Who taught you about money?

Right now I’m on holidays with my family in Bali.

The last time Liz and I were here, we were newlyweds without a care in the world.

I’d romantically feed her strawberries and we’d laze by the pool, armed only with our bathers, towels and a frosty beer.

“Tapas?” Liz would ask.

“Sure”, I’d lazily reply.

Things are a little different this time around.

I’m spoonfeeding berry puree at Eddie and we’re getting it all over both of us.

We’re still by the pool, though we now have head-to-toe rash shirts, zinc cream, insect repellant, floaties, and there’s no lazing:

“Are you watching him?”

“I thought you were?”

“You have to watch him!”

Yes, kids are demanding, which can be exhausting on your holiday, but it’s damned good when they channel it into learning about money.

Here are some questions I’ve received from Barefoot kids.

Mister Barefoot, How Do I Make My Money Grow?

Hi Scott,

My name is Olivia and I am six years old. I put my pocket money in the bank on Thursdays at school. How do I make my money grow? Mum says to water it.

From Olivia

Hi Olivia,

You are already growing your money by putting it in the bank on Thursdays at school!

However, I’d like you to ask your mum if you could stop putting your money in the bank from now on.

See, banking is very boring. The only people who really care about banking are the people at the bank. That’s why they give you all those comic books with silly characters like ‘Cred’. They’re trying to make it cool, but trust me it’s really boring.

But I pinky promise I’m going to teach you something very cool.

I want you to ask your mum to get three glass jam jars (without the jam!). Ask her to label them ‘Save’, ‘Give’ and ‘Spend’. Then keep them in your room, where you can see the money piling up inside them.

Next I want you to think about all the things you can do around the house (like watering the garden) that would help out Mum and Dad. Ask Mum if you can get paid in coins, but only if you do a good job.

When Mum gives you your pay, I want you to put one coin into each jar:

The ‘Save’ jar is for something big you want to buy but you can’t afford right now (preferably something like a Super Soaker that your brother wants). Each time you do a job and get paid, you’ll see the coins filling up in the jar. So long as you don’t take them out, you’ll be able to blast your brother with your Super Soaker!

The ‘Give’ jar is for helping other little girls who are not as lucky as you. At Christmas time you can buy these girls presents, wrap them, and put them under a tree at the shopping centre.

The ‘Spend’ jar is for lollies.

How Do I Earn More Interest?

Hi Scott

My name is Kyla and I am 14 years old. I get $40 pocket money per month, of which I save $10 into my saving account. I have also started delivering fliers and earn $19 upward per week depending on the number of brochures for the week. I save $10 per week of that money also. I do not get a lot of interest on my savings account. Any ideas?

Kyla

Hi Kyla,

Unfortunately I can’t help you earn more interest -- we’re all in the same boat at the moment -- but I can help you earn more money.

Now, you sound like a very smart person, so I’m going to get you to put a proposal to your mum and dad.

See, your parents are very busy people, they work really hard, but sometimes that means they don’t have a lot of time to hunt around and get the best deals on the things they buy.

But you do.

So over the next year, whenever your mum or dad pays a bill, ask them to show it to you, and then you can do the research online and see if you can get them a better deal. It could be on their electricity, or their mobile phone, or even when they’re shopping at the supermarket.And if you want to earn even more money, you could ask your parents if you can be in charge of monitoring the household power bill, and you could work out getting an extra payment if you can keep the bill under figure.

Good luck!

My Parents Are Losers

Hi Scott,

I saw your call-out for kids to ask you a question. Well, I am 16 and I have a question for you. What can I do about my parents? They are 46 (Dad) and 44 (Mum). They have always rented, and they have never had any money -- but Dad has always driven good cars like his latest HSV Commodore (bought brand new). They also have credit card debts. They have taught me what not to do about money.

Luke

Hi Luke,

You’re one in a million, mate.Kids model their parents’ behaviours -- especially when it comes to money. That’s why some families never seem to be able to get ahead. It’s like each generation gets stuck in a prison of poverty.

Not you. You’re smart enough to have learned what not to do from your parents.

I talk to teenagers all the time about money, but most of them are cocooned from the consequences of bad choices. You’ve lived it, and that’s why you’ll make better decisions than your parents have.

See, money is one of the great levellers of life: you don’t need a high-paying job, you don’t even need to be particularly smart, you just have to start. And that’s your power. You have the miracle of compound interest on your side. By starting to save and invest now, you’ll earn more money over your lifetime than your parents did working their entire lives.

Don’t bother trying to change your parents. It’s too late for them.

Love them. Just don’t live like them.

Tread Your Own Path!

Robbed With a Pen

Hi Scott,

I have an SMSF that I set up some years ago when I invested in land syndicates. The projected maturity date was somewhere between of 2012 and 2014 ... I'm still waiting. I've received some monies, with $99k outstanding. I have $50k in a no-interest Business Transaction Account, with plans to top it up before I retire in seven years. I want to place those monies, plus monies received from the land syndicates, into a low-fee, conservative super fund. How do I do this while meeting my ATO and legal obligations?

Elizabeth

Hi Elizabeth,

It's almost impossible to wind up your SMSF while it still has money owed to it. Still, that shouldn't stop you moving your superannuation to a more appropriate fund now. The first thing you can do is roll over the $50,000 of cash you're holding in your SMSF right now. There is nothing stopping you, and the rollover form is freely available on the ATO website.

You can treat the money from the syndicate the same if (and it’s a big IF) that starts flowing in. Each time you receive some of the $99,000 you can follow the same rollover process. Then, once all the money has been received and rolled over, you can then close your SMSF.

Scott

Help Me Buy a House

Hi Barefoot,

I’m wanting to buy my first home but don't have a deposit. I earn $37,000 a year. I have a car loan which costs me $327p/f and will be paid off in March 2018 (approx $10,000 remaining), plus a credit card with $3,500 owing ($4,000 limit). Would I be better off selling my car, paying off my debts, use the remaining money to buy a second-hand car, and then save for a deposit? I don't know which direction to take.

Rachel

Hi Rachel,

It sounds like you’ve reached a point in your life where you want some stability.

I’d suggest you do three things:

First, sell the car, pay off all your debts, buy a second-hand Toyota, and put $2,000 into an online savings account. That’s what we Barefooters call ‘Mojo’. Don’t use it for a house deposit -- this is the start of the security you’re chasing.

Second, repeat after me: “I, Rachel, promise that from this day forward I will never own a credit card or borrow for a car again.”

Third, spend the next 12 months working out how to make yourself more valuable to potential employers. Honestly, $37,000 isn’t going to cut it. Aim for $60,000 a year. That will probably require you to retrain so you can gain skills and experience in a different area (sales and leadership are where the money is).

I’d wish you good luck, but I don’t think you’ll need it. From the sounds of your question, you’re prepared to make difficult, disciplined decisions. Keep that up and there will be no stopping you. Email me back on your progress in 12 months. I’ll be here.

Scott

Self Managed Super Fund

Hi Scott,

Love your emails! My husband and I are looking into an SMSF. Is there anyone you would recommend to set this up? I was looking at ESuperfund -- they appear to make the administration side easier. Our plan is to purchase a small positively geared investment property and hold some cash in a higher interest online savings account in our SMSF. As our industry funds have insurance, we were thinking of still having our super deposited from work into existing super funds. Thoughts?

Mel and Trent

Hi guys,

I know it’s very un-Astrayan of me, but I don’t think buying a property in your SMSF is a particularly bright thing to do. First, because of the costs of borrowing in the super fund, second because of the current price of houses in most parts of the country, and third because if you own your own home you’re already overexposed to residential property.

Other than that, you guys sound smart: locking in low-cost insurance with your industry fund is a good idea. I’d stick with them and invest in shares, which historically have outperformed property over the long term.

Scott

So We Went on a $225,000 holiday...

Hi Scott,

We bought 36,000 points in Wyndham Vacation Resorts, but we were retrenched two years ago and have had only part-time employment since then and are struggling to keep up with the club fees of $219 per month. My partner needs two operations over the next year, and we don’t expect to be able to go on holiday anytime soon, or for any extended period in the future. We are considering just not paying the club fees anymore and forfeiting our points. What would be the consequences of doing this?

Amy

Hi Amy,

Oh for the love of coconuts!

You bought into a timeshare? Really?

Okay, I’m going to take my blood pressure pills and read their very glossy product disclosure statement (PDS). I’m guessing you haven’t read the PDS -- if you had you wouldn’t have given them a cent.

If you don’t pay your annual fees, the manager will slug you a $15 fee for every reminder letter, and charge you 15% interest on the amount due. They may also appoint a debt collection agency.

If you still don’t pay after a final demand, you forfeit your entire membership, not just your points for the year, which Wyndham will ‘attempt’ to sell for the full price. There’s no guarantee you’ll receive anything back at all.

You have the right to lend, give or sell your membership -- but, as Wyndham point out, you shouldn’t expect to get anywhere near what you paid. The only ‘bargain’ you got was in the beginning, when they bribed you with the free tickets to Sea World to sit through their high-pressure pitch-fest.

The current price for a membership with 36,000 points is $86,940.

Good lord.

If you’d put that money, plus your $219 a month, into a good Listed Investment Company (LIC), it would be worth around $225,000 in ten years’ time -- at which time you’d be earning $11,250 a year in dividends. That’s enough for a very nice holiday to wherever the hell you want. Plus massages.

You can sell your membership privately -- either on eBay or Gumtree, or through a number of web-based services which specialise in resale of timeshare ownership (though it’s unlikely you’ll recoup much of your initial cost). That’s what I’d do.

Scott

Double Tax Hit

Hi Scott,

After losing my engineering job last year, I have been working multiple part-time positions and taking occasional work opportunities when they arise. I am in the same position I was at university, with one job taxed at the normal rate and all other ‘second jobs’ taxed at a much higher rate. What is the Government’s rationale for taxing additional income like this, and is there any way around it?

Max

Hi Max,

One day a bloke who didn’t want to take a second job, and instead wanted to spend his weekends drinking frothies at the 19th hole, gave this excuse to his wife:

“Love, why would I bother working a second job … I’ll lose it all in tax.”

And from that point on it became one of Australia’s great urban myths. So let’s clear it up:

Whether you work one, two or 20 jobs, the same tax scale applies. Most people nominate one job to claim the tax-free threshold on (in fact they can claim the threshold from more than one job if their total income is below $18,200). And it simply makes sense to claim the tax-free threshold from the highest-paying job. This is good news for you because you now work as you want, and you know that you won’t be penalised.

Do the work, earn the money, pay the tax.

Scott

Tax-free Income

Hi Scott

We recently moved to Dubai (yay -- tax-free income!). In six months our first investment property in Australia, worth $230k according to the bank, will be paid. We plan to come back to Australia in March next year to purchase another property. Should we buy another low-value but positively geared investment similar to the one we currently have, or should we go for a negatively geared CBD apartment in the hope of a capital increase?

Liz

Hi Liz,

If you don’t have any significant Australian income, then negative gearing is a terrible strategy (because it works by giving you a deduction on your income tax). Basically, you’d be taking all the risks a ‘normal’ negative gearing strategy delivers but with only half the reward, i.e. no tax benefit. Worse than that, if you’re non-residents in Australia for a period of time, you may not even benefit from the 50% CGT exemption when the property is eventually sold. All up, your best investment (once you’ve paid off that property) is to diversify your investments into the owning the world’s best businesses.

Scott

50 is the New 40

Hi Scott,

I am a recently separated woman of 50. After settlement, I might get about $140,000. First, what are the chances of me getting a loan at this age? (I earn $70,000 a year.) Second, if I do get a loan, am I better off buying two smaller investment properties to rent out or one to live in?

Thanks,

Donna

Hi Donna,

Fifty is the new 40! You’re still young, though a bank will look more closely at your ability to pay a loan than with someone younger. What’s more important to a lender, though, is having a secure income and a decent savings history.

Assuming you’re planning on working until retirement age (which is 67 for you), you have 17 years to repay a mortgage. That’s totally achievable, given you’ve got a very healthy deposit.

I’d ditch the idea of buying two smaller properties. Instead, buy a home for yourself and make getting rid of the mortgage ASAP your priority.

If you want a tax-effective way to secure your retirement (which you also need to do), start salary-sacrificing into super. Yes, that’s going to be tight on your income, but plenty of people have bought a home, and topped up their super, on much lower salaries.

Scott

Love Me Two Times, Baby

Hi Barefoot,

My fiancé and I live in a large regional centre. We have a family home on a 30-year loan which we are on track to own in 12 years. We are now thinking of purchasing an investment property in an improving area -- a two-bedroom unit for around $120k returning $170 p.w. The thing is that in our town the real estate market does not grow quickly, so there are slow capital gains, though rental properties can yield 6% to 7% returns. Thoughts?

Tom and Rach

Hey guys,

That ‘6% to 7%’ is the gross return; let’s look at the net.

If your property is rented, say, 48 weeks per year (unlikely for a two-bedroom unit), you’ll bring in $8,160 in rent.

From that, deduct your loan repayments, agent’s fees, rates, land tax, maintenance, body corporate fees, depreciation, accountant fees … need I go on?

In a good year, you might break even.

In a bad year -- when the hot water cylinder blows up and your tenants go AWOL -- you’ll lose money.

If you lose money, you’re relying on capital growth (selling your house for more than you paid), which, as you say, doesn’t happen quickly in your area. And if interest rates rise, can you put the rent up? Probably not.

If you’re on track to own your family home in 12 years, you could probably bring that down to eight by concentrating on that, not being a landlord. When you don’t have a mortgage payment, you can really build wealth.

Scott

The Real Secrets of Success

Do you know the biggest lesson I’ve learned from answering thousands of people’s questions?

Most people ask the wrong question.

They frame it like it’s black or white. Cut and dried. A hopeless situation with no way out.

(Whether it’s true is beside the point -- it’s true for them.)

Yet every once in awhile I come across a crazy person who asks different questions. Today, I’m going to share with you three examples of thinking different, with three of the major financial decisions you’ll make: a car, a house, and a career.

The Car that Comes with a Year's Supply of Petrol

Car dealerships have their sales process finely honed.

The aim of the game is to upsell you -- that’s why each model has different price points.

Let’s take a look at the difference between the base-model Holden Commodore and the top-of-the-range Calais, which sells for $15,000 more.What do you get for that?

A wankier sounding name for starters.Leather seats, and a heater for your buttocks. Some faux-wood trim. A fancier gear knob. Alloy wheels.

“Do I deserve to have a toastie tushie?” you ask yourself.Yet you’ll make a better decision if you ask a better question: what could I spend 15 big boys on that would make me happier?This question leads to different answers. Fifteen grand could buy you:A year’s worth of petrol, insurance, registration, servicing, car washes, and pine tree air-fresheners.

Or a dirty weekend away each month for a year (with luxury spa treatments), plus a brand-new leather couch, a Sonos stereo system, and one of those over-the-top 60-inch televisions.

Or it could wipe your credit card debt, put three months of Mojo in the bank, plus pay for a slap-up celebratory dinner with an $80 bottle of hoity-toity plonk.

Or you could build a startup coffee-cart business which raises $30,000 a year and channels it to Vanuatu to help build classrooms, libraries and schools. That’s what Andrew Mellody, the 31-year-old founder of the award-winning social enterprise Co-Ground, would do.Then again, Andrew thinks differently.

The Caravan of Courage

Lots of young people complain that they can’t afford to live in a cool inner city area.

Andrew, who doesn’t draw a wage from Co-Ground, asked a better question: “How can I live in the area I love and still devote all my time and most of my money to my charity?”

That question led to an entirely different outcome. In fact, it led to him to Google Maps, where he pinpointed homes, with big backyards, in the area he wanted to live. Then he did a letterbox drop of those homes, explaining who he was, and that he’d like to rent part of their backyard for an old caravan he was doing up.

His plan worked. He got to live in his own four walls (with wheels!), in the area he wanted, for a fraction of the cost of renting. More importantly for Andrew, he got to devote his time and effort to Co-Ground, which he continues to do with impressive results.

The Multi-Millionaire Shoestring Start-up

Another mate of mine sold his financial services business and became one of the wealthiest people on the planet. (You and I are also among the richest people on the planet -- it’s just this guy is richer than all of us -- particularly after he and his partners sold the business for a nine-figure sum).

The business he sold had a thousand staff, offices around the world, and a corner office that overlooked the Sydney Harbour Bridge. Caterers would bring perfectly crafted cupcakes to client meetings, and real coffee (not from a pod).Yet it’s what he did next that’s really cool.

Having spent 30 years helping rich people get richer, he noticed that it didn’t seem to make them (or their families) any happier.

The clincher was that with the windfall from selling his business he was now in his former clients’ position. Yet instead of asking, “How do I turn this pile of money into an even bigger pile?”, he asked “How do I fix these people’s families and their finances?”

That question led him to starting a new business that helps ultra-wealthy families deal with the complexities and stresses of managing intergenerational wealth. And believe me, mix one part unearned wealth with two parts blended family, and you’ve got more drama than an episode of Real Housewives.

His business is doing pioneering work with ultra-high-networth families. He helps them create a legacy -- making meaning from their millions by helping others. He teaches people who are swimming in more money than Scrooge McDuck to spend it in ways that bring genuine joy to themselves and others, instead of living like, well, Scrooge McDuck.

You might think that if you’re targeting the Rich List crowd you’d need swanky harbour-view offices. Not so. He and his team work from their homes -- around their families. When they need to meet with their wealthy clients they use their boardrooms, or take them out to the best restaurants. “I’m having an absolute ball”, he says, “but, more importantly, so are my clients and the people they help!”

Let me close this column with possibly the hokiest thing I’ve ever written -- but it’s nonetheless true: the quality of your life, and your future success, depends on the questions you ask yourself. Ask different questions, and you’ll get different answers.

Tread Your Own Path!

Knock Some Sense into My Mum

Hi Scott

I need you to knock some sense into my mum! My parents are both in early 50s, and both have no money in super (they are self-employed and do not pay themselves any). She now says she does not want to “keep paying someone’s else's mortgage”, so they are saving madly for a house. She is looking at houses worth $600,000 with a deposit of 10%, but I am suggesting she should start paying into her super, buy a small house when we all leave the nest, and enjoy her later years (not in debt!). What say you?

Matt

Hi Matt,

You’re making total sense, and you’re totally right -- but that totally doesn’t matter. Your parents don’t want to have their dreams doused by their own son! They are thinking emotionally, while you are thinking mathematically. So take a leaf out of a politicians playbook -- get someone else to deliver the bad news. Arrange for your parents to see an independent financial advisor, who’ll surely tell them the same thing. Then just agree with the advisor.

Scott

Double Your Money

Hi Scott,

My waffle-free question is this: is Saivian a scam/pyramid scheme? I searched your website but “Nothing Found”.

Cheers,

Ian

Hi Ian,

Unfortunately I don’t keep a list of every internet scam on my website. So go to Google, right? Well, interestingly, the scammers seem to be getting better at gaming Google -- manipulating the search engine ranking so they can bury their bad press. (Even searching ‘Saivian scam’ brings up pages in which they say how good it is.)

That means you’re going to have to do something people haven’t had to do since Google was invented: think for yourself.

The Saivian website describes their service, which appears to be some form of network marketing, as “almost like DOUBLING your money in value every year by simply doing something you have always done”. Sounds like bulldust to me. Frankly, their website has a distinct ‘spray-on-hair-in-a-can’ feel to it.

Scott

Saving for Our Disabled Son

Hi Scott,

Our 18-year-old son has a disability. He is still at school and earning a pension, which provides him $18,950 p.a. We are saving all this money, and so far have $35,000 in a high-interest savings account (earning around 3%). We would like to invest some of his money wisely in an ethical fund. His income can then grow until the day he can live independently. We guess this will be over five years away. What would you recommend?

David

Hi David,

As far as an ethical fund goes, investment bank UBS has launched a series of Exchange Traded Funds (ETFs) with ethical ‘tilts’ that screen out companies involved with tobacco, weapons and Mariah Carey. Your son can earn $4,264 without the pension being reduced, so he’d need over $150,000 before there was any impact under the Centrelink income test.

But there’s also a ‘question behind the question’ here: how do you deal with the fact that, one day, you’ll be gone and your son will have to fend for himself? Depending on the nature of his disability, I’d use the next five years to teach him the behavioural building blocks of personal finance. My direct experience working with people with mental disabilities is that they have the ability to be very good money managers.

Scott

The Acorns App

Hi Barefoot,

I was wondering if you could look into ‘Acorns’ and give us your thoughts. This new investing app was on the news last week.

Thanks,

Monique

Hi Monique,

In the last few weeks I’ve had a closer look at Acorns.

It’s basically just an app designed to make investing small amounts of money easy.

The app collects small amounts from your bank account (like rounding up your purchases), so it’s like investing loose change. You can set it to regularly drag money out of your account as well. Acorns then invests your money into Exchange Traded Funds (ETFs).

My problem with these ‘robo-advice’ apps (as they’re sometimes called) is that they add another layer of fees. It’s cute if you’re just getting started (you have to be over 18 to have an account), but if I were serious about investing my savings, I honestly don’t think I’d bother.

Scott

Professional Poker Player Says “Hit Me”

Hi Scott,

I am 23 years old and play poker full time. I currently earn about $150k a year. The scary thing is, my family have come from nothing and have struggled financially their entire lives. I now have around a $250k net worth (though it fluctuates a lot) and am really unsure what to do with my money. I have zero debt, and have about eight accounts for budgeting as I am very strict on where my money goes. I also have $40k invested into Vanguard index funds. Do you have any advice?

Craig

Hi Craig,

I can help you with your finances, but with your poker playing I’ll have to defer to my good mate Kenny Rogers.

What advice would you give to Craig, Kenny?

“On a warm summer’s evening…”

Kenny -- get to the point -- we’re on a word limit here.

“Oh, sorry! You’ve got to know when to hold’em, know when to fold ’em.”

Thank you, Kenny.

Craig, you’re basically like any small business owner just starting up: you have fluctuating income but fixed living costs, and there’s a chance your business could go bust. So I’d treat your poker-playing like a business: have a set amount of capital you put into the business (and no more), then analyse the returns you’re achieving each financial year -- and only continue if it’s profitable. You should be proud of yourself -- there are very few people in their early twenties worth a quarter of a million dollars, and even less that are smart with their money.

Scott

Why Your Bank is Lying to You

Malcolm, I feel for you, brother.

On Wednesday, after the banks behaved like brats by not passing on all of the Reserve Bank’s rate cut, the Prime Minister held a press conference. He said -- essentially word for word -- the same things I say to my toddler each night at the dinner table:

“Your behaviour is just totally unacceptable. We treat you so well -- and this is how you repay us?! I think you need to explain your behaviour -- very clearly -- to your mother … because I am very disappointed in you. Now I demand that you eat all your vegetables!”

At which point my son pushes his bowl off the table and brussels sprouts go everywhere, and he grins at me as if to say, ‘and what are you going to do about it?’

Or in the case of the banks, they collude, collectively trouser $917 million … and grin even harder when Malcolm ‘demands’ they pass on the cut in full. They know he doesn’t have the mettle to put them over his knee and give them a politically incorrect spanking.

Yet the truth is, it’s not the banks’ fault for acting this way, any more than a tantrum-throwing toddler.

It’s our fault.

Just like parents, we set the rules and we decide what is acceptable behaviour:

We created these four precocious banking brats when we enshrined the ‘four pillars’ policy.

We underwrote their deposits.

And we have continually turned a blind eye to their naughty ways -- like when they rig interest rates, or when their financial planners rip off their customers’ life savings. Or, in the case of Commonwealth Bank, when they callously knock back insurance claims (like the case of the young dad with terminal cancer), simply because they can.

Former ANZ chief John McFarlane this week said he was ashamed at the reputation of our banks. "I joined the industry over 40 years ago where the bank manager was the doyen of the community".

McFarlane says that it’s no longer sufficient for banks to have an agenda "purely around shareholder value".

Easy for him to say, of course -- he retired in 2007 with a final salary of $4.2 million and a swag of shares worth $61 million. The bloke who took over from him, Mike Smith, was paid $88 million for his eight years of service -- over which time ANZ’s market value actually fell by 6 per cent. Where’s the value for the shareholder in that?

The banking lobbyists -- who I know and love so well -- will trot out the only argument they have: the Australian economy needs strong banks. And they’re totally right. The ‘net interest margin’ (the difference between what they pay on deposits and what they charge borrowers) needs to be maintained. Yet when four companies make a collective $30 billion in profits this year -- they’re in no danger of going broke.

Yes, we need strong banks, but what we need even more is strong customers.

The truth is that the banks are lying.

They can afford to give you an interest rate cut -- maybe even two or three.

You see, it costs your bank about $1,000 in marketing costs to replace you (and about six times that amount if you come via a mortgage broker they pay kickbacks to). That’s your negotiating power right there.

Here’s how to use it.On your way home from work, ring your bank and say this:

"I’ve decided to move my business over to Reduce Home Loans, who are offering me a comparison rate of 3.44 per cent. I’ve completed the online application, so can you please tell me what steps I have to do to move across my mortgage?"

This is a bluff, of course.Yet the bank’s sales team have strict targets (backed by incentives) they have to meet -- one of which is retaining profitable customers by giving them discounts to keep their business.

Sure it’s not as sexy as giving you a stock tip, but it works, and your gains are guaranteed.

Now let’s talk about another petulant child, Donald Trump.

Trump Says It's Time To Sell Stocks, Warns Of "Very Scary Scenarios" For Investors

Yes, you read that right.

The man who wants to be the leader of the biggest and most successful economy in the world is advising people to sell their stocks.

And maybe we should listen to him, because, like all things Trump does, he says he's the best.

While he’s admitted that he’s not much of a stock investor, he’s also claimed that 40 out of 45 of his stock purchases “rose substantially in a short period of time”. Analysis by Bloomberg suggests that if this is actually true it would rank him among the world’s top stock pickers.

More likely is that Trump is the Kim Jong Un of the stock picking world. The tubby leader doesn’t always play golf, but when he does he scores a hole in one, on every hole!

The world’s greatest investor of all time, Warren Buffett, is not having a bar of the Trump bulldust.

Says Buffett of Trump: “In 1995, when he listed Trump Entertainment and Resorts on the stock exchange, if a monkey had thrown a dart at the stock page, the monkey on average would've made 150% over the next decade. But the people that believed in him, who listened to his siren song, ended up losing well over 90 cents in the dollar. They got back less than a dime. I've really never known another businessman that brags about his bankruptcies.”

Yet maybe Trump has another angle for talking down the share market.

After all, according to S&P Global Market Intelligence, the performance of the Dow Jones in the three months leading up to a presidential election has displayed an uncanny ability to forecast who’ll win the White House. Historically, if stocks rise in price in the next three months, the incumbent party -- this year, Hillary -- wins the election 82% of the time. (And the opposite is true if stocks drop -- at least that’s what Donald’s banking on.)

Yet another reason to will the sharemarket higher.

Tread Your Own Path!

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.

Defence Force Housing

Hi Scott,

We’re in our late 30s with three kids (16, 14 and 5) and a household income of $220k. Here are our assets: home $350k (owe $190k), holiday cabin $40k, boat $55k (owe $20k), Mojo $10k. Our accountant is recommending we buy an investment property from Defence Housing Australia -- taking out a $400k loan and only paying $100 a week. He says we will get a bigger tax refund and set ourselves up for retirement. I want to pay off our home asap and then invest. My husband says I am impacting our retirement success. What do you think?

Jenny

Hi Jenny

First, you shouldn’t invest solely for tax reasons -- though some accountants do, which is why so many of them got their clients caught up in those awful Managed Investment Schemes (MIS) which wiped out the life savings of thousands of retirees.

Anyway, if I were looking at your situation, I’d knock off the boat debt first and then salary sacrifice into super at $25,000 each. Then I’d aggressively pay down the mortgage. If you want to invest in a property thereafter, you should buy a quality family home in a good area, from a local real estate agent.

Steer clear of packaged ‘investment opportunities’ like Defence Housing Australia (DHA). Why? Because they’re too expensive. Generally you’ll pay anywhere from a 10 to 15 percent premium for a DHA property -- and the areas they build in may not be high growth. Plus, DHA charges a nosebleed 16.5 percent management fee each year of the lease. Tell your husband that I’m on your side.

Scott

I’ve Been Nabbed!

Hi Scott,

I read your column in the Herald-Sun on Saturday (“NAB-MLC Super Funds”) and became alarmed! My super fund is with MLC (Super Fundamentals, Horizon 6 -- Share Portfolio), which it seems you were saying has one of the highest fee structures (in relation to NAB). I have around $100,000 in super -- not much, I know. Should I change it to another fund and, if so, could you suggest one or two? Thank you.

Peter

Hi Peter,

The NAB, via their MLC brand, have the biggest retail super fund in the country -- but they’re a very long way from being the best. As I mentioned in my ‘road test’ of their super offerings, they’re the Holden Cruze of the financial world: average in almost every way -- except for their fees, which are way too high for my liking. Then again, what else would you expect from a bank?

I’d draw your attention to the latest super league tables, which show that the top ten performing super funds are all not-for-profit industry funds. SuperRatings data shows that industry super funds have outperformed bank-owned retail funds by more than 2.2 per cent over 10 years. That’s not necessarily because they’re any smarter -- it’s because they charge less fees.

Scott

My Husband Says I’m Playing Defence

Hi Scott,

My husband is out of bankruptcy in March 2017. He now looks after our three kids, while I work full time, earning $120k. I have a $200k home loan (value $850-900k), credit card/car loans totalling $20k, and $90k in super (my husband has $75k in super). Is it as simple as paying off the debts and investing $30k in super (pre-tax)? What about positively geared property? My accountant tells me I have to negative gear, but I want security!

Donna

Hi Donna,

If you want security, you should do the following.

First, open an online savings account and deposit $2,000 into it -- this is your Mojo account.

Second, pay off your credit card and car loans -- that’s the best return you’ll get on your money.

Third, increase your pre-tax contributions (to your ultra-low-cost super fund) to $18,000 a year.

Fourth, boost your Mojo account to three months of living expenses.

Fifth, sack your accountant.

Scott

Credit Card Roulette

Hi Scott,

I've recently received an inheritance of $200k. My partner and I have $60k debt due to his past job loss coinciding with my maternity leave. What should we do regarding the debt repayment of $60k, creating a Mojo fund and preparing to buy a house? I have some hardship agreements with closed credit accounts at 0 percent interest -- do I repay these? And can I negotiate a lower figure to pay out my debts without damaging my credit rating for future lending? It's hard to get a straight answer from the banks!

Mary

Hi Mary,

The first thing I’d check is whose names the debts are in. If they’re in your partner’s name, and the inheritance is in your name, you may be able to cut a deal with the banks. However, part of being a grown-up is honouring your debts. If I were in your shoes I’d repay the debts in full, regardless of whose name they’re in. It’s the right thing to do.

Next, I’d open up an online saver account and deposit three months of living expenses in it ($12,000), so that you have a sense of Mojo in your life. Then, I’d deposit the rest in another high-interest online savings account and label it ‘deposit’, and continue to add to it for the next two years (even if you can afford a home right now).

In the meantime, I have a challenge for you. Over the years I’ve helped a lot of people who’ve come into large amounts of unearned money. Most of them end up blowing it -- especially people like you, who have a track record of spending more than they earn. Please prove me wrong!

Scott