a great job keeping it all together. All the sacrifices you’re making, and all the hard work you’re doing, isn’t going unnoticed. Your kids are watching and absorbing everything you’re doing for them, even if they don’t tell you today. You’re making a hell of a difference, you just wait and see.

Scott.

Your Password is a Problem

Hi Scott,
 
I found out about this through my work last week and I wish someone had told me sooner. It’s a government website that shows you how long it would take a hacker to crack your passwords. It’s quick and easy to use! www.nsw.gov.au/id-support-nsw/be-prepared/passwords 
 
Karen
 
Hi Karen
 
What a cracker of a tool!
 
Here’s what the site told me about my password:
 
“Warning! It would take about 2 minutes to crack your password”.
 
(Even more worryingly, apparently it has been seen in two data breaches).
 
I love it when the government comes up with something actually useful. Thanks for the tip.

Scott.

Is HECS Still a Good Debt?

Scott,

My son has two degrees but hasn't found work in his field. He is employed full-time but doesn’t earn enough to pay off his $85K HECS debt. It feels like a noose around his neck, and at 33, he’s convinced he’ll never own a home because of it. His self-esteem is plummeting, and as a parent, I’ve decided to pay it off. Schools push kids to go to uni, but now he wishes he had done a trade like his brothers. I just want young people to know—don’t be fooled by “interest-free” HECS. It adds up every year with inflation!

Megs
 
Hi Megs,
 
Well done for being in the financial position to come to your son’s emotional rescue.
Sadly, I think buying a home now depends on the Bank of Mum and Dad. Yet for the kind of people Paul Kelly sings about (‘they got married early, never had no money’), well, I think they’ve really hit the skids.
 
Anyway, do I think HECS is still a good debt?
 
Yes I do.
 
Look, the reason most people choose to go to university is so they can eventually get a well paying job.
 
Sure, it’s not as fair as, say, when Albo went to uni, he got to study being a student politician for free. However there is no interest charged on the loan, no repayment deadline (and it’s written off when you die), and the repayments only increase in line with your income.
 
That being said, you are 100% right: it is yet another piece of lead in the saddlebags of young people trying to buy their first home. Especially since 2022, when the government regulator changed the lending laws to require banks to take into account your HECS debt.
 
Here’s what that looks like:
 
Someone earning $80,000 a year, making HECS repayments of $3,200 a year, will have their borrowing capacity reduced by $32,000, according to Flint Mortgage Group. In other words, your annual HECS repayment reduces the amount a bank will lend you by a factor of ten.
 
(Note: Labor’s latest election vote bribe promises to cut your HECS debt by 20%, So vote one Albo, the battler bought up in housing commission, who now lives in a clifftop mansion, and gets to sit at the pointy end of the Qantas Club).
 
In that regard, it may be worth paying down your HECS depending on how much you need to borrow. However, that being said, that may also mean you need to factor in Lenders Mortgage Insurance (LMI), which insures the bank, not you, and will cost thousands of dollars over the life of your loan.
 
Still, I think the lesson for your son is a simpler one:
 
Don’t spend $85,000 studying two degrees that you can’t find employment for. I mean, what the hell did he study … Middle Eastern pottery?

Scott

What I’m watching

The nightly news is a no go zone in our home.
 
There’s too much blood and guts (and autocue).
 
However, Wednesday was a historic night, so after the kids were in their jim jams, we allowed them (and their teddy bears) to watch a few minutes of the news.
 
Big mistake.
 
The first thing they showed was a highlight reel of the US election campaign.
 
“Dad, why did he get shot?”
 
‘Well … America is a complicated place’.
 
“Do people really eat cats and dogs?”
 
‘No they don’t’.
 
“What is he doing to that microphone?”
 
‘Alright kids, it’s BEDTIME!’
 
Truth-be-told the only news our kids watch is the ABC’s Behind The News (BTN) – a national treasure – and Landline, which gives them an understanding of how the food makes it onto their plate each night.

Yet when I’ve tucked the kids safely in bed, here’s a couple of shows that I’ve been watching lately:
 
Bitconned 
Netflix
 
This documentary follows a 22 year old kid who set up his own crypto coin to get rich quick.
 
The opening line gets to the guts of it:
 
"We lied, we cheated, we made millions of dollars. And now I’m facing over 100 years in prison."
 
There’s a lot of bro-ness: Lambos, drugs, and wads of cash being thrown around. Yet what makes this doco so revolting (and compelling) is that it is not framed as the typical ‘road to redemption’ story, where the lead character works out that stealing hundreds of millions of dollars is bad.

I won’t spoil it for you, but there’s a twist at the very end that will leave you shaking your head.
 
What’s Next? The Future with Bill Gates
Netflix
 
Gates teams up with film maker James Cameron – who created the Terminator – to investigate both the opportunities and threats of Artificial Intelligence (AI).
 
Look, there’s way too much hype and bulldust around AI.
 
And that’s kind of what I liked about Gates’ approach, it’s a nerd’s view of the technology. He explains how it works, with the help of Cameron (who jokes about how writing sci-fi is getting tricky when reality keeps catching up), and none other than the founders of ChatGPT.

This short episode gives you a good overview of where AI is at the moment (the doco was released in late September), and points to where one of the richest men in the world thinks it will head.
 
Oh, and this is just one of five in the series. If you have time you should also watch his episode titled ‘Misinformation’. Bill looks at the spread of false information on the web, and the threat that has to democracy …
 
Tread Your Own Path!

Is My Super Genocidal?

Own up, Barefoot, you support the war machine. I have often wondered why my super investments in a fund like Australian Ethical have not grown as much as others. It’s because people like you (who I respect) tell them to invest in the fund that will make the most money, rather than the fund that will be best for us as people on this planet. Vanguard enables genocide, mate. Find a well-performing alternate super fund that doesn’t decimate entire populations.
 
Sandra
 
Hi Sandra,
 
I presume you are referencing a report from 2017 where activist investors wanted Vanguard (and other index funds) to dump their shares in PetroChina, Asia’s largest oil and gas provider, because of accusations of genocide.
 
Vanguard’s MSCI Index International Shares fund contains 1,439 companies (Apple, Nike, Netflix, etc), yet as of today it does not own shares in PetroChina.But it does raise a good point: an index fund simply owns the largest businesses  – it doesn’t put an ethical lens on them.
 
It’s the investment equivalent of a sausage: when you’re at Bunnings on the weekend you don’t ask if the snags are beef, pork or sawdust, right? (“You get what you get and you don’t get upset”, say my kids, who love a bit of sawdust on a Saturday.)
 
So the solution is ethical investing, right?
Well, that’s like buying an expensive free-range chipotle instead of the humble snag … but you still need to know what goes into it.
 
Case in point:
 
AustralianSuper’s ‘Socially Aware’ investment option was found to have money invested in the coal, oil and gas industries, and to own shares involved in nuclear weapons.
 
Mercer claimed its ethical fund didn’t invest in booze or gambling companies, though it was holding shares in Heineken and Crown Resorts.
 
Thankfully the regulator is trying to enforce the claims made by fund managers: last month Vanguard copped a record multimillion-dollar fine for misleading investors about the green cred of its own ethical funds.
 
Enjoy the sausage sizzle!

Scott.

Have I Been Doing It Wrong All This Time?

Dear Scott, 
 
Years ago I set up the Barefoot Bucket system and found it hugely successful, despite the ups and downs of my income. I religiously put money into my ‘Splurge’ and ‘Smile’ buckets, but I wanted to check with you that I’m using the ‘Fire Extinguisher’ bucket for the right reason – I actually use it to put 20% of my income towards regular bills (insurance, utilities, rates, body corp fees, etc). I suspect that isn’t right  – can you confirm if I’ve been doing it all wrong all this time?
 
Lauren
 
Hi Lauren
 
Yes, I can confirm you’ve been doing it wrong all this time.
 
And your penalty has been … you’ve been ‘hugely successful’ despite a variable income?!
 
That doesn’t seem so bad to me.
 
The idea behind putting 20% of your income into the ‘Fire Extinguisher’ bucket is so you can use it to fight financial fires that keep you up at night.
 
Which (for me) means:

First, direct it to paying off any personal debts (other than HECS-HELP).
 
Then, direct it to saving up a house deposit.
 
Now once you’ve bought your home, you then direct it to building up three months’ living expenses in your Mojo savings (or offset) account.
 
After that, direct it to getting the banker off your back – paying off your home early.
 
Finally, use the Fire Extinguisher to nail your retirement, which you can do with both barrels because, if you’ve followed the steps, you won’t have personal debts or a mortgage repayment!

Scott.

Should I Call Off My Wedding?

Hi Scott,
 
I’m blindsided but I am in love. I’ve just discovered my fiancé has $9,000 of debt he accrued overspending on Afterpay and Uber Eats over a two-year period. He consolidated this debt into a loan (at 17.5% interest!) and I only found out when I opened a piece of mail from a bank neither of us use (or so I thought). I’m not sure what to do. I’m not going ahead with the wedding now, so we’ve likely lost $10,000 in deposits, and we have $14,000 in savings. For context, we live in a three-bedroom townhouse that I own. I don’t know whether to try and make it work or cut my losses and run. Please help!

Renata
 
Hi Renata
 
I know your type.
 
You really value financial security.
 
That’s why you own your home. That’s why you’ve already calculated how much backing out of the wedding will cost you. And it’s also why you’re asking me – a finance dude with no shoes – if you should call off your wedding, rather than, say, a relationship counsellor.
 
However, I don’t know your fiancé’s type … but you love him, so I’m willing to cut him some slack. After all, maybe he racked up the Afterpay and Uber Eats debts wining and dining you?
 
Like you, perhaps he’s also blindsided by love, but he just so happens to be clueless about money (which would make him a card-carrying Aussie).
 
My view?
 
Let’s give love a chance.
 
If you haven’t done it already, I’d sit down and paint him a picture of what your ‘happily ever after’ looks like. Go into all the scary details: a paid-off home, a million-dollar super fund, private schools for the kids.
 
And then smash him with the following line:
 
“I do not want to marry you if we’re not on the same page financially.”
 
Of course, there’s every chance this poor shell-shocked bastard will agree to whatever you say.
 
So, it’s then that I’d bust out my book and ask him to read it. If he takes it on board, sets up the Barefoot Date Nights, and starts aggressively paying down his debts, you’ll know your financial values are aligned.

 But what if he doesn’t do the work? Well, he’s shown you what he values, and you can both move on and find people who are your types.

Scott.

I don’t want this to happen to you

The stock market is flirting with all-time-record highs …
 
… and that’s my cue to cock my leg and pee all over your portfolio.
 
You see, I still have PTSD from the GFC, when retirees would write to me in tears as they watched their super balance crater. They had no idea how much risk they were taking in their super fund ... until it was too late.
 
I don’t want that to happen to you.
 
Here’s the problem: while the best-performing super funds label their default flagship funds as ‘balanced’ options, the reality is that they’re often quite unbalanced. They have a large portion of their funds devoted to shares and other growth investments … which juices their returns and helps them win awards.
 
In other words, if your super fund is consistently one of the top performers, it’s likely they’re taking more risks than the funds they’re competing against.
 
Now, taking on more risk is great for an 18-year-old dish pig with 50 years of work ahead of him, but it’s potentially disastrous for a 63-year-old executive chef who’s about to light the flame on his last flambé.
 
Bottom line: Australia’s biggest super funds use an aggressive ‘one-size-fits-all’ strategy which might not work if you’re nearing retirement.
 
Yet there is an alternative. They’re called ‘target-date funds’ (or ‘lifestyle funds,’ same thing), and they’re becoming more popular, with a large amount of funds offering one.
 
Here’s the gist:
 
You pick a target date fund based on your age, and it automatically adjusts your investments as you approach retirement. So, when you’re younger, it invests heavily into growth investments like shares (because you have plenty of time to ride out the ups and downs). As you age, it gradually shifts you into more conservative stuff, like cash and fixed interest.
These funds are a great hands-off option, especially if they’re built with ultra-low-cost index funds.
 
My advice?
 
Call your super fund and speak to one of their financial advisors (your first appointment should be fee-free and obligation-free). Ask them to review the asset mix you’re invested in, and have them compare it to the asset mix of an index target-date super fund for your age. Then ask them what they’d recommend, and why.
 
Tread Your Own Path!

Cowabunga, Dude

Hi Scott,
 
Over three years ago you answered a question about my daughters following your ‘Jam Jars’ method. Well, I have a family update for you ... we are still going strong with the jars, and both girls have just saved over $100 for their own skateboards. Cowabunga!
 
Jo 

Hi Jo,
 
I love these photos – you can tell how proud they are of what they’re achieved.
 
Here’s the other thing you’ll notice: they’ll look after those skateboards a lot better than they would if Santa had pulled them out of his sack.
 
You’re building strong, capable women right there.

Scott.

Unplug Social Media

Hi Scott,

I live in constant fear that my 13-year-old son is being exposed to bad things on his phone. Last semester one of his friends was dacked at school and someone took a photo, and it worked its way around the school. He’s having severe mental health problems as a result, and the police have been contacted because the photo could end up in the wrong hands. I’m trying to teach him the dangers of social media, but I feel like a hypocrite as I’m constantly glued to my mobile phone, setting a very bad example for him. I really hate myself.
 
Leonie
 
Hey Leonie
 
You’re not alone. Everyone is dealing with this. Earlier this year I wrote about Wayne, who tragically lost his son Mac to a scumbag extorter on social media. It was the saddest column I’ve ever written.
 
To mark the first anniversary of Mac’s passing, Wayne has created a grassroots campaign that he’s calling Unplug24. On the 24th of October (this coming Thursday), he’s encouraging people to disconnect from their social media for 24 hours to raise awareness of the harm social media can cause.

So, will staying off social media for 24 hours change anything?
 
Well, that depends on you.
 
Personally, I unplugged from social media a few years ago – fully intending to get back into it (after all, I was told that to be successful I needed to be posting multiple times a day). However, I forgot to plug back in: I liked the freedom so much that I never went back.
 
And you know what?
 
I can tell you that I am genuinely happier for it … and so are my kids.

Scott.

The Guilty Golden Girl

Hi Barefoot,
 
I’m torn. My mum has been recently diagnosed with pancreatic cancer at age 66. She would like to set up a share portfolio for my four-month-old baby girl (her only grandchild). This is incredibly thoughtful. I’d like to accept wholeheartedly, but I know I’ll have to keep the account in my name and manage it for at least 21 years, and deal with the tax implications. What steps should I take to honour Mum’s wishes and set my daughter up while minimising my own personal admin and guilt?
 
Louise
 
Hi Louise
 
I’m sorry to hear about your mum.
 
But what she’s about to do for your daughter is going to create a lasting legacy for her.

I suggest your mum look into opening what’s known as a ‘children’s investment bond’:
 
The investment bond can be kicked off with a thousand bucks. Once she’s opened the bond, she can choose to invest the balance into low-cost local and international index share funds – and then let compound interest do its thing! Finally, your mum can nominate the age your daughter can get the goodies (say, on her 25th birthday).

Now, in terms of minimising your admin, investment bonds don’t require an annual tax return – even when they’re eventually transferred to your daughter – so there’s very little admin required. As for your guilt, I’d tell your mum that as the years pass you’ll encourage your daughter to add to her portfolio by doing jobs and perhaps even setting up her very own Barefoot Business.

Scott.