Will Interest Rates Rise Eight Times in the Next Two Years?

Barefoot,

This week I nearly had a heart attack when I read in the newspaper that economist John Edwards says that interest rates may rise eight times (!) in the next two years. There is no way my family could support this on my husband’s wage (I am a stay-at-home mum), be able to service our mortgage ($550,000) and afford to put our two children through school in a few years time. Can you please tell me that this guy is joking?

Erica

Hi Erica,

Is he joking? Well, let’s see: he’s an economist. He’s middle aged. He’s wearing a sober suit, sensible glasses, and he’s not smiling. I’m pretty sure he wasn’t doing a stand up routine.

However I think he was taken out of context. Edwards is smart enough to know that no one can predict the future (least of all economists, who on the whole are no better than dart throwing monkeys). What he was trying to say was that interest rates would move higher (at some point) in the future.

Here’s the interesting thing: anyone under the age of 45 -- and that includes you and me Erica -- has never experienced a recession in their adult lives. We have no reference point for it. In fact, our only experience is that housing prices go through the roof, and interest rates fall through the floor. People think it’s normal. But it’s not … not even close.

The truth is we’re living through one of the greatest booms in modern history. Eventually it will end (though only the monkeys know when). The only advice I’ll give you is to start preparing for higher home loan rates immediately. The worst that could happen is that Edwards and I are wrong ... and you pay your home off quicker.

No jokes.

Scott

An Update on the First Home Saver Super Accounts

I’m a little ‘dusty’ as I write this.

You see, as a card-carrying DIK (Dad I Know), I don’t get many leave passes from my wife … so when I got an invitation to an EOFY (End of Financial Year) finance shindig, I couldn’t pass it up.

After all, the EOFY is the one time of the year it’s socially acceptable for bean-counters to get on the grog.

You can picture it, can’t you?

Sharon was in the storeroom dishing out Cabcharges like party pills. Craig had a shandy. And late in the night Dennis got loose and moved his superannuation investment option from ‘balanced’ to ‘high growth’.

Boom!

So today I’m a little like a bear with a sore head.

And when I’m hungover, my tonic of choice is to call Treasury and talk tax policy on behalf of a reader.

Paula’s Problem

I got this question from Paula last week:

Hi Scott,

I’ve been reading your newspaper column since I was in primary school (my dad got me into it)! Now I am studying nursing at university, working part time in aged care, and saving for a home. I am very interested in setting up a new ‘home super saver account’. However, I called up my super fund (HESTA) and they don’t seem to know much about it, and they actually said it won’t come in till next year. Can you please clear this up for me?

Paula

My first reaction was “hell, have I been doing it for that long”?

My second reaction was, on Paula’s behalf, to follow up on the progress of the First Home Super Saver Scheme (which, if you remember, I talked about in my column some time ago). What I found is that it looks about as well planned as my son’s finger-painting, currently stuck on our fridge:

“What do you think of my picture, Daddy?”

“Oh that is beautiful! It’s a …. truck … right?”

“No! It’s a picture of you and mummy riding a horse.”

“Oh, yes! So it is!”

A quick refresher for those of you in the back row:

The First Home Super Saver Scheme was announced by our Treasurer on Budget night as a $250 million air kiss to housing affordability. As ScoMo crowed on the night, by making voluntary contributions of up to $15,000 per year and $30,000 in total, “most first home savers will be able to accelerate their savings by at least 30 per cent”. For an average earning couple it’s worth an additional $12,000.

From ‘Yeah!’ to ‘Meh’

That was in May.

The First Home Super Saver Scheme is set to launch on 1 July but, like Paula mentioned, none of the super funds I spoke to had the foggiest. And after speaking to Canberra, I worked out why.

The Government has had a bit of legislative constipation — the scheme hasn’t yet been passed into law. A spokesperson for the Treasurer said they were adamant that it would be tabled in the Spring session of Parliament, and that it would be passed.

Fair enough. But, to my mind, there’s a lot of uncertainty around it.

So should you open one up?

Maybe … (and, of course, only if it actually makes it into law).

You could consider opening a First Home Super Saver if you’re planning on buying a home in the next few years, and you already have a decent deposit. After all, it could be worth $12 628 extra to an average earning couple, compared to saving in the bank. Not bad.

However, since the Government announced these accounts I’ve had a lot of well-meaning parents and grandparents — not to mention savvy young savers like Paula — write and ask about opening one up for the long term.

My advice?

Don’t touch it.

Quite apart from the fact that the Government is still in need of some legislative laxatives, what happens if the current mob is voted out and the new mob decides to ‘ghost’ the First Home Super Saver Scheme (like you did with that mummy’s boy you dated twice in 2004)?

Well, if the scheme were scrapped, it’s possible your savings could be locked up in your super till you retire.

So, Paula, all I can say right now is: watch this space.

Tread Your Own Path!

The overnight $60,000 pay rise

Can you imagine getting an immediate $60,000-a-year pay rise?

Well, that’s what happened this week to a bunch of young blokes that I work with.

Even better, the average 20-something who got the pay rise is pulling in a whopping $371,000 a year.

I’m talking about AFL footballers … who this week scored a six-year, $1.84 billion collective pay deal.

But now for the tackle: despite the serious dough they get, a lot of these players will end up kicking their finances out of bounds on the full.

It’s a worldwide phenomenon: American footy players (lycra and crash helmets) earn an average of $US1.9 million a year, but most of them are broke within three years of retirement. NBA basketball players earn an average of $5.15 million a year, but 60% of them are broke within five years of hanging up their boots, according to a fascinating ESPN documentary called Broke.

How does this happen?

Well, this week I sat down with a bloke who knows: North Melbourne coach Brad Scott.

A few things you should know about Brad: first, he’s whip smart; second, he cares deeply about his players; and third, he happens to be a Barefooter!

(Oh, and fourth, I’m helping his boys this year … with their finances, not with their footy. Obviously.)

When it comes to footy and finances, Brad has seen it all.

In fact, when he was first drafted in the nineties, he was paid an outrageous sign-on fee:

“I got seven and a half grand”, he tells me.

“… and $250 a game.”

(And, just like my sheepdog Betty, if he got rubbed out or injured … no pay.)

While you may scoff at the players’ pay rise (and pay packet), after 20 years of playing and coaching Brad knows why many of them end up broke.

Let’s start the siren.

Show Me the Money!

“Part of the problem is that everyone else thinks they’ve got it made”, says Brad.

And then he proceeds to throw cold water over the “$371,000 average wage” claim that’s bandied around in the media (and by yours truly at the start of this column).

“Look, of the 44 players on our list, only 14 are earning above the average wage, and the rest are below it … and that would be similar for all the clubs.”

And ‘below’ is actually … really low:

The minimum wage for a rookie is $71,500, and for a second-year player it’s $100,000.

Sure, good money for doing something you’d do for free … but you’re hardly turning up to training in a Porsche 911.

And herein lies the problem:

“When you’re a young AFL footballer … you get a lot of female attention.”

“And the players … well, they’re not going to downplay the image. Really, it’s not in their interests to say … ‘hey I umm, actually don’t earn that much money’.”

And it’s not just the girls. Often when the players go home they shout their mates, and their families, who all believe they’re loaded.

I know what you’re thinking at this point: “Yeah, but that’s just what they start on, they’ll soon earn the big bucks.”

And you’re right.

Brad tells me that when some young players get a sizeable contract that can mean their salary is double or triple their first pay. And that’s when the real problems begin.

He’s My Private Banker

When your income triples, so do the opportunities to spend it.

There’s no shortage of banks — with private bankers in tow — wanting to lend these players huge sums of dough, to fulfil their Instagram images.

“The average AFL player career is just three years”, says Brad soberly.

“So, yes, technically they can service the debt while they’re playing … but what happens when they stop?”

A financial shirt front. “I’ve seen it too many times”, says Brad. “Plenty of guys I’ve played with end their career with a negative net worth position.”

That’s why Brad tells his players there’s only one thing he’s really impressed by: “It’s not what you earn, it’s what you save.”

Boofhead’s Bar and Grill

The final trap for many players … the world over … is that they tend to invest badly.

“They often invest in exotic investments”, says Brad.

Generally, it’s not their idea either.

The one thing I’ve learnt from dealing with professional sportspeople over my career is that there’s always a ‘bunch of blokes’ waiting around to hip-and-shoulder them into something complex, confusing, and high risk: restaurants, bars, property developments, you name it.

And best of all?

These high-tax-paying players can be so negatively geared, they’ll be positively screwed!

The Good Coach

The AFL and the clubs understand the problems players face, and that’s why they’re investing a lot into player development. Every club employs staff whose sole role is looking after player welfare. Plus, each player is mandated to have at least one weekday off per week to focus on professional development, either study or work placement.

Before the final siren sounds, the last word must go to Brad:

“The reason I’m passionate about financial education is that I’ve seen too many players who struggle after retirement, when they should be a step ahead. The reality is that a lot of players don’t succeed in the AFL — but they can all succeed in life.”

Tread Your Own Path!

Sinking Not Swimming

Scott,

My stepdaughter is a single mum in her early forties, with two kids. She earns $60,000 working three days a week, and has never owned property. She has $10,000 saved. She wants her bank to second-mortgage my house for a deposit for her in country Victoria on a house worth $350,000. I have $102,000 in credit card debt and (at most) $100,000 equity in my house. I am struggling with my own debt but I feel sorry for her and would like to help. I am widowed from my second husband. What should I do?

Linda

Linda,

It’s beautiful that you are wanting to help out your stepdaughter ... but with $102,000 in credit card debt you are clearly not in any financial shape to help anyone. It’s like someone who can’t swim diving into the sea to rescue a drowning person. Who’s going to rescue you?

Scott

I Got This!

Hi Scott,

I want to thank you. Reading your book helped me take financial control. I am a single mum of three. But in seven months I have paid down $10,400 in debt, saved $2,000 in ‘Mojo’, put aside $1,000 for Xmas, registered my car, and purchased a new fridge and drier -- all without having to use my credit card. In 12 months I will be DEBT FREE. Thank you! I am sleeping easy at night for the first time in years and can now make a better future for my kids.

Aruna

Hey Aruna,

I can feel your excitement dripping off the page. You’re in control, you’re winning, you’re unstoppable!

You may think your kids aren’t paying attention … but I promise you they are. Well done!

Scott

After the Fire

Hi Scott,

I was in a pretty horrific accident six years ago -- most of my body was burnt after being in a car accident that was on fire. I will get $900,000 from my insurance company, though I will need to put aside some of it for my future burn surgeries.

I am going through the process of building a house with my partner. Our house and land will come to $490,000, and we will be eligible for the $15,000 First Home Buyers Grant. We both have jobs (I work casual 12 to 24 hours a week as I can’t work more than that). We own both our cars. He still lives at home and I rent with my brother. We have no debts or loans and we each have over $12,000 in our saving accounts. Honestly I am freaking out, because I am 25 and have no idea about finances or what to do with my life. The insurance settlement goes through in just under a month. What should I do?

Danielle

Hi Danielle

I’m so sorry for what happened to you. It must have been horrendous.I know it’s a lot of money, but you don’t need to freak out. You could (and probably should) lock most of it away in a term deposit for 12 months while you take stock of things. There’s absolutely no need to feel pressure. None. If you rush, you could make impulsive, emotional decisions.

Then, when you’re ready, here’s what I’d suggest you think about:

First, talk to your medical team and get an accurate understanding of your future medical costs, and when you’ll need to pay them. Overestimate. Then, if it’s in the next 10 years, keep that money in a high-interest online savings account.

Second, if you can see yourself living in the house for at least the next 10 years, go buy it (if you have enough left over after your medical costs, that is). However, I’d like you to buy it outright, and in your name only. Go and see a solicitor and have them draw up a cohabitation agreement between you and your boyfriend. He can pay you rent and you can split living costs -- which will help, given you can’t work full time.

Three, I’d keep $10,000 in a (separate) high-interest online savings account as Mojo money.

Finally, I’d invest the rest in a low-cost share fund.Good luck!

Scott

Help! My In-Laws Are Outlaws

Hi Scott,

Right now I feel completely helpless. At 21 I purchased my home and have been renting it out for the past six years. I have always been a good saver. I met my partner a few years ago and we have been planning our wedding. However I recently found out he has taken out a $50,000 personal loan on behalf of his parents as they have been struggling. They make the repayments, but the debt keeps getting bigger. Their current lifestyle exceeds their pension payments by 150%! They have a $2 million home that they have promised they will sell and repay the debt, but they’ve been talking about it for years! How can I help his parents and him make better choices and live debt free?

Emma

Hi Emma,

You’re entering into a family that’s built on denial.

You won’t change his parents’ bad behaviour. But you can try and stop your fiancé enabling it.

The big risk is that you’ll end up ‘breastfeeding’ these Baby Boomers forever.

So here’s how I suggest you should handle it:

First, both make the repayments on their debt -- but only till the end of the year. This will give his parents enough time to sell the house and repay the debt.

Second, sit down with your parents-in-law and tell them that you can’t afford it, because you’re saving for your wedding and setting up your own family. But also tell them that you -- the loving but firm daughter-in-law -- want to help them out of this temporary tight spot.

Okay, so the thought of doing that probably makes your blood boil, right?

Well, here’s the truth: you and your fiancé are already effectively paying for the debt anyway. This way you get to cover yourself in glory, amp up the emotional pressure, and shine a light on their stupidity.

Third, I’d give them a copy of my book, which will show them how they can live a comfortable lifestyle with just $250,000 combined in super.

Finally, if your fiancé wants to keep living in denial with his parents, let him. Just don’t marry him.

Scott

What I learned from reading 385 job applications

Okay, so I’m kind of weird.

This year I’ve employed six people.

It’s not supposed to be this way; just ask the Daily Telegraph:

“The chance jobseekers with little or no experience have of finding work has plummeted, with startling figures revealing entry-level positions are ‘virtually non-existent’. Graduate jobs represent a mere 4 per cent of the entire new job market, falling 20 per cent in the past five years.”

Uh-huh.

When I talk to people (especially graduates) they bitch about how tough it is to get a foot in the door:

“It’s impossible to get a job without experience!” — “I can’t even get an interview!” — “How do I stand out?”

Yet, amid all the complaining, there are enterprising people quietly landing jobs … like the six I’ve hired this year.

And they didn’t have relevant qualifications, or fancy résumés, or stellar interview skills.

So what made them stand out? And how can you do the same thing?

Today I’m going to answer those questions, using one of my recent hires as a case study.

First, let me set the scene:

I had 385 applications for a producer role at Barefoot.

But I didn’t ask for résumés. Reason being, most people lie in résumés (and If I want to be lied to I can read Donald’s tweets).

And I didn’t ask for qualifications, or experience, because they don’t necessarily mean they can do the job.

And I didn’t even talk to them. Some people are excellent at talking about a job (you’ve been in meetings with these people), while others excel at interviewing for a job (because they’ve done a lot of interviews!). But, again, it doesn’t mean they can do the job.

As a boss I have an itch I need scratching, and all I care about is how good you are at scratching it (and not in a weird way).

That’s why at Barefoot we’re famous for long online surveys where we get candidates to do the actual task we’re hiring for. And, not surprisingly, a lot of people give up. (That’s part of the plan.)

Now, a confession: I don’t read through an entire application to work out what’s special about you.

No-one else does either. Recruiters spend an average of six seconds on each résumé, according to Time magazine. (Admittedly that sounds like a bulldust statistic. Personally, I spend about 18 seconds.)

Instead, I use a favourite tactic of many business owners: I put in a ‘hidden question’ that I go straight to, so I can do an initial cull. Then I read the ones I haven’t culled.

Now this may seem a hard-nosed way of doing things. Game of Thrones almost.

But I think it’s the most egalitarian way of employing people: I don’t care if you’re male, female or androgynous, how old you are, or where you’re from. All I care about is how good you are.

It doesn’t suit everyone. I once had a senior journalist contact me to apply for a role. We’d worked together years back, and he was a legend in his own lunchbox. Here’s how our phone conversation went.

Journalist: “I see you have a job going … I think I’d be perfect for it.”

Barefoot: “Sure! Just fill out the survey on the website.”

Journalist: “Really?! I mean, I have 20 years’ experience, so I am clearly very qualified.”

Barefoot: “You’re right. No need to do the survey.”

Journalist: “Great! So when would you like to meetup to discuss the role?”

Barefoot: “Never.”

As a postscript to this story, a few months later he did the survey … and his answers sucked.

He’s now working for a competitor of mine, bless his cotton socks!

How to Stand Out From the Crowd

So let’s talk about the person who actually got the position. How did she stand out?

Firstly, she got my ‘secret question’ spot on. She realised there was a question behind the question — so rather than giving a short answer, she explained her reasoning in detail, showing me she knew her stuff.

Second, she joined the Barefoot Blueprint to see if she’d be a good fit — and figured out what I needed to hire someone for. That showed initiative.

Third, she linked me to her profile on the freelancing site Upwork, where she’d done a few jobs in her spare time — which told me she didn’t mind hustling for extra work, she could manage her time, and she could get things done.

None of these things took her long to do, but they paid off in a big way.

Now, I know what you’re thinking: “Okay, Barefoot, but I want to work for Company X, where they have a hiring process with real résumés and real interviews. So your advice doesn’t apply to ME.”

I thought you’d say that. So let me tell you how you can use this strategy no matter what job you’re going for.

Barefoot’s Advice to Jobseekers

My ‘secret question’ technique is ruthlessly efficient: it forces you to show how you can do the job at hand.

And that’s the secret to any job application.

All any employer wants to know is this: “Can you do the job, or not?”

So get to the point.

Ask yourself: what are they actually asking for? What do they truly need done? What’s the real job here?

And then make sure your answer (or your résumé, or interview) addresses that.

What you want to say is: “Here’s the job. Here’s why I can do it better than anyone else. Here’s evidence of how I’ve done it in the past.” Show them, don’t tell them.

Here’s you: “But Barefoot, I don’t have any experience.”

Here’s me: “Well, go and get some. Freelance on the side. Volunteer. Heck — offer to do the job for free for two weeks to prove you can do it.”

Yes, it takes a bit more elbow grease than submitting the same résumé to 56 applications on Seek.

But if you do this, you’ll be irresistible to any employer … and you’ll be too busy getting job offers to complain about how few jobs there are.

Tread Your Own Path

Something I Said I’d Never Do

Hi Scott,

I am 28 and and earning $70,000 a year. I am also $10,000 in debt because I did something I said I would never do: took out a personal loan. I have been desperately trying to pay it off, but it seems with every fortnight’s pay something comes up -- my car needed servicing, my bed broke, and now I have to buy an expensive bridesmaid’s dress. I feel overwhelmed, like I am never going to get out of debt.

Gemma

Hi Gemma,

You haven’t actually asked me a question, so I can only assume you are wanting me to:

a) Listen empathetically as you vent about your first world problems, while I gently stroke your hair and whisper “it’ll be okay, honey”.

Or,

b) Give you a kick up the backside.

I’m going with option B.Y

ou say you’re “desperately” trying to get out of debt, but I’m calling your bulldust.

Make a freaking decision!You’re either totally committed to getting out of debt, or you’re not. It’s this indecision that’s causing your overwhelm.

Once you’ve made the decision that you absolutely, positively will get out of debt, the rest is a cakewalk:

If your bed breaks (not a bad problem to have in your 20s by the way!), all you do is lay the mattress on the floor until you can afford to buy a new one. Simple!

If you’re asked to be a bridesmaid, you tell the bride that you can’t afford it. Or tell her that it’s such an honour that you’ve decided to work overtime for the next 12 weeks to pay for it (and make your additional extra debt repayments).

Here’s the thing that no one tells you about getting out of debt: it’ll build a confidence in you that will change the course of your life. Just ask Chris.

Scott

I Got This!

Hi Scott,

I spent my twenties telling myself I could never afford to own a home, so I just spent my money. Then I started reading your stuff. When I saw that even singles on the minimum wage could make a go of it, I kicked myself in the backside. I got a better job where I could put in heaps of overtime, I sold my car, and I set about paying off my personal loans (plural, because I was still paying for the car before it too!). I stopped using drugs (all of them, massive effort) and I saved.

I found a sense of self-worth, pride and confidence. I met an amazing woman, and we bought a house together. We have a small mortgage on a beautiful home, and no other debt. We own shares (something else I thought was beyond my reach) and we have cash in the bank.

We will pay our home off just after my 45th birthday -- I am 33 now. We got married two months ago, we have been on holidays together (I never had money to travel before) and now I am moving into a new career over a period of a couple of years because it is time to spend my days doing something I enjoy rather than something that pays me enough to survive. And all this in just under five years, with so much time left to achieve more. Thanks mate, you changed my life.

Chris

Hi Chris,

I didn’t do anything.  That’s what happens when you give up your excuses, and fully commit. Well done!

Thank-you for reading.

Scott

I won $250,000 on a Gameshow

Hi!

Recently, I was lucky enough to win $250,000 on a gameshow! Since winning, I have paid off a loan I owed my dad and and put the rest into our mortgage -- the house is valued at $320,000. I have just bought a new car and paid for it out of my home loan. The balance is now $95,000. We intend to start a family inside the next 12 months and are scouting for investment properties (we earn $110,000 combined). I am very excited but also confused about whether buying another property is wise at this point in our lives.

Mike

Hi Mike

Congratulations for winning Family Feud and killing Channel Ten (just kidding). If I were in your shoes, and planning a family within 12 months, I’d focus on three things:  First, boost your pre-tax super contributions to 15 per cent of your gross income.  Second, save up three months of living expenses in a Mojo account. Third, take a baseball bat to your mortgage. If you can be debt free by the time your first kid goes to school, you’ll have dramatically less Family Feuds.

Scott

Pregnant and Dumped

Scott,

My husband left me two months ago. I am 24 weeks pregnant with our third child. Since having our first child five years ago, I have been on maternity leave, doing home duties and working one day a week, as it was agreed I would stay home while he worked. Now he is gone and I have all the bills to pay. He is not paying child support as yet, so I am reliant on my Centrelink payments and one day of work. I am a smart woman who just wants a financially secure future for myself and my children. Maybe it is just ‘baby brain’ but I honestly do not know where to start.

Kate

Kate,

I can’t imagine the stress you’re under. Given you’re in the final trimester, you need to focus on just a couple of things: close off your joint bank accounts and credit cards, and apply for a Child Support assessment with the Department of Human Services to see how much your ex-husband needs to pay you. Then, seek legal advice immediately.

Scott

I Got This!

Hi Scott,

I have suffered with chronic alcoholism and drug addiction my whole life. Father not present, nor any real family. Mum (the main provider) died suddenly when I was in my mid-twenties. Never really holding down a job, I faced being homeless. Very scary times.

But I took control. I cleaned the family home and rented it out. This gave me space to go to rehab. I was there for 18 months and re-learnt everything -- how to live, how to look after myself, how to be accountable -- and I have been 100% sober now for five years. I also went to TAFE, and secured a role in sales at a contact centre. I have held that job for three years now and have been promoted to managing a team of sales reps.

Earning around $80,000, I have some money to invest, so I have got onto your newsletter and am learning more each day. I now have $40,000 in my ‘Grow’ account and an investment portfolio worth $27,000. I am proud to say I have just built my brand-new home, and am renting out a room to subsidise costs. I have also been overseas six times in the last two years. I took control of a very scary situation at a very uncertain time in my life. I am now living the life of my dreams -- a far, far cry from the person I was when my mum died.

Bill

Hi Bill,

You’re a shining example of how anyone can tread their own path. Your mother would be proud. You got this!

Scott

Am I Going to Lose Everything?

Hi Scott,

About 18 months ago I put a $15,000 deposit on an off-the-plan apartment. The idea was to sell my home for the same amount as the apartment and move in. But I have not sold my home and it is now worth less than the apartment. I have been caught by the development finishing six months early, combined with a flat housing market in Perth.

I asked for an extension and got 30 days from settlement, but after that I get penalised. So can I legally get out of this deal, or can they just bankrupt me? I only have my house, my car and a very little super, as I had a stroke in 2002 and used my super then. I also get easily bamboozled due to the stroke.

I work two days a week and am on a disability pension, earning approximately $44,000 per annum. I am 71 (and single), so my ability to get a loan or pay one off are minimal. Please help me -- I cannot see any way out except one, and that would leave a big mess for my children. I would not do that.

Jenny

Hi Jenny

You’re definitely in the dung ... I just don’t know how deep you are.Now, some people believe they can walk away from an off-the-plan development and only lose their deposit.

Yet that’s not always the case.

Ultimately it depends on what’s in the contract you signed, and how desperate the developer is … and given Perth apartment prices are cratering at the moment, I’d wager they’re as desperate as I was at my high-school formal.

The worst-case scenario is that your developer swallows your deposit, hits you with financial penalties for not settling, and then sues you for the losses of on-selling your apartment (when they eventually find a buyer).

But that’s all in the future, maybe.

Let’s you and I just deal with the next 30 days.

It’s highly unlikely you’ll be able to settle in the next month, and it’s also highly unlikely you’ll get bridging finance. So here’s my advice: see a lawyer immediately.

Let me be crystal clear, Jenny. Put down the newspaper. Pick up the telephone. Call a lawyer.

Have them review your contract, then ask their advice on mounting a case for being released from the contract due to your impaired judgement.

What are you doing still reading, Jenny?

Get on the phone. Now!

Scott

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

Rich Girl Loses it All

This week we’re going to do something a little different.

See, right now, the newspapers are full of the tragedy. It’s desperately sad and heartbreaking and futile all at the same time: but the fact is, none of us can control the acts of terrorists.

So this week I’m going to focus on things you can control. I’m going to introduce you to three Barefooters — readers of this column. Each of them reached a turning point in their lives — a teenage rich kid who suddenly found herself homeless, a go-getting bloke whose financial advisor almost ruined him, and a woman who stared down her violent husband.

But the real story … is what they each chose to do next.

Rich Girl Loses it All

Courtney grew up an only child in a middle-class family.

By her own admission she was extremely spoilt, always getting whatever she wanted, whenever she wanted.

Yet when her parents separated, when she was 13, her childhood ended and things unravelled — quickly:

Courtney went to live with her father in January of that year. Tragically he suddenly and unexpectedly died in September of the same year. So she moved in with her mother.

Courtney knew that one of the reasons for her parents’ break-up was her mother’s drinking. Yet what she didn’t know was that in the year since the separation her mother had turned into a full-blown alcoholic, drinking from the moment she woke up until she passed out.

A few weeks after Courtney moved in, her mother abruptly took her keys and kicked her out. At age 14, she was homeless. For the next five years Courtney spent time on the streets, in refuges, couch-hopping, and in and out of government housing.

At 19, with $1.92 in her bank account, Courtney reached crisis point. Here’s what she did next.

“I went back to school and completed Year 12. I surprised myself when I got good enough marks to get into uni, where I’m currently studying commerce. I can only do it part time, because I work to support myself. Along my journey, I have read every single one of your newspaper columns. I have 412 of them marked ‘financial’ in case I have to re-read any of them. I feel like Barefoot is the financial parent I never had.”

The Go-Getter

Mick was always a go-getter.

He didn’t want to live an average life like other people. And the key to living the life of his dreams was to build wealth, so he hooked up with an equally go-getting advisor.

Over the next few years, Mick’s advisor took him down the ‘borrow to invest’ path, and go-gettered him from one investment turd to another.

He was losing money. The interest payments were crippling. The stress began to jeopardise his marriage. Mick had reached crisis point. Here’s what he did next:

“One day, while up in the mountains (must have been the fresh air), the penny finally dropped. My wife and I decided there and then to become debt free and take control of our lives.

“The first thing we did was dump the adviser. Then we offloaded the crap he’d signed us up to — the margin loan, the costly managed share funds. And then we paid off our house — in three years — and began stashing cash into super, into an index fund, and buying shares in low-cost index funds.

“Until we became debt free, I had no idea just how much of a burden it is. The best advice I could give anyone is to follow the Barefoot principles and KEEP IT SIMPLE. We all work too hard for our money to blow it by making mistakes. Funny, but through my mistakes I found financial freedom.”

He Has No Hold Over Me Anymore

Sandy was happily married for 10 years, and had two lovely children.

Three years ago she was sitting in the backyard when her husband announced, “I want a divorce”.

Like every woman who faces this situation, she was terrified:

“How am I going to support my kids?”

That fear stopped her from ‘rattling the cage’ for the next two-and-a-half years.

It kept her from having the courage to leave the house (or boot her husband out). And whenever she tried to broach the idea of finalising a property settlement he would threaten to not pay child support. Sandy knew he was controlling her. She knew she had to stand up and take care of herself. And then one night he became violent.

Here’s what she did next:

“It wasn’t until I read Scott’s book that I fully believed I could do this on my own. Now I’m taking back control. True to form, once my husband wasn’t getting his own way, the child support ceased. However, I’ve now sorted my buckets and I’m days away from the property settlement being finalised, which will allow me to purchase a home on my own.

“I’m also looking at investing for the future for me and the children. My plan is to be financial independent and not reliant upon what child support he deems fit to pay. I used to rely on it, but now — if I receive it — it will be a bonus that goes into the Grow Bucket for my children’s education.”

You Have More Power Than You Think

What I love about these stories is that they’re so different, but they share one similarity: each person found themselves in deep trouble and then took control of their situation — and changed it.

Over to you.

Tread Your Own Path!

You Ripper!

Barefoot,

I just wanted to tell you about my latest Barefoot Date Night. Like you advised I rang the bank, followed your script, and they reduced my rate from 5.35% to 4.54%, all in a six minute phone call!  I was sceptical at first, but now I'm over the moon on the outcome of the phone call. Thanks again mate!

Daniel

Hi Daniel,

Well done man!

And to encourage everyone else to follow your lead, here’s my “$22,064 Phone Call Script” from my book:

You: Hello, my account number is ______. I’ve been with you for ___ years, but I’ve applied to refinance with UBank. Their rate is ____ per cent, which is a full ___ per cent cheaper than you’re charging me. Given our longstanding relationship, I’d like you to match the offer—or send me the forms I need to switch to UBank.

Bank rep: One moment, please.(You’re bluffing, of course. However, the bank’s sales team have strict targets, backed by incentives, that they have to meet—one of which is giving profitable customers discounts to stop them leaving.)

Bank rep: We can’t match the rate you have quoted. However, we understand you are a valuable customer, so we would like to offer you a 0.15 per cent discount.

You: That’s not good enough. I’ve already got conditional approval … so in order to stay I need at least a 0.5 per cent discount. Could you please speak to your supervisor? I’m happy to wait.

Bank rep (a full six minutes later): On reviewing your case, we can offer you that 0.5 per cent discount on your current rate.

You: Brilliant! Please send me an email confirming the new rate and confirming that it will be applied as of start of business tomorrow.

Scott

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

Barefoot Confessions

Hi Scott,

I am 25 years old, newly married. I am the worst spender I know. I have about $8k debt that my husband doesn't know about.We want to start a family but I'm worried I’ll get stuck as a stay at home mum and be in debt forever. I can’t control my money. I want to pay off my debt and get my finances into order but I don't know where to start. I really need your help.

Jessica

Hi Jessica,

Where do you start?

You’ve already started, by admitting what’s going on in your head. Now you need to share it with someone who can help you -- your husband. The way you’ll get out of this mess is to fess up to the man you married, and tell him what you wrote to me: that you’re worried about being stuck as a stay at home mum, that you’re depressed, and that you self medicate by spending (okay, you didn’t say that -- I did).

The good thing is that you’re fronting up to him with an $8,000 debt. That’s not a lot of dough in the scheme of things. If you work together as a team, you can pay it off by the end of the year.

However, let me give you this warning: if you continue to keep this a secret from your husband, things are going to get a lot worse. Your debts will grow in line with your depression. The truth is that your current financial situation is a symptom of what’s going on in your head.

Luckily for you, you have a bloke that loves you, and wants to help you.

Let him.

Scott

My Sister is Scamming My Dad

Hi Scott,

My dad has gone guarantor on a loan for my sister and her partner, so she could buy a property worth over $1 million. I know she has at least two other properties that dad probably does not know about; all of which she could have sold to overcome her "financial woes". She has been conning the family out of money for years. It is highly likely dad will not outlast the life of the loan. My question is: can the bank hold up the process of settling the estate because of the guarantor thing? Dad's plan was to evenly split his estate between all his children and give some to charity but there won't be anything left if my sister has her way!

Megan

Hi Megan,

To answer your question correctly, I’d need to read both the bank guarantee that your father signed, and his will. Yet that’s a job for a specialist estate planning lawyer, who can take into account all of these issues and plan your father’s wishes accordingly. The only problem is, a lot of men don’t like thinking about their wills (some believe it’s tempting fate).

So you need to give your old man a bit of motivation. If I were in your shoes, I’d give him the heads up: as it currently stands the reading of his will may resemble a scene from the Game Of Thrones. Gently explain to him that it will be much better if he sets everyone straight now once and for all … no matter what he decides to do with his money.

Scott

The Chicago Bull

Hi Scott,

I have a terrible credit rating. I'm 45 and only have a couple of thousand dollars in savings, and $6k in super. I also have have $15k in credit card debt. I earn $800 a week. My question is, when is the right time to enter the housing market?

Chris

Chris,

You’re like a middle-aged tubby little fella limbering up to have a crack at the NBA! Dude, you’ve got no savings, fifteen grand in plastic, and you’re earning below the average wage. Right now you’ve got as much chance of buying a house than being drafted to the Chicago Bulls. So let’s keep it real. You first need to increase your income, then knock out your debts, build up your savings, and only then will you be ready to shoot for the stars.

Scott