Dr Phil, Where Are You?

Hi Scott,

I am 27 and newly married. My husband earns over double what I do, and he does not like the idea of combining our finances. Instead, things are split down the middle, though he saves over twice the amount I am able to. Is there a way to start broaching the Barefoot ideals without having huge arguments? I am really unsettled by it.

Emma

Hi Emma,

I actually read your question out to Liz ... and she shut me down as only a wife could: “Honey, you’re not Dr Phil ... just stick to the finance.”

Bam! That’s why I love my wife -- she gives me brutally honest feedback, and most of the time I don’t even have to ask for it!

Still, I’m going to sidestep her sledge and answer your question. Reason being, I’ve had thousands of conversations with couples, and the number one predictor of staying together is whether or not they share their finances. (Okay, so another predictor would be if hubby is shagging his secretary, or if wifey is an ice addict … but you get my drift.)

It makes sense when you think about it: How do you think his plan is going to work when you leave work to raise kids? Seriously, how can you plan a life together if you don’t share your money?

Here’s what I’ve worked out: the person who doesn’t want to share has control issues (that would be your husband) -- and the other eventually learns to adapt. A study released this week by Finder.com.au found that nearly one in three Aussies keeps at least some of their spending a secret from their partner.

No winners there.

So, what should you do?

I’d suggest you have your husband read my book, The Barefoot Investor: The Only Money Guide You’ll Ever Need.

Yes, that’s a blatant plug, but there’s a good reason: I’ve structured the steps around having Barefoot Date Nights where you work on your finances as a team (with wine and garlic bread in your hand).

And if he refuses?

Well, far be it for me to play Dr Phil, but I’d suggest you take a leaf out of my wife’s book, and tell it to him straight.

Good luck.

Scott

Death, Taxes … and HECS

Hey Scott,

In your book you mentioned that HECS debt dies with you. My wife passed away in 2011 -- and the $15,000 she owed rocked up bang on settlement of her estate. So I paid it, on advice from my lawyer. Is there any way to get this back if I paid it unnecessarily?

Harry

Hi Harry,

The executor of your wife’s estate was legally required to lodge a tax return up to the date of her death, which would have included the compulsory HECS-HELP debt repayments up to that date. The balance of her HECS-HELP debt would then have officially been written off by a (weeping) ScoMo.

So if your lawyer instructed you to pay off the entire debt, you got the wrong advice. I’d be calling the lawyer up and explaining the situation, and asking them to lodge an objection with the Tax Office so you can have the funds returned. And I’d expect the lawyer to do it gratis.

Scott

We’re in a Pickle

Hi Scott,

My boyfriend bought a one-bedroom apartment in Brisbane’s inner city three years ago for $404,000. We are in desperate need of more space and would like to sell, but a recent valuation has put it at $320,000. With $350,000 still owing on the mortgage and only $20,000 in savings, this puts us in a pickle. Renting the place out will not cover the mortgage, and by the look of Brisbane’s property market the value may continue to decrease. What is the best way to deal with this situation?

Anita

Hi Anita,

The way you’ve written your question tells me you want to sell: you’re ‘desperate’ for more space, renting the place isn’t an option, and you’re worried the apartment will drop further in price. All of these things may well be true, and if they are, you should save up the shortfall and sell. However, it was only three years ago that your boyfriend bought this joint. So before you crystalise the significant loss, I’d want to understand why he bought it in the first place. What was his plan at the time?

Scott

The Secret Credit Card

Dear Scott,

I am at my wits’ end. My husband is a spender who leaves me to pay all the bills, including a car loans of $17,000, a mortgage of $239,000, and an ever-spiralling credit card debt -- currently $38,000. Actually that’s not quite right. I have just discovered he has another credit card on which he owes $20,000! Of course I asked him how we can possibly pay this back, but I still have not heard an answer.

Nikki

Hi Nikki,

He’s cheating on you.

Financially, he’s cheating on you.

You haven’t given me enough information on your financial situation, but experience tells me he’s addicted to something -- most likely gambling.

So, I want you to do three things:

First, go to the bank, and put a stop on all the credit cards (ask him if there are any others), and request detailed account statements.

Second, sit down with your husband. Don’t bother asking him how he’s going to pay the money back -- he has no freaking idea -- if he did, he wouldn’t have racked up a $58,000 debt in the first place. Instead, just go through the statements, and work out where he’s spending the money, and why.

Finally, and based on how the chat goes, you should book in to see either a gambling counsellor (1800 858 858) or a financial counsellor (1800 007 007), and definitely a relationship counsellor (1300 364 277).

Scott

A Woman Is Not a Financial Plan

Dear Scott,

I am 22 and have independently bought my home ($207,000 owing), have $5,000 in Mojo, have $7,000 in other savings, and have no debt besides HECS and the mortgage. My (fairly new) boyfriend earns $53,000 and has a car loan of $25,000 and few savings. He is kind and generous but a spender, whereas I am a saver. As the relationship gets more serious, how can I protect my assets and encourage him to develop healthier financial habits? To reverse your saying, a woman is not a financial plan!

Natalie

Hi Natalie,

If you end up shacking up with him, you could protect yourself by having him sign a cohabitation agreement. Though that would be kind of weird -- don’t you think?

It’s a bit like buying a dog that you’re secretly worried will one day go feral and bite your hand off.

Better to just not sleep with dogs.

Still, let’s give the bloke a break. He could just be young, dumb, and full of credit. He wouldn’t be the first fella to fall into the trap of trying to impress a young filly by flashing his (borrowed) cash.

So, explain to him that this approach may work with girls -- but it doesn’t wash with a confident woman like you. If he really wants to impress you, tell him he can start by becoming debt free. And if it works out you can’t teach an old dog new tricks, drop him off at the pound.

Now, if you’ve got to the bottom of my answer, and you’re thinking to yourself, ‘you’re being a bit of a hard arse Barefoot’, read the next question.

Scott

No Such Thing as a Silly Question

Hi Scott,

I am loving your book and have one (probably silly) question. My husband and I, both 40, are tackling a $45,000 credit card debt on $70,000 a year combined income. Most of it is business credit card expenses -- his small business has had a very quiet start to the year. Do we redraw this amount from our mortgage (we have $300,000 in equity), pay off the credit card and start again, or keep chipping away?

Kelly

Hi Kelly,

Yes, you can refinance the debt onto your mortgage to get a lower rate.But there are a few things to remember:

First, it’s no magic wand. You’re eating into your family home, and there are only so many times you can do this.

Second, you’re turning a short-term debt into a long-term debt.

Third, you’re putting a bandaid on a deep gushing wound.

The wound was caused by your husband’s flailing business. Paper-shuffling your debts doesn’t mean it won’t happen again. So I’d sit down with your husband and have what comedian Tom Gleeson calls a ‘hard chat’. If the business doesn’t improve by Christmas, it’s time for hubby to get a job.

Scott

I'm in Love

Scott,

I’m in love! I met a guy six months ago, and he’s now moving into my house and wants to put his income into paying down my mortgage while we use my income to live on. I am on $105,000 and he is on a $90,000 base (more with overtime). He has no debt, while I owe $330,000 on my home, $250,000 on an investment property (barely breaking even), and $20,000 on my credit card (from a holiday). We are going to get married eventually, but the plan is to live together and pay down my mortgage for a couple of years until we need more space for kids. The trouble is, I do not want him taking on my debt. So should I sell and start again together?

Melanie

Hi Melanie,

“I feel it in my fingers, I feel it in my toes, when love is all around me” …… you’ll probably make dumb money decisions.

Seriously, I’ve had little lambs last longer than you’ve known this bloke. (And you know what eventually happens to them, don’t you?)

A few things:

First, keep everything separate until he puts a ring on it. If you want to live in sin (as my grandmother calls it), charge him rent, and pay that straight off your mortgage. Easy.

Second, get rid of the credit card debt pronto. (Seriously? On a holiday? WTF?). Do the sums on your investment property and then ask yourself the ultimate question: would I buy this property again today? If not, get rid of it.

Now’s the time to get on top of your debts. But don’t do it for him. Do it for you. Repeat after me: “This man isn’t my financial plan.”

Finally, it sounds like you’ve fallen hard for this bloke. The best way to see if he’s as committed to your future as you are (other than checking his phone) is to sit back and watch what he does over the next 12 months. If he’s serious he’ll be working and saving like a man possessed. “Come on and let it show!”

Scott

Paid Off the House … What Next?

Hi Scott,

My partner and I both turn 32 this year, and by January 2018 we will have our home paid off in full, all on a combined $150,000 a year. We are already thinking ‘what next?’ and would appreciate your advice. We think we will both put an extra 10 per cent of our wages into super, build up our Mojo, and save for an overseas trip. We are also considering buying an investment property or getting into the share market. And one more thing: we intend to start a family in the next year or two. Where is the best place to put our money?

Ella

Hi Ella,

O.M.G.

You paid off your home in your early 30s?

If you were standing in front of me, I’d give you both a big bear hug. Better yet, let your family and friends give you one -- plan one hell of a par-tay for January 2018! Seriously, paying off your home is one of life’s great achievements. Celebrate it.

(For anyone keeping score at home, you’ll notice that Ella gave the month she would be debt free. She’s focused on her numbers. This didn’t happen by accident.)

Okay, so what should you do now?

Well, first, avoid the Instagram-envy of thinking you have to trade up to a more expensive home. The ultimate status symbol isn’t a flashy home or car -- it’s having the freedom to travel and spend quality time with your kids (when you have them!).

Being debt-free at such a young age, you can’t help but become incredibly wealthy. I’d suggest you go through the Barefoot Steps: boost your pre-tax super contributions, and build up your Mojo to cover three months of expenses (which will be much less without a mortgage). Then, I’d look at setting up a family trust and investing in low-cost share funds (consider buying an investment property when the market crashes). If you’re able to invest just $30,000 a year, you’ll be looking at a nest-egg worth over $5 million by the time you retire.

Scott

The Gambler

Hi Scott,

My situation is complicated and I need your advice. I am in my early 40s and have been with my fiancé for seven years. We do not live together but have bought a block of land (in his name) and are building a house (in his name), and will move into this house together. I have contributed money to this, but my issue is that he has a gambling addiction that he is in denial about, and he lies and deceives me. He believes that it is his money and that I should not say anything. I am fearful I will lose everything.

Hayley

Hi Hayley,

Yes, your situation is complicated, but it has a simple -- though brutal -- answer: don’t marry an addicted gambler.

Your fiancé has a long road ahead of him, but he hasn’t even taken the first step -- admitting his problem. The alarm bells should be ringing in your head: he deceives you, and he believes your money is his, and you have no say over anything. It’s highly likely he’ll gamble the lot.

If I were in your shoes I’d do three things. First, lovingly and supportively explain to your fiancé that he needs to get help with his addiction -- or you’re leaving. Second, sit down with a financial counsellor (1800 007 007) and get their help in removing your name from any joint accounts you may have with him. Third, talk to a solicitor and see if there’s an option for getting a financial settlement … before he blows the lot.

Scott

Our Friends Almost Ruined Us

Hi Scott,

My husband and I lost $300,000+ in the GFC -- bad property, tax schemes (‘woodlots’), loans for shares, etc, all sold by a dodgy financial adviser and all of which collapsed! We have slowly shed the debts. We now follow Barefoot, are ‘hosing down’ our home loan ($185,000), have $65,000 invested, are building up our Mojo account, and have started giving Kiva loans. Despite all this, I cannot shed the resentment I have for our friends who promoted the financial adviser to us. In your experience, do people like us eventually forgive themselves for listening to bad advice?

May

Hi May,

You’ve managed to pull yourself out of a financial hole; now you need to let it go emotionally, for a few reasons:

First, the money ain’t coming back.

Second, it’s not your friends’ fault. Truth is, most people have no idea how to judge a financial planner: Did he have a nice smile? Nice suit? Salon-styled hair? More likely, he made your friends some money (well, before the GFC hit) and they were just trying to help you do the same.

Third, if you’re going to get angry at anyone, direct it at the financial advisor, not your friends. He was the one who broke your trust and did the wrong thing by you.

You know what? It’s highly likely your friends lost a lot of dough with this douchebag too. Why not have a chat to them and explain what you went through -- and how you pulled yourself back up again. Just sharing that story with them will make you feel better. Promise.

Scott

Worried Grandad

Hi Scott,

My granddaughter’s father (my son-in-law) died when she was 10 years old, and left her a legacy. She is now 19 and has a share portfolio worth $105,000 earning (around $7,000 fully franked) and cash investments of $30,000. She attends uni and has part-time work earning $20,000 p.a. All good. But for the past year she has been seeing a boy who only works part time and lives with his mother. I think they may be planning to move in together. How can she protect her assets if this relationship fails?

Doug

G’day Doug,

You could encourage them both to sign a cohabitation agreement, which is a legal document between a couple who choose to live together. Honestly, though, it’s not ironclad and it doesn’t necessarily stop things from getting messy if he’s got dollar signs in his eyes. You could choose to transfer the shares into a trust, or invest via an investment bond for another layer of asset protection, though you’d need to consider the capital gains tax implications of doing so.

For my money, the best way to protect your granddaughter is to explain, in as many ways as you can, what the money represents, namely her father’s dying wish that his daughter be financially secure. It’s her job (with your loving guidance) to honour him, and the way to do that is by learning to become a good money manager. She may need to hear it 30 times before it really sinks in: it’s not just shares and cash in a bank, it’s a bond she shares with her father. No one else.

Scott

My Fiancé Had a Surprise For Me ...

Hi Scott,

First-time caller, long-time listener. In May I was all set to be married to what I thought was a lovely gentleman. I always had a sneaking suspicion that he carried a reasonable amount of debt (due to his lavish spending), but I finally pried it out of him: he owes $107,000 on credit cards! What should he do? What should I do? Can a leopard change their financial spots? I am 39 and was hoping to have a child ASAP!

Mandy

Hi Mandy,

Greetings, and welcome to the Jerry Springer section of my weekly Q&As. Actually, my first thought when I read your question was that you may have been a contestant on Married at First Sight. And I had the same reaction that my wife has when she watches that show (mumbling and shaking the head). Anyway, thank god you found this out before walking down the aisle. Your discovery is a game-changer, for a few reasons:

First, because there’s something off about a bloke who only admits to his fiancé that he’s got $107,000 in credit card debt when he’s pushed. That’s not normal. What other questions should you be pressing him on?

Second, because you’re planning on having children with this guy, so you need him to be a good provider. That’s not being sexist, it’s being a realist. You’re probably going to take time out of the workforce to raise children, so you need to be able to rely on him to provide. Unless he’s earning very good dough, he won’t be able to.

Finally, because he’s a financial loser. That’s not very nice to say, and very judgemental. However, there are two instances when you’re allowed to be judgemental: when you’re watching reality TV, and when you’re choosing a life partner.

Scott

Barefoot, should I call off my wedding?

My column last week -- why engagement rings are a scam (and why you’ll buy one anyway) -- went off like a drunk uncle on the dance floor. I was flooded with emails.

Perhaps it’s because we’re in the peak season for weddings.

Or maybe it’s because it coincided with the finale of The Bachelor, where Richie chose his winning woman. Richie gave us a candid insight into the depths of his love and devotion when he confessed to the media:

“I had the biggest blue balls in Australia.”

What a man! What a catch!Now my older readers may not know who Richie is or, for that matter, what "blue balls" are.

Try googling it.

On second thought, don’t do that. Seriously. You really don’t want to do that.

Instead, let’s shift our attention from contrived reality television to three real wedding emails I received this week -- enough to make the Bachelor look blue.

Should I Call Off My Wedding?

Dear Scott,

I am 28 and getting married in two weeks. I am having doubts about going through with it for many reasons, most of them financial, which is why I am writing to you.

My fiancé is a real estate agent and owns his own agency, which is set up in a trust. There have been instances where employees haven’t been paid. He’s a big talker, which doesn’t go down well with my father, or my brothers, all of whom are tradies.

We bought a home for $1.2 million two years ago, but he borrowed the money, not me. So is the house debt mine as well? He also took out a credit card in my name, without my approval. And there are lease payments on his Mercedes-Benz (I drive a Kia -- but again, do I have to pay?). Please help me! Please don’t publish this!

Lisa*

(*name changed)

Yes, this is a real question … and yes, she didn’t want it published.

So I called her.

Barefoot: “Hi Lisa. Now I’m no Dr Phil, but when a bride-to-be is two weeks out from her wedding and she’s more concerned with her financial exposure than her flower arrangements … well, I think that’s telling.”

Lisa: “Do you think so?”

Barefoot: “Yes, I do think so.”

Lisa: “It’s just that we’ve already paid for everything ... and we won’t get our money back … and everyone’s RSVP’d … and it’s in two weeks!”

Barefoot: “You’re thinking about the next fortnight -- I’m thinking about the next forty years.”

Lisa: “I feel sick.”Barefoot: “This could be the luckiest day of your life.”

Postscript: On Wednesday morning this week I received the following text message from Lisa:

“Thank you for taking the time to call. I really needed to hear your advice. Wedding has been called off. Surprisingly, he took it well! Everyone has been supportive of my decision. Feel free to publish. It could give other people hope if they’re in the same situation!”

One wedding down, let’s go to the next email.

Who Keeps the $11,000 Engagement Ring?

Barefoot,

I just read your article on engagement rings being a rip-off. It was very timely because I certainly got ripped off. I proposed to my girlfriend of three years last November with a 1.2 carat ring which cost $11k. She said yes. Her phone went off one night when she was asleep and, long story short, she’d been banging another bloke! I called off the engagement, but get this, she won’t give me back the ring. Won’t even talk to me. I want the ring back. What can I do?

Ben*

Hi Ben,

Trust me, you don’t want the ring back.

What would you do with it? Give it to your next flame?

As I said last week, the truth is that buying an engagement ring is like buying a new car: the moment you walk out of the showroom, the price drops by 30–50%.

Now, given you were in a de facto relationship for at least two years, the ring will form part of the property division that you may want to pursue legally. The only problem with ‘lawyering up’ is that you could be throwing good money after bad (and money spent on lawyers in a relationship breakdown is almost always classified as ‘bad money’).

Instead, look on the bright side: she cost you only $11,000 (she’ll cost some other dude a lot more than that). You got off lightly. Good on you.(P.S. Tell her it was a cubic zirconia.)

Marriage, Mortgage, Midgets

Hi Scott,

Love reading your column each week! My fiancee is pregnant and we have a wedding coming up, all booked in. We then have less than five months to the birth of our child, plus a large mortgage that we cannot afford on only one income. Is my bank required to freeze my repayments while my fiancee is on maternity leave? I will be asking them either way, but please set my mind at ease. It is almost worth having her fired otherwise!

Terry*

Terry, Terry, Terry.

You really haven’t thought this through, have you, cobber!

What you’re referring to is applying for a ‘hardship variation’ on your home loan. You have the right to apply for a variation, and the bank is legally required to consider your application -- but they don’t have to agree to it.

Even if they do agree to temporarily freeze or reduce your repayments, they’ll get their pound of flesh by extending the loan and adding the interest on the end. It’ll cost you more in the long run. It’s like Usain Bolt sawing off one of his legs so he can compete at the Paralympics. Sure, it’s an option, but what’s the long-term cost?

Relationships Australia says that 80 per cent of relationships that break down do so because of money problems -- and you have more money problems than most. So look at the next five months as your Marriage Olympics: the two of you need to work out a realistic five-year plan. It’ll involve making tough decisions -- the first of which is to cancel your honeymoon. Sing it with me, Terry: “The honeymoon is over, baby, it’s never going to be that way … again.”

There’s No Need for Blue Balls (or Bank Accounts)

Don’t hold out like old Richie. If you’ve got a prolonged state of … monetary tension ... let it out by heading over to AskBarefoot and hit me with your best shot.

Tread Your Own Path!

The dirtiest, slimiest, most heartbreaking scam of them all.

This week, it’s National Consumer Fraud Week.

And today I’m going to talk to you about the dirtiest, slimiest, most heartbreaking scam of them all.

(No, it’s not the Nant Distillery in Tasmania -- although I’ve got my eye on you guys.)

What makes this scam so shocking is that it’s an ‘inside job’. And it happens every single day.

Here’s a real-world example, courtesy of a woman who rang my radio show a few years back:

Woman: “A year ago my mum had to go into a nursing home because she has dementia. She has almost $115k in savings which she no longer has any use for, and I have a son who has just been accepted into acting school in New York.

My siblings and I are wondering what the cost implications would be if we take the money out now and divide it between the family.

Will we pay more tax doing it that way?”

Barefoot: “Can’t you wait until the poor woman dies?”

Woman: “Sorry?”

Barefoot: “You are stealing her money.”

Woman: “No, I’m calling because I want to know about the tax implications of…”

Barefoot: “No, you are stealing her money.”

Woman: “She doesn’t need it.”

Barefoot: “Who says?”

Woman: “I do!”(And with that the woman hung up on me.)

The Worst Scam in the World

Clearly, this woman didn’t feel that she was doing anything wrong.In her mind, she and her siblings were going to get the money eventually … why not just speed it up?

This is known in the industry as ‘inheritance impatience’.

Though I prefer to call it ‘Granny Greed’ (or Grandpa Greed).

“It’s pretty consistent,” says Greg Mahney, the CEO of  Advocare.“Research shows that about 1 in 20 will experience some form of elder abuse, and the most common is financial abuse.”

Though no one really knows the true figure of course.

After all, what parent wants to admit their family are ripping them off?

And sadly, it mostly is family that do the damage: the latest research from Advocare suggests that 89 per cent of perpetrators are family members.

We’re not talking peanuts either. In the 2013-14 financial year, the Elder Abuse Prevention Unit in Queensland uncovered 139 older people who were ripped off to the tune of $56.7 million in total. And that’s just in one state.

Statistics are one thing, but let’s look at three real-life case studies, given to me by Advocare:

Case Study 1:  Down in the Dumpster

An elderly woman lived in a nursing home while her son took care of her home. He got her to sign some paperwork for bills relating to the house, which she did without checking. An aged care advocate drove past her home later that day and saw that her possessions were being thrown into a skip, and a ‘for sale’ sign was placed on her home. He’d had her sign an authority to sell.

Case Study 2: Granny Falls Flat

An elderly woman sold her house and gave the proceeds to her daughter and son-in-law, so they could build a granny flat onto their home, where she could live for the rest of her life. A few years later, the couple divorced and the family home was sold in the separation of assets. It severely limited her aged care options.

Case Study 3: The One-armed Bandit

A frail elderly man living in a retirement home gave his daughter his ATM card to get some basics from the shops. An aged care advocate checked their bank account and found thousands of dollars of unauthorised transactions -- from pokie venues.

Here’s the thing: most of the kids get away with it.

Why?

First, it’s the circle of life (as Elton John sang). Elderly parents often rely on their kids to dish out their pills, feed them, clothe them and drive them around. They rely on them.

Second, they’re coming to the end of their lives and don’t want to harbour a grudge.

Third, there’s the grandkids.

Heavy, huh?

Well, mark my words, this is going to become a much bigger problem, for a few reasons.

The property boom has many oldies living in million-dollar homes while their kids and grandkids struggle under the weight of massive mortgages. Rising superannuation has meant that we’re creating the wealthiest generation to ever retire. And then there’s another boom: it’s predicted that by 2050 in Australia people aged 65 and over will double, and dementia will triple.

So what can you do to protect your ageing loved ones?

Well, on a practical level, you need to ensure that your entire family are on the same page, and that they respect your parents’ wishes -- even if they don’t agree with them.And make sure that  everything is documented with an independent legal expert -- keeping a close eye for the idiot brother-in-law who’s always scratching around with a sob story looking for a ‘loan’.

The other thing to do is appoint two enduring powers of attorney:

One from the family and one from outside the family (preferably a trusted friend or even a lawyer) who doesn’t have dibs on Aunt Mavis’s BHP shares in the will. If they’re appointed jointly, it means they’ll have to make their decisions jointly.

And hopefully they’ll act in the best interest of the person who matters most.

Tread Your Own Path!