Should I Sell My Investment Property?

Scott, I’m torn!

Back in 2008 I bought my first home for $126,000. I have paid it off since then and started renting it out in 2012, when I moved into my husband’s home. My rental property is now worth about $150,000 and, to be honest, I do not think it is ever going to rise much in value. The only upsides are that it is relatively easy to find tenants for it ($220 per week) and I make about $5,000 a year from it. I am considering selling and using the proceeds to invest in shares, and to renovate our home. Or should I just keep it? It would be nice to rent it to a single mum with four kids!

Ally

Hi Ally,

What an awesome achievement!

In years to come, how powerful would it be to show your kids -- especially your daughters -- the home that Mum saved up and bought on her own, before she met Dad? Who cares if it’s a poky little joint? Stories are powerful, especially for kids.

Having said that, if you’re not emotionally invested in the property, I’d probably sell it, cop the tax, and move on.

What tax?

Well, it’s likely you’ll be up for capital gains tax (CGT), though you’ll only pay it on any gain you’ve made since 2012 (when you moved into your current home). Better yet, that capital gain will be further discounted by 50 per cent as you’ve held the property for over 12 months.

So why sell?

Well, you’re already questioning the likelihood of future capital gains, and you wouldn’t hold on to it just for the 3.3 per cent rental yield ($5,000 a year). Besides, let’s face it, being a landlord can be a triple pain in the rump -- hello renters, repairs, and real estate agents.

If I were in your shoes, I’d sell the place, make a tax-deductible donation to a woman’s shelter in your area, spend as little as I could on renos on your current home, and put the bulk of it into super.

Scott

Amazon wants the keys to your house.

Oh, and the retail giant also wants to install a camera at your front door to track people coming in and out.

Seriously.

‘Amazon Key’ is a security camera and locking system that lets you get deliveries inside your home when you’re not there.

Here’s how it works:

When the Amazon delivery driver arrives at your front door, he (or she) scans your package. If the package is approved, the door unlocks, and the camera starts recording. Now here’s the cool part: you can watch the delivery driver from your phone … and apparently even talk to them:

“Put the ice-cream in the fridge please cobber.”

After the driver has dropped off the package, the door automatically locks behind him. (And if you’re busy working you’ll get an email with a recorded video of the drop-off.)

Amazon Key costs $249 and is currently available in 37 cities across the US — but if it’s successful you can be sure it’ll be quickly rolled out here in Australia.

Righty-o. So what does this all mean?

First point: this is just another reason that Amazon is fast becoming the ‘everything store’.

In the coming months Amazon Home Services is rolling out 1,200 different services — from cleaners to dog walkers — who will all sync into the Amazon Key system.

The bottom line for Aussie businesses is brutal: if you don’t have the chops to compete globally, then the best companies in the world will eventually come Down Under and cut your lunch (and most likely deliver it by drone).

Second point: is this ‘1984’?

Are consumers seriously going to allow a conglomerate to set up a camera in the privacy of their homes?

Sure!

In fact, Amazon Key perfectly complements Amazon Alexa, the voice-activated speaker that is constantly listening in to your conversations (and awaiting your Amazon orders), and the cute-looking Alexa Alarm Clock, which has an in-built camera and microphone (in your bedroom!).

Yeah, but what about letting strangers into your home?

Well, think about the intricate security system most of us have now: you keep a spare key under the doormat so that Sally (surname unknown) — the cleaner you met for 10 minutes as you showed her through your pigsty of a home — can get in. Good old Sally wouldn’t use your toothbrush to clean the toilets, right?

… Hang on, give me that security camera!

Tread Your Own Path!

Romantic Comedy or Horror Movie?

Hi Scott,My partner comes from a wealthy family. We are engaged, are having a baby, and have joint finances. Four years ago he was briefly engaged to someone else and he bought a house with a $50,000 inheritance from his grandfather. At the time, he and his parents agreed to a caveat to protect his asset from her. Wise move, and it worked. Fast forward to now, and I have been jointly paying for this same mortgage for a long time, on my wage of $110,000 a year. We want the caveat removed; they don’t. Advice?

Tess

Hi Tess,This sounds like the plot of a made-for-TV romcom. You meet the man of your dreams, but his meddling parents don’t approve of you!While I’m only getting your side of things, here’s what I’m reading:One: it was originally your fiancé’s inheritance, so it’s his money, not his parents’ money.Two: you’re now helping pay off the mortgage, so your name should be jointly on the title, if it’s not already. What’s more, if you can get the caveat lifted, you may find that you can get a cheaper deal on your mortgage.Three: the difference between you and his last squeeze is that you’re pregnant with his child -- their grandchild.In other words? Dude’s on the hook for 18 years, as Kanye would say.Besides, in the grand scheme of things, $50,000 isn’t a huge amount of money -- it’s more about the principle of your in-laws treating you like a fly-by-night floozy who’ll one day shake down their son.My advice? Just like in all good romcoms, your fiancé needs to stop being a mummy’s boy, stand up to his parents, and defend your honour!Thank-you for reading,

Scott

‘Zero Balance’ Is a Trap

Hi Scott,

I need your help as I am 34, on maternity leave and near broke … though still inspired by my five-month-old baby. I should be secure, relaxed and focusing my energy on the bub (despite the sleepless nights). The trouble is, in my 20s I racked up credit card debt to the value of $7,000. Years ago I took out a ‘zero balance’ transfer to another bank and it has now grown to $17,000! I am ashamed, but have come clean about it with my partner. He just handed me your book and I am now in ‘debt domino’ mode, gradually paying it down on my $88,000 wage. But what else can I do?

Natalie

Hi Natalie,

Well done for facing your debt demons. Trust me, everything gets easier from here.

Doing the Debt Domino (paying off your debts smallest to largest) will build up your self-confidence while systematically knocking down your debts.

However, before you start knocking down the dominoes, I’d like you to check how long it’s been since you made a repayment. Reason being, if you haven’t touched it for six years you may find that it’s a ‘statute-barred’ debt and you may not be legally required to repay it (note: your credit rating will be shot if you don’t pay, but that will eventually go away too).

Now, do me a favour and pass me over to your partner. Go on, do it. I’ll wait. Hey, Champ!

Well done for giving your partner my book -- it’s a great first step, but you need to do more.

See, this amazing woman is not only the mother of your children, but your partner in life. You need to work together on knocking out these debts as a team. There’s only upside for you: first, you get out of debt quicker; second, you build strong financial habits that will ultimately change (or prune) your family tree; and third, you’ll have a happier wife … and a happier life.

Scott

How Should I Save for My Baby?

Dear Barefoot,

Firstly, I want to say thank you. I have been following the Barefoot system and this year my husband and I got pregnant with our first child! I am self-employed and had planned to work until a few weeks before he was due and then take advantage of government maternity leave. But he had different plans and arrived 10 weeks early; he’s still in the hospital ICU but thankfully doing well. More so, thanks to your book, we have two months of living expenses saved up and therefore can focus on our amazing little man rather than worrying about work. My question is: a friend has suggested that, rather than buy him gifts, we should drop some money into an account for him -- is Westpac’s ‘Bump Account’ worth looking into?

Emma

Hi Emma,

I don’t know what you’re thanking me for -- you did all the hard work.

(Then again, I have always said that Barefoot Date Nights are a wonderful aphrodisiac … and given we’ve sold 480,000 copies … that’s a lot of lovin’ going on.)

Now, to your question.

The Westpac ‘Bump Account’ really should be called the ‘Dump Account’, because it seriously has a stronger stench than your little one’s nappy.

Here’s how Westpac puts it:“On our 200th anniversary, every child born in 2017 is eligible for $200. If your parent opens a Westpac Bump Savings account in your name, we’ll deposit $200 into it which you can withdraw when you’re 16.”

Okay! Let’s rip off that soggy, boggy nappy off!

First off, you (the parent) have to wait 16 years to get the money.

Second, you’re dropping your kid into the bank’s sophisticated marketing funnel -- which will go into overdrive when they’re 16, rebellious, possibly Emo, and desperately lusting after a new iPhone 24.

Third, the interest rate they’re offering is trickier than a teething poo:

The base interest rate is a stinker 1.5%, and to get the advertised rate of 2.3% you’ll need to make a monthly deposit, ensure your account balance is higher at the end of the month than at the beginning, and keep your balance above $0 at all times.

Finally, and most importantly, if you’re saving long term for your kids, you’d be better off investing the money into shares via a low-cost index fund or a listed investment company (LIC).

In other words, dump the Bump -- your kid can do better!

Scott

My $297,641.32 … errr, investment?

The first time, my wife flung her arms around me and, through tears of sheer joy, whispered “we’re pregnant”.

The second time, she raced up behind me and squealed with delight.

The third time, she pushed open the bathroom door, locked her eyes on me, and pitched the plastic preggo stick square at my noggin. (To be fair to her, it was a Friday night and I’d just got home from the pub … so I wasn’t exactly on my A-game.)

That was twenty-two weeks ago.

For the record, we’re over the moon to be having a new baby … it’s just that Liz was wanting a few months before going back into the ‘baby bubble’. (Fun fact: at our pre-marriage counselling session, Liz put down that she wanted three kids … I put down six. Time will tell who wins.)

Here’s one thing I do know: unlike buying a slab of beer, it doesn’t get cheaper the more kids you have. According to a study by Suncorp, the average Australian parent spends $297,600 raising a child to age 17.

Hang on — $297,600? That’s a very specific number. Maybe Simon from Suncorp followed Junior around with a Casio every day of his life. And then on his 17th birthday Simon hit ‘equals’ and triumphantly announces, “You cost me $297,641.32! But hey, I’m your dad, so let’s round it down to $297,600.”

Either way, it’s a huge number.

Worse, Suncorp’s research suggests it costs $984 per month for the first two years of your child’s life. That’s a huge whack of dough for any young family, let alone for those of us who want six kids (no wonder Liz threw the stick at me!).

So in celebration of our currently baking baby, this week I’m answering questions from new parents and parents-to-be.

Tread Your Own Path!

Burning Through the Bucks, Baby

Dear Barefoot,

I am 35 and engaged to the most generous guy, who I love. But we have spent $31,000 in two months! We earn $330,000 p.a. combined and have equity of $850,000 in our two properties, which we will sell next year so we can get a nice home with a small mortgage. Recently I did an audit and found we had spent $31,000 on … nothing! Meals out, weekends away, events at home, clothes, bond, removalists, some double rent for a period. I want to be debt-free in five years. Kick us up the pants!

Amanda

Hi Amanda,

Honestly, on your income you probably don’t need a kick up the pants -- you’re going to be fine ...… so long as you continue earning $330,000 a year. But if the money dries up, things can go into reverse pretty quickly.

It’s a three-step trap that I’ve seen plenty of high-income earners -- doctors, lawyers, footballers -- fall into:

First, buy expensive toys (boats, cars, and cash-draining McMansions).

Second, spend like a Kardashian -- and only invest in money-losing ventures that ‘lower my tax!’.

Third, get hit with one of the big D’s: divorce, disease, disability … or a downturn where you lose your income.

It’s more common than you’d think: recent research from Digital Finance Analytics (DFA) found that 30,000 households living in wealthy suburbs like Sydney’s Vaucluse (median price $4.5 million) and Melbourne’s Brighton (median price $2.6 million) are at risk of defaulting on their debts.

Truth is, wealth isn’t what you earn, it’s what you save.You want to impress me?

Don’t humblebrag about the $31,000 you’ve peed into your Prada handbag over the past couple of months.

As financial philosopher Shania Twain says, “That don’t impress me much”.

Instead, buy a house you can afford, pay it off, then show me your plan for how you will eventually replace some of your income through passive income, i.e. your investments.

Thank-you for reading.

Scott

The revolution starts with you

The Commonwealth Bank is under fire (again).

This time it’s because CHOICE magazine called for the CBA’s Dollarmites school banking program to be banned.

(For the record, I’ve been banging on about this issue for the best part of a decade, including two years ago when I fronted a Senate Inquiry into Banking and argued that Dollarmites should be banned.)

Anyway, CHOICE said that Dollarmites is essentially a marketing scheme that pays schools kickbacks so they can weasel their way into classrooms and flog their products.

The CBA also gets to promote their own special North Korean-style financial education in the classroom, complete with corporate-collared cartoon mascots like ‘Cred’ — short for credit card — who has the tagline ‘Cred’s a cool dude’.

In response, the CBA has said they’re ‘holding a review’ into the program.

Yet, as the honourable John Howard will attest, you never hold a review unless you already know the outcome.

Mark my words, the CBA has absolutely no intention of giving up Dollarmites.

That’s because it is, quite literally, the most successful marketing campaign in Australian history: over the past 85 years, millions of Aussie kids have innocently been siphoned into the bank’s marketing funnel. Many of them got credit cards when they turned 18, and became ‘cool dudes’.

As a sign of just how strong the Dollarmites program is, today almost half the Aussie population open their first account with the CBA. Westpac, though, are trying to get the generational jump on the CBA — by focusing on the foetus, with their recently released ‘Bump Account’ (I promise you I am not making this up).

And it’s rumoured that ANZ will soon launch a ‘Sperm Account’ that targets responsible tadpoles who don’t want to be caught without ATM access during the fertility process. (Okay, so I made that one up. But don’t be surprised if, a decade from now, CHOICE is calling for the banning of the Sperm Account).

So if the CBA is never going to voluntarily get out of schools, what can we do?

If you ask me, we need a parent-led revolution.  
Starting with this question …

Tread Your Own Path!

Talking kids and money with Jenny Marchant on ABC Mornings

I was on the air last week with Jenny Marchant from ABC Mornings discussing teaching kids about money.

Have a listen below if you missed it.

It’s 2am and I Can’t Sleep

Hello Barefoot,

I am typing this at 2am -- I cannot sleep. My husband and I have a household income of $200,000 and have three small kids -- but we never see them, as we work in the city and live 60 kilometres away. The three-hour daily commute is taking its toll on us all. The house is great, and affordable, but a long way from work. Yet moving to a house big enough for all five of us that is close to the city would put us into mortgage stress. We are stuck -- what do we do?

Jenny

Hi Jenny,

Do you want the money or the box?

On one hand, a study from a university in Sweden found that relationships where one partner commutes longer than 45 minutes are 40 per cent more likely to end in divorce.

On the other, Deakin University Emeritus Professor Robert Cummins and his team have found that financial insecurity (read: mortgage stress) produces similar feelings to that of physical torture.

And you’re stuck in the middle!

Or are you? You see, it may not feel like it -- especially at 2am -- but you do have choices.

You can choose to ditch your commute and seek out jobs closer to home -- even though they’re likely to pay less. (Perhaps one of you could try this option while the other continues to commute.)

Or you can choose to spend less, and spend more time with your young kids. This is what I’d work to if I were you.

Besides, the proof is in the pudding: the Australian Wellbeing Index has repeatedly shown that people living in regional Australia (Woop Woop!) are among the happiest people in the country.

Happy travels.

Scott

Dump the Dollarmites?

Dear BFI,

My kid’s school is considering school banking, and someone suggested Dollarmites. I bit my tongue while screaming NOOOOOO inwardly. I want to attend the next meeting armed with my Barefoot ‘bible’ and strong arguments against Dollarmites, but I also need to supply an alternative. Someone else suggested school banking with Bendigo Bank, but what would you suggest? I want to educate our kids about finance, not set them up for financial ruin.

Melanie

Hi Melanie,

As Jenny from the Block would say, “You go, girl!”If I was at your P&C committee, here’s how I’d lay out the argument.

First, let’s look at this from the school’s perspective.

The CBA has said that it pays the average school $400 a year in kickbacks. That’s a great deal for the bank (after all, bank tellers get bonuses for signing up accounts). Yet it’s a crummy deal for even the most cash-strapped school.

Second, let’s look at it from a parent’s perspective, who are the ones putting the money in.

The CBA Youthsaver account pays a pretty attractive 2.29% per annum (*).

* Welcome to banking! If you fail to make at least one deposit a month, or if you make even one withdrawal, you’ll get a not-so-attractive 0.01 per cent. And if you forget about the Dollarmite account after a few years (which many of you will do), you’ll actually end up losing money when you account for inflation.

Finally, let’s look at it from a kid’s perspective.Financial education is a core life skill that every child will be tested on every day of their adult lives.

It’s far too important a subject to be left to a bank’s marketing department.In fact, financial education isn’t about opening a bank account … or even much about money. It’s about teaching values. It’s about raising resilient, hardworking, responsible and generous kids.

So, Melanie, what would I suggest?Hold off till next year.

Why?

Because I’m in the very, very early stages of writing my next book … which is all about teaching kids good old-fashioned money values and skills. And I’ll be taking it to schools -- no kickbacks, no bank accounts and no dancing mascots.

Scott

Your Book is a Joke, Barefoot

Dear Barefoot Investor,

I had three separate friends recommend that I read your book, so I gave it a try. I have to admit I was enjoying it, until I got to page 79. That’s when you started talking about credit cards, and you showed you have no idea.If you really area money guy, surely you could make credit cards work for you? If you like, I could teach you how to use the banks to get serious rewards. Maybe you could join me in first class … or maybe they don’t let people in without shoes?

Matt

Hi Matt,

Bang! You sure schooled me.

The truth is that I have my own rewards scheme going on -- but it’s got nothing to do with flights, or toasters.

Let me explain:It’s no secret that the banks have been playing hokey-pokey with the value of rewards points for years -- but right now it’s just getting ridiculous. These days, getting a reward from your credit card is almost as hard as getting a reward from your wife after seven years of marriage.

Case in point: over the past 12 months, the banks have been secretly shutting down, or radically reducing, the value of their rewards cards. According to financial comparison site, Mozo, the banks have yanked the value of their rewards points, on average, by a staggering 63% in the past year alone.  Bottom line: the value of the points, and the restrictions on redeeming them, will only continue to go one way -- down. So what’s my rewards program?

Well, it’s not having to bother playing the rewards point shuffle. It’s not having to worry about innocently missing a repayment and being slugged with back interest for the month. It’s not having to pay a hefty annual fee. But Matt, do you know what the platinum-titanium-reward-of-them-all is? I’m modelling good habits for my kids. They’ll grow up knowing Dad doesn’t do credit cards. That’s a powerful message, and for me that’s the ultimate reward.

Thank you for reading.

Scott

Talking to the Taxman

I have a rather curly question but I hope you can answer it. My husband and I are five years from retiring and, combined, we have just over $620,000 in assets, including an investment property with a mortgage. My question is, does Centrelink take the mortgage from the investment property off the total of investment assets when assessing us for the Age Pension?

Beverley

Hi Beverley,

In a word, yes. Centrelink only counts the equity in the investment property (less the debt) for the Age Pension asset test. If, however, you have both a mortgage on your home and a mortgage on your investment property, I’d encourage you to focus on paying down your home over the next five years, because its value is totally exempt from the asset test.

Scott

Greetings from a Maximum Security Prison

Hi Scott,

I am a teacher and run IT classes at a maximum security prison. Having just read your book, I’ve been incorporating some of your principles into the classes. For example, we set out 60% ‘living expenses’ and 40% ‘other’ on an Excel spreadsheet and worked out the compound interest.

I mentioned the book, and one of the young men (it’s an all-male prison), who is 28, asked for the title and wrote it down. I then remembered I had a copy in my prison-issue, clear-plastic bag, so I read them the part of your book called ‘Letter to My Boys’.

He said, “You know, I’ve been feeling fairly depressed the last couple of weeks. This has given me some hope for when I get out.”I said to another young man in the class, who has a six-year-old son: “If you had something like this that you could use to educate your boy when you get out, would that give you something to focus on other than drugs and the criminal life that goes with it?”

He responded, “Absolutely, I can’t wait to hear more, and I would love to set my son up so he doesn’t follow my path”.

I felt like a proud mother! Isn’t it nice to know that your book is touching people in the most unconventional circumstances. I love my job, I love the young (and older) men I work with in prison. But I get disappointed when I feel we are not really giving them skills to change their lives – though I try. I am there with them, and I know some of your simple principles will be too.

Best wishes,

Kelly

Hi Kelly,

Thanks for your amazing email.

I’ve spent a bit of time in prisons myself.(Helping young inmates with their money, not doing time.)

For readers who haven’t read my book, the ‘Letter to My Boys’ is a letter I wrote to my boys (in the future, when they can read) explaining the power of compound interest.

Briefly:

A teenager gets a job on a farm and invests $5,000 a year from age 15, then stops at age 25, then lets the compound interest tick over. Total outlay: $50,000.

His mate doesn’t start investing till he’s 25, but then invests $5,000 a year for the next 35 years. Total outlay: $180,000.

At age 60, who has more money?

You’d think it’d be the guy who put in $180,000, right?

Wrong.Even though the teenager has put in less than a third of his mate, he ends up with 50% more ($2.7 million, versus $1.64 million).

The power of compound interest, along with discovering the joy of hard work, is one of the great levellers in life. It doesn’t matter what your family background is, how smart you are at school … or whether your father has been in jail.

Everyone needs hope, especially the children of prisoners, so I’m sending you 20 signed books. Keep up the good work!

Scott

Your Barefoot Book Doesn’t Work for Us

The other day I was doing an interview with Mia Freedman, the founder of Mamamia.

I told her that, if I printed out all the hate mail I got, I could bale it.

Mia: “Are you seriously suggesting you have people who hate you … you, the Barefoot Investor?”

Me: “Absolutely.”

Sure, I’ve got the best-selling book in the country this year — but it hasn’t been all bookmarks and semicolons.

Take this online review of my book:

“All in all, if I had to describe the book in one sentence it would be,‘The more I read, the dumber I felt’ — not because Scott made it so simple, but because it was apparently clear he really has no idea.”

Ka-Pow!

That is a superb sledge that even the great Rodney Marsh (ask your father) would be proud of.

That and many other awful things are live on the interwebs for all eternity. My customers could read it. My nanna could read it (well, probably not). My kids could (eventually) read it.

How would that make you feel?

Not great, is my guess.

Yet the only way to avoid criticism, as the old saying goes, is to say nothing, and do nothing …

But where’s the fun in that?

So, let me tell you a simple trick I use to deal with haters …

Care With Both Hands

Truth is, most people worry about what other people say about them.

Yet here’s the rub: if you’re doing brave things — working hard, starting a business, kicking arse with the Barefoot Steps — chances are you’re going to make someone around you feel uncomfortable. And they may try to bring you down a peg or two … back to their level.

If you listen to them — or worry about what you think they’d think — it’ll eat away at your self-confidence. And that will keep you in jobs you don’t like, relationships you’ve outgrown, cars you can’t afford. Worse, it’ll waste the precious time you have on this planet.

What’s the answer?

Care with both hands. I can count the number of people I care about on two hands — chances are you can too. And when you think about it deeply (and I have), these are the only people who matter.

If you’re being a jerk, or hurting people, or behaving like a Kardashian — they’ll pull you up on it. And that’s the only time you need to worry about someone’s else’s opinion. For the rest, just talk to the hand.

Tread Your Own Path!

My Partner’s Secret Debt

Hi Scott,

I have read your book and love it. Using your formula I have already paid off a long-term debt. Unfortunately, my partner and I have separate finances (her choice) and I recently found out that, in the time I paid off my debt, she racked up another for twice as much. Frustrating! We both earn OK incomes (combined $200,000), but are still renting at age 37. As we have three kids, I really want to get into our own home in the next four years … how do I convince her?

Jake

Hi Jake,

Uh-oh.

So you two have made the ultimate commitment -- three puppies -- and yet she’s still keeping you in the kennel when it comes to sharing her bank account with you?

As Dr. Phil would say: “Hmmm”.

And now you want me to tell you how to convince her?

Honestly?

I only have one party trick. I wrote about it in my book. It’s called a monthly Barefoot Date Night.

And I can tell you that, over 450,000 copies later, it works unbelievably well. Not only will it get you on the same (financial) serviette, but you two will be stronger and happier when you’re working towards a shared financial goal -- especially when it’s something as amazing as buying your own family castle.

That’s how I’d sell it to her anyway (and then I’d bribe her with great food and wine).

And if that doesn’t work?

Well, maybe it’s time to stop talking and start watching: after all, money talks and bulldust walks.

I’ve learned that if you want to know what someone values, look at what they’re spending their dough on.

So the question is, Jake, what’s your partner spending her dough on?

Scott

Wife vs Husband

Hi Scott

My wife and I are having a disagreement about fixed vs variable home loan rates. I have your book and I notice that Rule 2 is “Don’t Fix Your Rate”. Well, my wife just threw your book against the wall! Currently we have a variable rate loan (discounted from the standard variable rate), but let’s say we fixed our rate for three years. After that time, would we be transferred back to the discounted standard variable rate or would there be some issue?

Matt

Hi Matt,

She threw my book against the wall?

Spicy!

Most banks will flick you back to their standard variable rate after your fixed term ends. There’s nothing stopping you from fixing again, of course, but it will be at the rate on offer at that time.

Personally, unless you’re eating sausages each night (things are really tight), I don’t like fixed rate loans, for the same reason that mortgage brokers and bankers love them -- they lock you in!

Listen: get the cheapest variable rate you can, and repay as much as you can, and you’ll come out ahead.

Bottom line: I like the flexibility. Right now I’m seeing sharp variable rates: Citibank has a 3.48% rate (inclusive of a 0.15% cash back with rebate mortgage broker), and UBank are sitting at 3.74%.P.S. I’m ducking!

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.

Should We Sell Our CBA Shares?

Hi Scott,

We got Commonwealth Bank shares when the bank was floated years ago. Until recently they were worth $100,000, but now they have plunged to just $74,000. We are retired and self-funded (income about $70,000 combined) and do not want to watch them disappear! What is your recommendation?

Bernice

Back it up,

Bernice!

I’ll answer your question in a moment, but first, for the benefit of younger readers, let me give the backstory:

The Commonwealth Bank floated on the share market in 1991, for $5.40 a share. The minimum you could purchase in the float was 400 shares -- so you BPAY’d your $2,160.

A few weeks later you ticked the ‘dividend reinvestment plan’ form.And then you sat back and ate kabana.

Fast forward to today.

Your $2,160 investment is now worth … drum roll please ... $138,400.

(So, given you say your shares have ‘plunged to $74,000’, I’m assuming you have sold some along the way.)

Yes, my nipples are getting hard, but let me give you one more amazing stat: last year CBA paid out $4.29 per share in dividends … that’s 80% of what you initially paid for each share!

Okay, so that’s the backstory. Now let me answer your actual question -- should you sell your CBA shares?

The answer is … it depends. If your CBA shares make up more than 30% of your portfolio, it would be wise to sell down part of your holding and diversify by investing in other companies. (This doesn’t just apply to CBA shares; it’s not good to be too reliant on any one company.) It’s even more attractive if you’re holding the shares in a self managed super fund (SMSF) and you’re in pension phase, as there are no tax consequences. Either way check with your accountant. Winner, winner, chicken dinner!

Scott

Your Steps Can’t Work for Us

Scott,

I have a bone to pick with you. I have been a loyal follower for years, have ALL the newsletters, and have just bought your book. I have read it and re-read it and now am more confused and frustrated than ever!I am a stay-at-home mum. My husband is a self-employed tradie who relies HEAVILY on a $9,500 business overdraft. He earns between $45,000 and $55,000 after tax to ensure we can still get Centrelink ($10,000). His income is so sporadic that, when it does finally come in, it is gone on living expenses, suppliers and a bit of savings. Your steps can’t work for us.

Deb

Hi Deb,

Are you seriously happy living your life playing Centrelink limbo?

The problem with that game is that, even if you manage to earn as little as you can to get under the bar, you’re still … in limbo.

If your husband is earning only $45K a year as a tradie running his own show (with debt!), that’s the universe telling him it’s time to seek out a regular job and then focus on paying off his overdraft.

And another thing: a good tradie doesn’t blame his tools ... my steps work, but they need the right materials: in your case, cash!

Scott

Forget iPhone X, I'm Getting This Instead ...

My iPhone is basically my office — it’s where I do business.

In contrast, we got a ‘burner’ phone for my 60-something farmhand Archie … this is not where he does business.

He often shoots me blank text messages, and when he does work out how to reply it’s often IN. FULL. CAPS:

Now unless you’ve been labouring away in a paddock in Romsey, you’d know why I’m telling you this.

Last week, Apple had a big event, where they announced a few of their newest gadgets.

I dutifully got up early and watched it, and in the process saw why Apple is the most valuable company in the world (and on track to becoming the first trillion-dollar company — for reference the entire ASX 200 is valued at $1.3 trillion).`

It droned on for two bloody hours … though you wouldn’t know it by looking at the nerds in the crowd, who were absolutely losing their Samsungs at all the new — and insanely expensive — kit!

Enough!

How many more pixels do you need till your life is complete?

Does the slither of extra screen around the edges justify an $1,829 price tag for the top-of-the-line iPhone X?

Or maybe it’s that you can use Apple’s (slightly creepy) face-scanning feature to turn yourself into a poop emoji?

Why am I ending every line with a question mark?

However, there was one product that I think could be the next big thing: the latest Apple Watch.

The new version has its own SIM card, which means you won’t even need to lug your iPhone around.

Hell, I’m thinking of buying one.

I’m a big user of Apple Pay, via my ING account, and I like the idea of using my watch for purchases, without my wallet or phone (or shoes). Even better, the watch takes calls, right on your wrist, just like Dick Tracy (ask your parents).

I’m even thinking about getting one for Archie … it’s even waterproof, which will help when it’s calving season.

Climb Every Mountain

Hi Scott,

I just wanted to say thank-you for your book. Your advice has pulled me through some uneasy times, and in October this year I am set to build my legacy … by climbing Mt Kilimanjaro solo to raise money for the Cancer Council. You have taught me that spending my hard-earned money on giving back and helping others is so rewarding; I see it as a reward for finding financial control. Know that, as I reach the summit with my Cancer Council flag in hand, it was funded through the advice you provided, and that I will raise a beer for you -- if I can sneak one to 5,895 metres!

Jack

Well done, Jack!

The beer will be nice and cold at that elevation.

Thank you for reading.

Scott