Five Questions You Need to Ask Before You Give Your Boss the Bird

Have you ever thought about flipping your boss the bird, and doing your own thing?

I’m sure you have.A survey released last week by the NAB found that one in three Aussies want to be their own boss.

The urge to bird is even stronger for young people -- one in two want to run their own show.

So let’s get one thing clear: owning your own business is the most reliable way to get seriously rich.

Yet it’s not all sunshine and cupcakes.

Like you, I’ve read the motivational stories of entrepreneurs who say relatable things like “I’m just a normal girl who sort of just stumbled onto this million-dollar business”.

Unlike you, I get to meet many of these entrepreneurs. Most of them are a little cray-cray. They are not normal. The people who make it to the top of their field in business are, in most cases, total workaholics, completely ruthless, and quite often a little unhinged.

(Guilty, as charged.)

It makes sense. After all, we’re talking about people who are willing to throw in a dependable wage, with entitlements like sick leave, holiday pay, superannuation and normal work hours, to back themselves against against better funded, more experienced competitors.

Okay, maybe you’re not setting out to be the next Richard Branson, but regardless, it’s a huge life-changing decision. So here are six questions to ask yourself before you flip the bird:

Question 1: Have you spent 20 hours a week on your start-up, while holding down your full-time job?

That’s the first question I ask people who tell me they want to quit their job to start their own business.

You’ll clock up 60 hours a week in a start-up … and that’s in a slow week. If you’re not already devoting 20 hours a week to your start-up, there’s a good chance what you’re really doing is running away from a job you don’t like.

You can do both for at least 12 months. If you can’t, you’re probably not cut out for business.I call this the ‘Trapeze Strategy’: don’t let go of the bar (your secure paycheque) until you’re safely holding the next one (your successful business).

If you start your business off part time, you may work out that full-time business in not for you -- but what you’ve got is a great part-time gig that can turbocharge your mortgage or build a huge investment portfolio. What’s so bad about that?

Question 2: Where are your customers?

That’s the second question I ask people.

Most of the time they come back with the three F’s: ‘friends’, ‘family’ or ‘Facebook’ (as in, ‘my friend says they’ll be my first client’ or ‘I’ll spread the word on Facebook’).

That’s not a strategy, it’s a plan for the weekend.

You need to know how much your best competitor has to lay out to attract a customer, and then work out how much profit they make on each sale.

The bottom line is that it’s not enough to be a good programmer or a good jewellery-maker -- you have to enjoy making sales and must be prepared to devote at least 50 percent of your time to doing it.

Question 3: Are you planning on getting into bed with anyone?

That’s the third question I ask, and there’s only one correct answer.

The answer is ‘no’.

I can count on one hand the truly successful business partnerships that have lasted decades, while the vast majority end bitterly. It’s like a marriage, only with money and no sex.

If there’s someone you want to get into business with, by all means sit down and create a sweetheart deal commission structure for them, but you want to own 100 percent of a business or zero. Trust me on this.

Question 4: Are you ploughing your life savings into the business?

Again, there’s only one correct answer.

Again, that answer is ‘no’.

(I’m not classifying a franchise as a business -- in most cases you’re basically buying yourself a 100-hour a week job. The real business is in selling the franchises, and it can be very, very lucrative.)

Small businesses are risky, and most of them fail.

Yet the good news is that you don’t have to stump up large sums. Case in point: half the small businesses from the NAB survey were started with less than $5,000.

Question 5: Does your family support you?

This question trumps the lot of them, because it will have a huge impact on those you love.

When I first met my wife (who, unlike me, wasn’t brought up in a small business family), I explained that owning a business is a lot like having a kid. The first year is like a bombshell -- you suffer sleep deprivation and total exhaustion. It gets a little more manageable over the first five years, but it’s still a slog. And, just like a parent, you’re never totally free from worry.

That being said, it’s the best thing I’ve ever done and, family aside, it’s my proudest accomplishment. I can work from anywhere in the world, see my kids grow up, and be 100 percent in charge of my time, and my income.

So if you’re thinking about starting a business, look at it this way:

The easiest way to make money quickly -- as in next week -- is to freelance. Even better, freelancing cuts through the bulldust and allows you to road-test your ideas, your pricing strategy and your skills … all without leaving the security of your day job.

In other words, start swinging on the trapeze!

Tread Your Own Path!

The Real Estate Mistakes Most First Home Buyers Are Making

“Aussie Dream is Dying” read a newspaper headline earlier in the week.

I happened to be reading the article as I was waiting for a coffee. So I turned to my hipster barista -- who was all beardy and tattooed and David Beckham-like -- and read him the following sentence:

“The Australian dream of homeownership will reach a tipping point, possibly as soon as next year, when fewer than half of all adults are expected to own a property.”

Barista: “Bang on, brother! Why would I bother spending my twenties saving for a deposit … it’s hopeless prices just keep going up. And what do you have to show for it -- nothing!”

Barefoot: “Well, nothing but … EIGHTY THOUSAND BUCKS.”

By my reckoning he’d put precisely as much thought into getting his neck tattoo as he had his long-term financial security. He’s not unique. After being Barefoot for 15-odd years, I’ve spoken to literally thousands of young people about making the biggest purchase of their lives -- here are the five biggest mistakes they make.

Mistake #1: They’ve given up

Ever wondered why news websites publish so many stories about an impending housing crash?

Because it’s clickbait to a generation that’s priced out of the market and have given up -- thinking their only hope for buying is a crash.

That’s a cop-out.You can’t plan your life around something you have no control over -- the only thing you can control is yourself, and your savings situation. The time to start preparing to seize opportunity is right now.

Brass tacks?The average full-time pre-tax wage in Australia is $75,000, or $4,800 a month in the hand. So, a couple both earning full-time wages could live off one income (very frugally) and save a $100,000 deposit in 21 months.

Still, your mind should be set on owning your home outright, rather than just limping over the line with a deposit. Think of it this way: saving a deposit is like the Socceroos beating Togo to qualify for the World Cup. It’s the beginning of the campaign, not the end.

Which leads me to the second mistake first homebuyers make.

Mistake #2: They buy a home when they can’t afford it

They mortgage themselves to the hilt.

There’s a reason Australia has the highest household debts on the planet: we borrow too much.

One rule that I’ve lived by, is to borrow less than the bank is willing to lend.

What comes after a bird makes its nest?

Babies … and Baby Bunting bills. And sleep deprivation. And, later, school fees.Professor Bob Cummins from Deakin University has found that financial stress has similar effects on the body as physical torture.

Is it any wonder that the median duration from wedding bells to divorce bills is 12 years?

The truth is that buying a home creates financial stress and insecurity -- until you manage to get ahead of your mortgage. As all homeowners know, running a home is expensive, costing up to 5 per cent of the purchase price each year.

And this is compounded if you take on more debt that you can afford.

Mistake #3: They buy an investment property first

Here’s the pitch that young couples give me: “We’ll buy an investment property to start off with, just to get our foot in the game, and then we’ll use the equity to buy our family home in five years.”

I’m yet to see this plan work (the only exception being couples who buy an investment property to eventually move into). Reason being, the upfront costs of owning a home, and the ongoing costs, take years to recoup.Bottom line: If you want a family home, save up and buy one.

Mistake #4: They don’t consider other options

My hipster mate had written off the entire housing market, because he wouldn’t live in a suburb whose cafes didn’t serve organic tofu and coconut water.

However, there are options if you really want to buy your own place. You can move to the city. Currently my prediction (made 12 months ago) of an apartment bloodbath in capital city CBDs by 2018 is going swimmingly, especially in Melbourne, with press reports of apartments being re-sold at discounts of up to 30 per cent from their original off-the-plan purchase price.

Some desperate developers are offering holidays to Fiji and Bali worth $5,000, for buying a $350,000 one bedroom apartment. (Is anyone that stupid? It reminds me of Homer Simpson buying a pirate pregnancy test just because it came with a free whistle.) Don’t trip to Bali or Fiji just yet. Prices are likely to go lower as the oversupply really kicks in.

Or you can move to a country area and have less of a mortgage, less stress, and more time to spend with their kids. That’s what I did.

Mistake #5: They don’t back themselves

Yes, we’re living through the greatest housing boom in history (according to The Economist).

However, there’s no reason you can’t get yourself a home if you want to -- even if you’re single.

When I met my wife, she’d bought a little apartment on her own (with an oven she found on the side of a road, no less!). No help from anyone -- just savings and a determination that a man didn’t need to be her financial plan. And the Barefoot community has heaps of single people on average incomes who’ve bought their (capital city) homes.

They’re everyday people, just like my hipster mate.

Tread Your Own Path!

Mixing It Up

Hi Scott,

Mate, what percentage of an investment portfolio should be Aussie shares compared to international shares? Considering Aussie shares provide dividends more than international shares (which are more growth oriented), I am not sure what mix I should have. What is your rule of thumb here? (Love your work -- keep it up!)

Cheers,

Arthur

Hi Arthur,

Very good question.When it comes to international markets, Australia is like a chihuahua at a dog show -- we represent only around 2 per cent of the world market. (Though we do have a big bark for a lapdog-sized market.)

Over the last century Australia has had the best performing stock market in the world. If you look back over 40 years, we’ve achieved roughly the same 12 per cent per annum returns as the rottweiler of the financial pound, the US. (International shares which include other countries have returned slightly less over the same period.)

It’s been a remarkable run; $10,000 invested 40 years ago would have compounded into $900,000 today -- even more remarkable considering the backdrop of the dot.com bubble, the Asian debt crisis, the GFC, a couple of wars in the Middle East … and Pauline Hanson.

You’ll generally get better tax-effective income through Aussie shares (thanks to generous franking credits), but that’s not a reason to avoid going international. To diversify your holding it makes total sense. For a passive, very long-term approach, consider a split along the lines of 60 per cent Aussie, 40 per cent international.

Scott

Virtual Reality

Hey BF,

I am 26 years old and have about $6k tied up in CBA and AFIC shares, with the plan of buying another $5k worth and sitting on them for as long as possible (while incrementally buying more). However, I was recently looking into investing in VR (Virtual Reality) as it seems to be the next tech hit, and apparently the time to strike is now before it blows up. So I have two questions: what are your thoughts on investing in VR, and what is the best way for Aussies to buy overseas shares?

Thanks,

Mark

Hi Mark,

What are my thoughts on investing in Virtual Reality? None. I have no thoughts whatsoever.

What I do know is that most of the big tech companies are already ploughing billions of dollars into VR — Alphabet (the company formerly known as Google), Facebook (which recently paid $2 billion for VR company Oculus, which at least has a product on the market), Microsoft, AMD, Samsung and dozens of others.

Who’ll win the race? Again, I have no idea. However, I do have a solution for you. If you invest in a global exchange traded fund (ETF), you’ll get a small stake in all the technology giants in one easy purchase.

Scott

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

Breaking Bad (Advice)

Hi Scott,Due to bad advice 20 years ago, my wife and I put the family home in a company name which she had tried to get off the ground as a small business. We still have the company because we believe that to close it and return the property to our names would trigger a massive CGT impost. We just go on paying ASIC fees and land tax every year, and when the kids inherit it, same thing. Is there any point to us seeing a solicitor about our plight? Or can you see any way out for us?Regards,

Phil

Hi Phil,

Holy smokes!

The ASIC fees and land tax aren’t the issue here - it is, as you suggest, your capital gains tax (CGT) bill.

I’m guessing your words about the business which you ‘tried to get off the ground’ mean it didn’t take off. Whether there’s a loss from that which might offset the gains on the house is something you could look into. The problem is that CGT will need to be paid one day (and to make matters worse, you won’t even qualify for the 50 per cent concession on CGT that individual investors get).

If you’re going to stay living in the family home, then you could always handball the problem to the next generation - that is, assuming your kids inherit your shares in the company, they could decide themselves what to do. This is one of those situations where a good accountant can help -- preferably not the same accountant who advised you to buy the house in a company name.

Scott

Eat Pray Love

Hi Scott,

I am 31 and my wife and I have a nine-month-old child. I am long overdue a career change -- my current job is driving me insane! I want to start a career in a different field, but to do that I feel like I have to start at the bottom and work my way up. I feel like I am trapped because we have worked out our budget and cannot go below my current wage. I can't find any entry job that pays the wage I am on now. I feel trapped. How do I get out? My wife works three days and can't do more due to our child. Help!

Craig

Hi Craig,

You know, there are times when you really just have to throw caution to the wind and back yourself.

Now is not one of those times, Craig. You’re a father, and it’s your responsibility to provide for your family. No Eat, Pray, Love for you, my friend.

Well, not in a traditional sense. You can eat leftovers as you hustle each night (after everyone else is in bed) to get both the skills and the contacts you need to land your dream job. You can then pray that if you work hard enough you’ll be presented with an opportunity to work in the field full time without taking a pay cut (though you’ll have to really hustle for this to happen). Only then will you be able to look after the people you love.

Scott

Credit Card Pensioner

Hi Scott,

I am retired and have a superannuation balance of around $126,000 from which I draw down a monthly pension of $1,925. I also have a current credit debt of around $4,500 which is being paid off at approximately $150 per month. Should I withdraw a lump sum from my super to pay off the credit card?

Colin

Hi Colin,

It’s time to wake up and smell the coffee, cobber.

You’ve got a spending problem.

All up you’re after-tax income of $45,800 (combining your monthly amount with the age pension of $22,700), should be more than enough to fund a comfortable lifestyle, according to ASFA (Association of Super Funds Australia), who track these things.

Yet you’re spending more than that.

You can keep this up for about six years -- that’s how long I think your super will last, based on your current drawdown rate. Then it’s baked beans for breakfast, lunch and tea.

It’s time to start acting your age. Withdraw the lump sum, pay off the credit card, cut the damn thing up, and start living within your means.

Scott

You’ve Gotta Know When to Fold ’em

Hi Scott,

I’m a 35-year-old man with a $70k annual salary, $100k in super, and a problem with gambling online (I am currently $60k in debt). The only way to control myself is to not have access to my overall finances. My goals are clear and mapped out, but I need help to execute them. What are your thoughts on money managers like ‘MyBudget’ in my situation?

Dennis

Hi Dennis,

Congratulations on confronting your addiction. Having helped a lot of people with the financial ramifications of gambling, I know how big a step you’ve taken.

Your next step is to call ‘Gamblers Help’ on 1800 858 858. You need counselling and treatment for your disease -- do not do it on your own. If you had a ruptured appendix you wouldn’t do a DIY job with a pair of pliers and some kleenex. Same rules apply.

Under no circumstances should you go anywhere near MyBudget.

First, because they charge too much. (You not only have to pay off your debt, but their fees as well, and if they’re running your budget, guess who they pay first?)

Second, because no one should hand over the responsibility of managing their money. Period.

Let’s be honest: if you’re still in the throes of your addiction, and you get the urge to gamble, you’ll find a way to do it whether you’re with MyBudget or you’ve locked your money away in Scrooge McDuck’s bank vault.

Your healing process will come from learning how to confidently manage your money in the face of your recovery -- and the best way to do that is not with MyBudget but by working with both a gambling counsellor and a specialised community-based financial counsellor (Gamblers Help will set you up with both).

The bottom line is this: just like there is no such thing as a ‘quick win’, there’s also no ‘quick fix’ for a serious addiction. Please, reach out for help.

Scott

The $31,203 Road Test

Are you looking for Australia’s biggest and best super fund?

Well, that’s what we’re going to cover today.

You see, the front page of the Australian Financial Review this week said that NAB is the new king of super, claiming the bragging rights of Australia’s biggest retail super fund.

It’s a fair bet that either you, or one of your family, or at least one of your ex-boyfriends, is with NAB.

Now I wouldn’t be doing my job if I didn’t do a road-test on Australia’s biggest retail super fund. So buckle up (because I’m also going to show you how to make $31,203).

Guaranteed.

The Holden Cruze of Super Funds NAB’s super offering (from this week, branded as ‘MLC Super’) is the financial equivalent of a Holden Cruze.

No-one consciously chooses a Holden Cruze.

It’s just the car that the bored middle-aged woman behind the counter of Budget rent-a-car hands you the keys to. The Cruze is a car that’s foisted upon you. Eventually you’ll get a better one, but right now, well, who gives a toss?

That explains NAB’s super offering right there.

No-one actually does independent research and chooses a NAB fund.

That’s because their performance over the years has been, well, Cruze-like.

According to SuperRatings, over 1, 3, 5 and 7 years, it’s come in near the back of the pack.

That perfectly explains NAB’s hierarchy of needs, which are as follows:

1. NAB.

2. NAB Funds Management.

3. NAB Financial Planner.

4. NAB Banking (investment loan, mortgages, and credit cards referrals).

5. Client.

Holden versus Ford

Yet rather than just kick the tyres and drive around the block, I thought I’d line it up in a proper drag race against Australia’s biggest super fund.Hang on, didn’t I say NAB was the biggest?

No, there’s a difference. NAB has been crowing about being the biggest retail super fund (which means it’s run by a financial services company for profit).

The biggest super fund is AustralianSuper, which is an industry fund (i.e. not for profit). It manages $100 billion on behalf of more than 2 million members.

Retail funds have been battling industry funds for years (a real Ford vs Holden battle).

Up until now, industry funds have been out in front, mainly thanks to their lower fees.

Still, the entire industry is as seedy as a night at the dishlickers: Australians are still forking out some of the highest super fees in the world - between 2004 and 2013 the cost of the average fund fell from just 1.4% to 1.2%, even though the total super pool grew from $625 billion to more than $1.6 trillion.

To look at, there’s not much difference between our NAB and AustralianSuper contenders. We’re looking at the ‘balanced’ model for each, which means you’ll get a mix of shares (both Aussie and International), a bit of property, and some bonds and cash.

Where they differ is the sticker price.

AustralianSuper is the poverty pack. You’ll pay an investment fee of 0.57% (which gets the Barefoot rating of “meh” as it’s not the lowest in the market -- not by a long shot), plus a $1.50 per week admin fee. Anyway, on a balance of $50,000, that’s costing you $363 each year.

Now for NAB …Their cheapest option will set you back $623 per annum on the same $50,000 balance.

Next in line is their mainstream model (with leather trim), called ‘MLC Masterkey Fundamentals’, which ups that slightly to $630.

Or, if you’re unlucky to be stuck in one of MLC’s older funds (but still called ‘Masterkey’), get ready to fork out $1,033 in fees every year on a $50,000 balance.If you (or your dad or your uncle) are still in that fund, then somewhere along the line a NAB salesperson took your boss to the corporate box at the footy and got them on the squirt -- in exchange for signing up his entire staff up to a stinker of a corporate super fund.

But maybe that’s about to change ...

“National Australia Bank is combining five of its superannuation funds to create the country's biggest retail fund, promising to share cost reductions from the merger with its 1.3 million super members” said the newspaper this week.

Huh?

“Promising to share cost reductions?”

That didn’t sound very banklike, so I rang up NAB and asked them “specifically how much are you sharing?”

“The majority of our Corporate Super members will receive a 0.04% reduction to their fees… that is the equivalent of $20 per annum on a $50,000 MySuper account balance” said the NAB spokesperson.

That sounds more like it!

The $31,302 Car Crash

When it comes to cars it’s not the driveaway cost that slugs you, what you really need to focus on is your running costs, over years and years and years … it’s the same with super. Let me explain.

Take a kid -- let’s call him Freddy Falcon -- with $10,000 in AustralianSuper.

He’s earning $60,000, and keeps his nose to the grindstone for the next 40 years.When he retires his super balance will be (based on very, very conservative projections)... $286,517 in today’s dollars.

His mate -- Harry Holden -- has the same $10,000, but he goes with MLC MasterKey Super Fundamentals.

He earns the same as Freddy, and works just as long.

And when he clocks off at 60, he’ll pocket $255,314.

In other words, despite being in a balanced fund just like Freddy, he’s $31,203 worse off.

Struth!

That’s enough savings to buy you a Holden Cruze… though I wouldn’t recommend it.

Tread Your Own Path!

The $500,000 Headache

Hi Scott

I have made two horrible financial decisions: I bought two apartments off the plan in the Pilbara a few years ago from a dodgy ‘armchair developer’. We paid $1 million, and they are now worth maybe $500k. Even worse, one is in a trust/company structure. Our cashflow can handle the costs, but we are left with no ability to invest. My question is, who do I go to for advice? Accountants do not ‘advise’ and there is no money in it for financial planners. I want to get my family out of the mess I put them in!

Christine

Hi Christine,

There are two questions here.

First, you want to know whether you should sell the properties.The only advice I can give you is common sense: time never turns a dud property investment into a good one … just an older one. So I’d suggest you offload them. But only you can pull the trigger -- it’s your money after all.

Second, if you do sell them you’ll incur a capital loss (in both your personal name and the trust/company name), which you’ll be able to bring forward and offset against the capital gains you get when you do make some better investments in the future!

Scott

Husband is Terminal

Hello Scott,

My husband, Trevor, has recently been diagnosed with a terminal condition. He will get a super payout of less than $100k. I work full time but am currently on leave caring for him. I have about six months of leave left. We have no debts, rent our home, and have recently used our savings on a final overseas holiday while Trevor is still well enough to travel. My question is, what is the best way to invest his modest super payout while still ensuring we can access it if needed?

Janet

Hi Janet,

I’m so sorry for your situation.

You’ve got a chance to sort out your financial affairs together, which will give your husband the peace of mind that you don’t have to do it on your own.

So I’d like you to review his will and any accounts that are in his name. Then I’d like you to call a FISO (Financial Information Service Officer) on 132 300, who’ll be able to advise whether you’re eligible for a carer’s allowance. (Note: the FIS is a free government service.)

Finally, in answer to your actual question, if you have any debts you should pay them down as a priority, then keep three months of living expenses in an online savings account (I call it ‘Mojo’). Any left over should be invested in shares, preferably through your super fund. This is something you can ask the FISO about as well.

Scott

Backyard Blitz

Hi Barefoot,

My husband works full time on his own business and I am a stay-at-home mum to three kids. We recently finished building a unit in our backyard and we have not subdivided yet, so they are on the one title. The back unit we own outright, and we owe $160k on the one we are living in. Hubby wants to rent both out and hope the bank will lend us enough money to buy our dream home. I cannot help thinking maybe we would be better selling both properties and living debt free. What do you think?

Lucy

Hi Lucy,

First, the statement ‘the back unit we own outright’ is irrelevant, because if they are on the same title the bank will hold both as security. Second (even though I don’t know the value of the units), your hubby’s plan sounds … terrible. You’d be living in a home with a big mortgage while renting out two units with only $160k owed. I agree with you. Sell, use the proceeds to buy your dream home, and live debt free.

Scott

Puff the Magic Dragon

Hi Scott

Interesting article you wrote on National Fraud Week. Your article hit home. I have two brothers: one living at home (aged 42) and the other (aged 50) living just around the corner. Both smoke the ‘magic dragon’ on a daily basis. Being from an Italian background, my mother will not kick out the one who’s living at home. Both are constantly asking for money, which she hands over, feeling sorry for them. Mum is on the age pension and has $70k in a savings account. What do I do?

Tina

Hi Tina,

It sounds like your mother is a wonderfully kind person.But this situation is totally her fault. She’s the one who’s enabled this behaviour with your brothers.And as a result they’re basically little boys living in grown men’s bodies. It’s all very … sad.I wouldn’t expect the ‘boys’ to have the ability to change -- we’re a few decades late for that. The only way anything will change is if you can convince your loving, caring mother that she’s actually causing her sons harm by enabling this behaviour. She’s not helping them, she’s hurting them (and herself). That’s the truth.Good luck.

Scott

The Biggest Mistake You’ll Make With Your Retirement

Well, it looks like the nation’s superannuation reforms are now in the hands of ... Pauline Hanson.

And that’s quite concerning, given that I seriously doubt Pauline could tell the difference between a hedge fund and a halal burger.

“Please explain?”

So until Canberra clears its political bowels, it seems that detailed financial planning is off the agenda. But that’s not necessarily a bad thing, because it gives us a chance to talk about the number one mistake people make when they retire.

And no, it’s not retiring with too little dough.

In fact, just the opposite. I’ve found the people who make the biggest mistakes in retirement tend to be those (particularly men) who have million-dollar nest eggs.

The Biggest Mistake You’ll Make With Your Retirement

It’s said that the two most dangerous years of your life are the year you’re born and the year you retire.

You made it through the first one, so let’s talk about the second, with the help of a case study:

Fifteen years ago, a friend of mine’s father retired.

He’d spent 30 years working as an engineer in a government department.

Then he turned the magic age of 54 and 11 months, which was the kick-off age for what is arguably one of the most generous retirement schemes in history -- a defined benefit pension that paid out a factor of his final wage, every month, until the day he died.

He’d never have to worry about money again.

As was the tradition, his workmates gave him a send-off on his last day. The irony wasn’t lost on him: he’d spent his entire life rushing around chasing his tail. And the day he could finally put his feet up and relax they gave him… a bloody gold watch.

Tick. Tock.

On the first day of his retirement, he woke up at the same time he always had. Had a shower. Put on his suit. Made some breakfast. Caught the bus into the city. And then … sat in a coffee shop and read the newspaper for three hours. After that he caught the bus home, wondering what the hell he was going to do with himself for the rest of the day.

The Curse of the Million-Dollar Super Fund

Here’s you: “Curse? A million bucks in my super? I’d, I’d…”

Here’s me: “Wake up whenever you want?”

Here’s you: “Yeah!”

Here’s me: “Go on the Baby Boomer equivalent of a Contiki tour (hello Trafalgar) and get pissed with other suburbanites?”

Here’s you: “Well, maybe once a year...”

Here’s me: “Sure. And for the other 11 months of the year you can sit at home, make smalltalk with your wife and her friends, and wait for your kids to drop off the grandkids ... every second Thursday.”

Here’s you: “Ummm, I guess. What else have you got?”

Here’s me: “Death?”

Most people work incredibly hard throughout their careers to provide for their families -- especially those who beat the odds and retire with million-dollar super funds.

And, particularly for men, their work comes to define them. Not only does it build their super, but it gives them their self-worth and something productive to do.

These workhorses don’t realise that their career has been to the detriment of friends, hobbies and cultivating other interests (well, besides drinking beer and watching the cricket), till after they get home from the Trafalgar tour.

So, what’s the solution?

The Golden Rule of Retirement

The golden rule of retirement is ... keep working.

Of course most people don’t have a choice, given that research from the University of Melbourne suggests that only 53 per cent of couples and 22 per cent of singles are on track to achieve a comfortable level of retirement income.

Yet that doesn’t mean you have to keep your existing job (especially if you’re a tiler with dodgy knees).

You can do something less labour intensive, and possibly not full time. And if you do, the Government will bend over backwards to help you.Once your reach your Age pension age, you’ll not only be able to draw a tax-free pension from your super, but in addition you can both earn up to $28,974 each without paying a cent of income tax. You can save up for a trip of a lifetime, and stretch it further by making it a working holiday. Throw all that into a retirement calculator -- it works better than Viagra!

Yet what if your advisor says, “You’re a winner, you don’t have to work another day in your life.”

Barefoot says, “Work anyway” (even if it’s a day or two a week).

Work is good for you: retirees who continue doing some kind of part-time work are found to be the happiest and the least likely to suffer depression.

Why not use the skills you’ve honed over your career to do some useful work?

I meet so many Uber drivers who are well-to-do retirees who don’t need the money -- they just like chatting to people and earning their keep at the same time.

And I’ve got one final tip for you: think about your legacy. What do you want to be known for? What is it that you could be known for?

You don’t even need to be wealthy. I know of a bunch of old tradies who build wheelchairs for kids in third world countries. And last week I wrote about a stay-at-home mum who built a hospital in Uganda. One of the greatest human needs is the desire to be useful and appreciated. Helping people is the key to your own happiness.

The bottom line is this: in retirement you need enough money to live… and enough to live for.

Oh, and you may be wondering what happened to our ‘coffee shop’ engineer.

Well, after three months of reading the newspaper, one day he looked at his gold watch and decided it was time to do something. He needed meaning and purpose. He had something more to give. So he went back and became a teacher, and worked happily away for the next 14 years.

Tread Your Own Path!

Dial a Bin, Get a Raise

Hi Scott,

I have recently become a Barefoot member and have changed so much of what I was doing with my money. Thanks very much! But I have a question for you: I am a small business owner of a skip bin hire company in Melbourne (Unlimited Bins) and, as I cannot go to my boss and ask for a pay rise, what can I do to get ahead?

Troy

Hi Troy,

Make each Friday afternoons a ‘Financial Friday’. First, look at your sales for the last week and make a stretch goal to beat it next week. Then, do one thing that will bring in more bucks before you clock off for the week (advertising? Chasing up a lead? Getting a testimonial?). Second, look at your expenses for the last week. Then, look at one expense and try and eliminate it, or at least minimize it, again before you clock off for the week. Financial Fridays are a bit like putting a Fitbit on your arm. The ritual of focusing on your revenue and expenses each week will have a dramatic effect on your profitability.

Scott

AMP Screwed Me

Scott,

I have invested $200 a month over the last 20 years in an AMP whole of life policy. After 20 years, I have a withdrawal amount of… $64,196! Divided by 240 months (20 years), that is $267 dollars per month -- or about what I gave them. I feel cheated -- I can’t even use that money for a house deposit. What’s more, the payout on my death would be $300k, which is not enough for my kids to buy a house outright in Brisbane. What do you recommend?

Dennis

Hi Dennis,

A whole of life policy is an old-school product that bundles together an insurance policy with a managed fund. It’s a wonderful investment -- for the insurance salesman who sold it to you. He would have been slung 125 per cent of your first year’s premium plus an ongoing trailing commission as high as 8 per cent.

You got snookered.

Now, I assume you already have adequate term life insurance in your super fund (if not, call your fund and get it). So now you need to focus on getting out of this policy without getting a thousand amps (or AMPs) up your rear end.

Let’s look at your options. You could keep paying your premiums. If so, your policy will mature when you reach 95 or you die (whichever comes first) and you or your beneficiary would receive the full insured sum of $300,000 tax free. But I wouldn’t recommend it. Or you could surrender the policy and take the $64,196, but I wouldn’t recommend that either. Your best option is likely to be to convert it to an ‘endowment policy’, which can mature in at least five years’ time.

Still, given the thousands of dollars of commissions you’ve paid over the years, I’d encourage you to ring up AMP and ask them to run the numbers on the best outcome over the next five years.

Scott

Brexit Blues

Hi Scott,

My husband just inherited money from his mother in the UK. Unfortunately, the transfer to his UK bank account came through late last week as Brexit unfolded. We plan to use the money (250,000 pounds) for our retirement funding. However, the exchange rate has just wiped out a depressing chunk! We need to know what the cheapest and most reliable way is to get the money out of the UK so we can act as soon as the exchange rate looks more favorable. We're hoping it will bounce back up at least partially over the next few days or weeks. Help!

Marg

Hi Marg,

Yes, the pound got shirt-fronted by the Brexit vote. (My view is that Brexit will be like any other divorce: it’ll get dirty, it’ll be expensive, and it’ll drag on longer than it should.)

Right now the market says a pound is worth $1.80. However, if you look at it over a 10-year period, the pound has traded from as low as $1.44 (just over three years ago) to a high of $2.62 (during the GFC). So in that context, last week’s fall was a mere blip.Now, unlike most finance guys (middle-aged white men in suits), I’m honest enough to tell you that I have no idea what the pound will do in the future. No one does. ‘Hoping’ the currency will bounce back over the next few days or weeks is not a strategy.

The bottom line is that you can’t control the currency, but you can control how much you pay to transfer the funds to Australia. Generally speaking, avoid the banks (who will slug you with fees, then hit you again with a terrible exchange rate). Instead, use a regulated currency exchange specialist like OzForex or CurrencyFair.

Scott

A Nasty Surprise from the Bank

Hi Scott,

After saving for eight years, my husband and I finally have a deposit to buy a family home. So there would be no nasty surprises when applying for a loan, we ordered copies of our credit files. As it turns out ... we don’t have one. We’ve never had any debt before, or even a phone plan. I’ve been advised to get a credit card ASAP or we won’t get a loan. Is this true? I thought maybe our proven savings and reliable employment history might be enough for the bank to lend to us.

Penny

Hi Penny,

Lean in close, because this is very important.

The next time you meet the person who ‘advised’ you to get a credit card, here’s what I want you to do:

Cock your head to the side. Raise one eyebrow. Purse your lips. Then say, “Talk to the hand, girl, cos the face ain’t listening”. Next, lean back, and wave your index finger at them, while wobbling your head, and say: “The Barefoot Investor tells me that all I need to get a loan for a home is a good deposit, a great savings record, a reliable employment history, and the basic 100 points of identification.”

Puh-leez!

Scott

Who You Should Have Voted For

Happy new financial year!

Actually, the start of the new fiscal year won’t be that happy for everybody.

I’ve always thought that politics was showbiz for ugly people, and the weekend’s non-election had more twists and turns that an episode of House of Cards.

It seems like the only real winner from the election so far is Nick Xenophon, who looks like he’ll be able to wield a big stick in the new parliament. Over the years I’ve had a bit to do with him, and I quite like the guy.

So, how will he influence your hip pocket?

Well, negative gearing reform is all but dead and buried.

Xenophon is pro-negative gearing … he’s apparently got eight investment properties himself.

He’s also in favour of a Royal Commission into the banks, and for cutting super entitlements for the wealthy. Though we’ll have to wait a while to see what happens with the Coalition’s proposed changes to superannuation.

The bigger problem is this:

With a potentially hung parliament, whoever becomes Prime Minister will spent much of their time just trying to keep their job (and the rest of their time massaging the egos of the cross benchers).

So in terms of reform, don’t expect much to happen in the next three years (or until we get sent back to have another go at voting). And if there’s crisis, like a GFC Mk 2, don’t expect any strong leadership at the helm.Of course we don’t actually know how any of this is going to pan out yet … but we’ll keep you informed.

And now, here’s my nationally syndicated newspaper column.

Who You Should Have Voted For

As a finance guy, I look at both political parties the same way I look at a separated couple who have leased BMWs and $48,000 each in credit card debt, but are trying to one-up each other to win their kids’ affection.

“Hey Tammy, do you want a pony?”

“Hey Timmy, do you want … umm… Delta Goodrem to play at your eleventh birthday party?”

Let’s be honest: what both sides really care about is who gets to drive around in the fancy white car with the little Aussie flags on the bonnet (hell, even the Greens want flags on their Prius).

It’s enough to turn you into a ranty-tanty Alan Jones. Or, in my case, to feel fed up with the lot of them.So today, in honour of the political Punch-and-Judy show, I’m going to share with you the stories of two people who genuinely deserve your vote.

They’re not wealthy. They’re not seeking election. They’re not wanting handouts.

They’re people like you and me.

The Country Mum Who Built a Hospital

“What am I going to do now?”

Helen Brown was a typical stay-at-home mum, wondering what to do with herself after her fourth and final son left the nest.

“We are not wealthy. We live in Kyabram, and my husband runs a small signwriting business. We’d never been overseas before, so when the boys left we decided we should have a holiday”, says Helen.

So in 2007 Helen and her hubby saved up and went to Uganda.

They quickly realised they were more interested in meeting people than watching animals, and they struck up many friendships during their travels. They stayed in touch with one bloke they met, a community leader called Ssenwogerere (or David for short).

After they got home, David wrote to them and mentioned that five elder women from his village needed to raise $200 as seed capital to get into the chicken business. Helen decided she’d do some fundraising in the Kyabram community, and ended up raising the dough.

The following year, she saved up and took two of her sons to the Ugandan village to meet the women.

That trip was a turning point for Helen and the village of Lubanda. When she returned home she started up HUG (Help Us Grow) as a not-for-profit organisation to help the village community help themselves.

Helen is not religious, she believes passionately in a hand up rather than a handout, and she doesn’t draw a wage from HUG. “Every last cent goes to the community”, she tells me.

Small chickens?

Hardly.

Since 2008, HUG has built the village a community centre where the locals come together and learn new skills, a secondary school, and a medical clinic that serves a population of around 50,000 people.

How’s that for a legacy?

“I go every year. This is my tenth year … and I spend three months there each time”, she tells me.

“Why do you do it?”, I ask.

“Because it fills me with absolute joy.”

The Man Who Never Forgot

Chennupati Jagadish grew up dirt poor in a small village in southern India.

He may never have gone to high school if it weren’t for a kind teacher who invited him to live with his family and study.

And you could say that Chennupati made the best of it. He went on to become one of the world’s leading physicists, lauded for his pioneering work in nanotechnology. He’s even received an Order of Australia for his contribution to physics, engineering and a whole bunch of other stuff that goes straight over my head.

The dude is seriously accomplished (and what’s more he’s a Barefooter, which is how I heard about him!). For a boy who studied by a kerosene lamp, he’s come a long way.

Now there are plenty of people who get to the top of the tree, only to forget the kind people who helped them along.

Not Chennupati.

Despite being on an academic’s wage, he wanted to repay the favour by giving students from the developing world the same opportunity he had all those years ago.

So he and his wife ploughed $140,000 of their own cash into an endowment fund. It pays all the students’ costs -- airfares, living expenses, the whole enchilada -- while they’re studying away from home.

“It’s important to remember the people who helped me, and to express our gratitude. I want to leave my mark behind me, and our endowment will continue for ever.”

Again, how’s that for a legacy?

“I’m a scientist, and I publish a lot of papers”, says Chennupati, “but the most satisfying thing in my life is helping young people.”

Living Your Legacy

I’ve shared these stories with you today for two reasons:

First, for the past 55 days you could be forgiven for thinking you live in southern India, or Uganda, with all the problems the pollies have spooked us with.

The truth is we live in the greatest nation on earth. I mean, where else in the world could one of the biggest election issues be changes to super: “You mean I can have only $1.6 million in my super fund tax free … THIS IS AN OUTRAGE!”

Second, you don’t have to be a politician to make things happen. Hell, you don’t even need to be wealthy.

And that’s the real story here: Helen and Chennupati have, each in their own way, created a legacy that will live much longer than the next election cycle.

Tread Your Own Path!

Money Makeover

Hi Scott,

My wife and I used to have three investment properties -- and we hated every minute of it. Now we own our house outright, and it’s a bloody good feeling. We are happily married with two kids (5 and 7). Our situation now is like this: we have NO debt (I mean zero), a combined income of $90k, super of about $75k, shares worth $25k and cash $25k. For the first time we have surplus cash that is not going to banks or rental agents, so please give us some direction. I do not want to waste it.

Jim

Hi Jim,

You rock.

When you don’t have to make a monthly repayment to a bank, you can really start to build wealth.

Here’s how:

Based on what you’ve told me, you’re probably picking up some Family Tax Benefit (around $118 per fortnight, more if one of you is on a low income).

So start up an investment bond for your kids (a bond can be kicked off with about $1,000) and then every month add your Family Tax Benefit to the bond.

You won’t pay any tax on the earnings, and in 10 years you can pull out the lot tax-free (or leave it to grow, and give it to your kids when they’re older).

Best of all, Centrelink ignores investment bond earnings when they work out your Family Tax Benefit.

Then I want you to turbocharge your super.

Make sure it’s in an ultra-low-fee fund. My standard advice is to boost your pre-tax super contributions to 15 percent (talk to your bosses about salary sacrifice).

If you do that, by age 67 you’ll have over $600,000 (in today’s dollars). But with your mortgage paid off, and your Mojo, I think you should challenge yourself to do more than that.

Scott