I’m Down on Bended Knee

Hi Scott,

I have been seeing my girlfriend for three years now, and I am finally ready to propose! She pointed out the ring of her dreams on the weekend, and it looks like it is going to cost me $4,800. The jeweller is offering a payment plan which requires 10% deposit plus 14% p.a. I have enough to cover the deposit, but I would also love to take her to Fiji in one month so I can propose. I am unsure if I should go with the payment plan option or pay the ring with my credit card, or what?

Dan

Hi Dan,

It sounds like you’re about to get yourself on the hook, cobber ... in more ways than one.

So let me spell this out for you:

First, there is no correlation between how much you spend on the engagement ring, and how happy your marriage will be. None.

Second, diamond rings are one of the biggest marketing con-jobs in history (though of course I bought one anyway). The key is to save up and buy one with cash … hopefully via Gumtree at a substantial discount from a bruised bachelor. You’ve got rocks in your head if you borrow money to buy an engagement ring. Don’t do it.

Third, I proposed to my wife on the back porch. Would she rather it had been in Fiji? Sure. But she still said yes. Job done. If your girlfriend loves you, it won’t matter where you propose.

Finally, and most importantly, know this: the spending decisions you make today will set the tone for the rest of your married life.

Bula Bula!

Scott

Facebook Gets Freaky

Mark Zuckerberg wants to get to know your kids.

Specifically, he wants to get to know your primary-school-aged children (after all, he already knows more about your teenager than you do).

Hang on, isn’t Facebook restricted to people who are at least 13 years old?

Yes it is. In 1998 the US Congress passed laws that restricted children under the age of 13 from giving out their personal information without their parents’ permission. The cost of complying with these laws meant that most platforms put it in the ‘too hard basket’.

Until now.

This week Facebook introduced ‘Messenger Kids’, for children aged 6 to 12.

Zuckerberg says it’s totally not about trying to lock little kids into using his platform. Rather, he’s motivated by wanting to help parents keep their kids safe online. Messenger Kids will be advertising free (for now), and the app has built-in parental controls.

Yes, the billionaire boy wonder is here to help you. True dinks!

Well, let’s take a look at that.

Earlier this year a 23-page Facebook report marked ‘Confidential: Internal Only’ was leaked to The Australian.

In the report, Facebook promised advertisers the ability to track a teen’s emotions: “By monitoring posts, pictures, interactions and internet activity in real-time, Facebook can work out when young people feel ‘stressed’, ‘defeated’, ‘overwhelmed’, ‘anxious’, ‘nervous’, ‘stupid’, ‘silly’, ‘useless’, and a ‘failure’.”

This is truly the golden age of advertising!

Facebook advertisers can target that anorexic girl right at the very moment she truly hates herself.

For its part, the social media giant issued a public statement about the leaked report saying, “Facebook does not offer tools to target people based on their emotional state”.

Yet.

But as the old saying goes, if you don’t pay for the product — you are the product.

My view?

Give a bunch of my son’s little mates a backyard-built billycart and a hill that my wife has already warned me is “way too steep”, and these kids will get all the ‘likes’ and ‘LOLs’ they need. (Besides, they have the rest of their lives to learn to hate themselves, engage in superficial online relationships, and have billycart envy.)

The simple reason Facebook is worth $511 billion is that you and I hand them our private data. Even better, we devote an average 250 hours per person per year to updating our personal data for their advertisers!

Now parents have to decide whether or not they want to sign up their kids to work for Zuckerberg’s advertising machine.

Tread Your Own Path!

My Husband Ran Off with a Younger Woman

Dear Scott,

Well, I never thought I would be writing this but … a month ago my husband of 21 years fessed up to wanting to run off with a girl 25 years younger who he met only a week before. Ouch! Fortunately, I have been Barefooting for the last few years and have paid off all debts (apart from the mortgage), and I have put $6,000 extra into the mortgage and saved $5,000 in Mojo.

It is probably not enough to get me through the financial mess of separating our finances, including the family home and a used-to-be jointly run business. But, despite the dent to the ego, I realise that if I am clever enough to have come this far, I will be okay. My question now is, how do I pay off my house after giving him his share?Thanks,

Kirsten

Hi Kirsten,

You sound like the dream person to get divorced from — if I did that to my wife, I’d literally be in fear of my life.

Without knowing your particulars, let me tell you the number one financial mistake that I see most women make when they divorce: they keep the family home.

Do you still need a big family home? Can you afford it on one wage? And, even if you answered yes to both of these questions, do you want to live in a home with all that emotional baggage?

If you can sell it as part of the settlement and come out with cash in your pocket, that would give you less stress and more freedom — and that’s exactly what you deserve. New Year, New You. You Got This!

Scott

Daddy’s Girl

Dear Barefoot,

My father monitors my money from afar and, as a 25-year-old woman, I feel I am being treated like a child. He thinks my partner and I are financially illiterate, and disagrees with us having joint bank accounts (he and Mum keep their money separate). He does not have my account passwords, but he does ask for updates on my money, and has forceful discussions with me about my budget — talk about pressure! Reading your book, I want to take control of my money, but I know this will be very hard for Dad. How do I tread my own path?

Jessica

Hi Jessica,

Your old man just wants the best for you, but he’s got boundary issues.

You’ve probably worked this out by now, but forceful conversations about money are rarely about money — they’re usually about control — and it sounds like your father wants to control you just like he did when you were a kid.

Of course you’re now an adult, living with your partner, and your financial situation has nothing to do with your dad.

My suggestion would be to give him a copy of my book for Christmas. This will show him you’ve got your head in the right space financially. Then explain to him that if you ever need any further advice he’ll be the first person you ask.

Scott

Too Old to Die Young

Scott,

Subconsciously I always thought I would die young, as my parents and older sister did. So I have tended to ‘live for the moment’. Now that I am still (thankfully) here at 69, I am too old to die young! My husband and I continue to work in our own business, which we enjoy. Our joint taxable income last financial year was $116,000, and we have $750,000 in business loans. If we sell the business and pay off the loans, we should realise about $600,000, but that’s it — no super, no house, no assets. Should we buy something modest, or rent?

Jill

Hi Jill,

You’d be amazed how many people I meet who tell me that retirement ‘just sort of crept up on them’ ...… over 50 years.

But I’ve got a few suggestions that should help you out.

First, talk to your accountant before selling the business, as there are capital gains tax (CGT) exemptions for small business owners who are selling and retiring, especially if they’ve owned the business for 15 years and it has a turnover less than $2 million per year. Depending on your circumstances, it may be more tax efficient to roll the money into super — and then you could take out a lump sum and buy a modest home.

Second, given that you’ve enjoyed your business, why not negotiate with the new owners (once you’ve sold) to continue working in it a day or so a week? It’s good for your transition to retirement, and good for the transition of the business. Best of all, you could earn $20,800 ($13,000 p.a. of work bonus and $7,800 income) before your rate of Age Pension is reduced.

Combined this equates to $35,058 of Age Pension and $20,800 of employment income, for a total of $55,858 p.a. of income. The best part is that it would be tax free — couples can have $28,974 p.a. each of income tax free, thanks to the Seniors and Pensioners Tax Offset (SAPTO).

Scott

Help! My Wife’s a Ball-Breaker

Hey Scott,

My wife and I are currently following your teachings. However, we have come unstuck on overtime payments and additional income. I am working a second job, and doing overtime in my main job, to increase the amount of ‘fun money’ I have. But the wife says these extra funds should just be put on the home loan and I should not have access to them. I have searched but cannot find what you say to do with overtime and additional income. Can you please enlighten us?

Corey

Hey Corey,

You should check the index of my book — under ‘B’ for ‘ball-breaker’.

(Only joking.)

Then again, she could be right. If your mortgage is eating up more than, say, 40% of your income, I’d definitely side with her — it’s time to put in the overtime and pay that sucker down.

But if it’s under control, I’m on your side. You have every right to a bit of ‘fun money’.

The reason I lay out the Barefoot Steps is to get people to focus on the big moves that will get them to financial security. However, some people get a little overzealous, and get so focused on reaching the end that they forget about stopping to smell the … Bintang in Bali.

Bottom line: money in marriage is a team sport, so you should both have a say on how you spend your money.

Scott

The Barefoot Movie

Hi there,

I am successfully following your instructions on splitting my income -- 10% to ‘Splurge’, 10% to ‘Smile’, 20% to ‘Fire Extinguisher’ and $3,000 in ‘Mojo’. I see in the book it says that Mojo will grow, but I cannot find any instructions on how to add to it. Is this something we add to later in the process, or have I missed something?

Wendy

Hi Wendy,

You’ve shot off an email at page 132, haven’t you!

You just need to keep reading. In fact, you remind me of trying to watch a movie with my wife. She sits on the couch next to me whispering, “Why did he kill her? I thought she was on his side?” To which I reply, “I don’t know either -- let’s wait and find out”.

So let me lay out the closing credits for you. My book is organised into 9 Barefoot Steps that you complete in order, one by one:

Step 1: Schedule a Monthly Barefoot Date Night

Step 2: Set Up Your Buckets

Step 3: Domino Your Debts

Step 4: Buy Your Home

Step 5: Boost Your Super to 15%

Step 6: Boost Your Mojo to 3 Months

Step 7: Get the Banker off Your Back

Step 8: Nail Your Retirement Number

Step 9: Leave a Legacy

The power of the Barefoot Steps is that they focus on you doing just one thing at a time.

You won’t get overwhelmed.Just move through them one at a time.

Thank-you for reading!

Scott

Spill the Beans

Hi Scott,

I am a 32-year-old tax accountant earning $100,000 a year -- and I am facing a dilemma. I could (for $300,000) buy in as a partner in the accounting firm where I currently work, replacing a partner who is soon to retire. But I am not happy at this place and have always wanted to start my own accounting business. I already have some clients on the side, worth about 20% of my salary. Would quitting my job and going it alone be the right move?

Ben

Hi Ben

You haven’t said how much partners get paid at your firm, and therefore how long it would take to earn back your investment. But I don’t think it really matters. If you’re not happy there, why would you sink $300k into it?

Personally, I think being in a traditional suburban accounting firm is a really tough business, and it’s only getting tougher.

In the coming years technological advancements like ‘blockchain’ and artificial intelligence will revolutionise the industry. Even now, the bread-and-butter business of tax preparation and compliance is dwindling -- and if Labor gets in they’ve promised to limit deductions for tax advice to $3,000 a year. (Okay, so that last one doesn’t have legs -- I’m sure it just means that accountants will charge clients ‘financial strategy’ fees instead.)

Still, there’s no doubt in my mind that accounting is going to look very different 20 years from now. To succeed you’ll need to be a truly trusted financial advisor to businesses, rather than a suburban cardigan-wearer doing tax prep.

If I were in your shoes I’d do what I call ‘swinging on the trapeze’ -- that is, keep your $100k-a-year job (holding onto the trapeze bar) while you invest time and money into building up your side hustle, then move to it full time when you’re ready (landing on the other side of the trapeze). That way you might just create a business you’ll want to spend the next 30 years in.

Scott

Jimmy Barnes and I go head to head

“Last year industry outsiders Jimmy Barnes and Scott Pape taught the book industry how to sell books”, wrote the Bookseller + Publisher recently.

Yee-haw!

Two working-class men who — let’s be honest — couldn’t give a Khe Sanh about a semicolon are now rubbing our dewey decimals up against famous authors like Tom Winton (or whatever his name is).

My book has officially been in the bestseller charts for 52 weeks in a row, and has sold over 500,000 copies.

(Catch me if you can, Jimmy!)

Okay, so now that I’ve bragged about the book, let me tell confess how dumb I really am:

This time last year I told my wife that books were ‘dead’.

“No one buys books anymore. It’s all about ebooks and audiobooks downloaded on Amazon”, I told her.

Wrong!

In the UK and the US, sales of ebooks plunged by nearly 20% last year, while sales of physical books were up 7%.

And Australians are some of the biggest book buyers per head in the world: according to Nielsen BookScan, collectively we spent close to $1 billion on 53.6 million books in 2016 … and this figure didn’t include ebooks or audiobooks.

My own experience backs this up: over the last year The Barefoot Investor has topped the charts for both ebooks and audiobooks … and yet roughly 90% of total sales were still of the dead-tree variety.

And it gets better: the bulk of these books have been bought from … shock horror! … local bookstores.

There’s a good reason for this: I’ve purposely never sold my book on my website, even though I’d get a higher clip.

Why?

Well, when I published my first book as a young and unknown author, it was booksellers who helped sell it. They recommended it to their customers, and in so doing helped me build a following. So this time round I wanted to return the favour by getting people to go out and buy the book from bookstores.

And buy they did, with many scooping up multiple copies as presents for family and friends. And that makes sense when you think about it: when was the last time you handed someone a gift-wrapped ebook for Christmas?

Tread Your Own Path!

Uber’s Dirty Little Secret

If you’ve got an Uber account, you really need to read this.

You may have heard that last week Uber fessed up to the fact it had been hacked in October last year — with the names and contact details of 57 million of its user and driver accounts being stolen. But instead of making the breach public, they paid the hackers $100,000 to destroy the copied data.

Trustworthy fellows, those hackers. I’m sure they did what they said … even used the recycling bin, right?

Here’s you: “Uber are clearly morons … but how does this affect me?”

Here’s me: “The Australian is reporting that ‘more than one in ten Aussies may have been affected’.”

So how do you know if you’re the one in ten?

Well, Uber is continuing to dig its hole — they’ve decided not to contact customers whose data has been breached, and instead have said they’re “monitoring the affected accounts and have flagged them for additional fraud protection”.

Poor form!

It’s like if you find out you’ve got an STD. The right thing to do is to ring up your former partner and say, “Look I probably deserve a slap, but you’d better get tested … because I’ve got the clap”. Uber is doing the equivalent of checking in on your ex’s Instagram every now and again to ensure none of their bits are mysteriously falling off.

For the record, if this hack happened next year, Uber would be toast. That’s because laws to be introduced next February will force organisations to contact victims and report data theft to the Australian Privacy Commissioner.

So what can you do if you have an Uber account?

Three things.

First, you should assume that your details have been breached.

Second, you should change all your passwords. If you’re normal, you have one password that you use for everything. Stop doing that, and start looking into encrypted password vaults like LastPass.

Third, you should check your credit file, which you can get for free if you write to the credit agencies.

Actually, for $79.95 you can get your file plus an alert system that pings you if any changes are made to your credit file for 12 months, via MyCreditFile.com.au.

Hang on, can you trust MyCreditFile.com.au?

Err, well, it’s a product of credit reporting agency Equifax (formerly Veda Advantage), which earlier in the year suffered one of the biggest data breaches in history.

Tread Your Own Path!

My Mother-in-Law is a Sponge

Scott,

My soon-to-be mother-in-law is bad with money. She has over $100,000 in credit card debt, as well as a couple of 60-month interest-free loans that were never paid and are now charging 29.99% interest. My fiancé (we are both 25) is considering getting a loan in his name to ‘help’ her, but I believe she will just go back to her old ways. I worry about this debt when it comes to us buying our first home or if she does not pay for the loan. Over the past two months we have already paid $5,000 for her bills. Help me!

Gillian

Hi Gillian,

There’s no such thing as one Smartie.

That’s the lesson I’ve learned from my two-year-old: I give him a Smartie, knowing full well that it sets me up for a full-blown tanty if I won’t give him a second one.

After paying $5,000 of his mum’s bills, that’s the situation your fiancé is facing (and it sounds like your mother-in-law is behaving like a toddler -- not so smartie).

Bottom line?

Your mother-in-law is financially crazy. And you’re absolutely within your rights not to invite crazy into your life -- and you sure as hell don’t need to be guilted into funding her stupidity.

However, that’s a harsh message to deliver to your fiancé.So here’s what I’d do instead:

Explain to your fiancé that your mother-in-law needs love, kindness and understanding. She needs expert guidance. She needs a financial hero who can help her … in fact, she needs James Bond! Or, more accurately, she needs to call the not-for-profit Financial Counselling Australia hotline on 1800 007 007.

However, if she’s stamping her foot, quivering her lip and demanding another Smartie, you may need to book an appointment on her behalf. You should even offer to go with her -- that’s what a loving daughter-in-law would do. The financial counsellors are the best people to help her face up to the reality of the decisions she’s made, and provide solutions for her path forward.

Now repeat after me: no more Smarties!

Scott

The Acorns App

Hi Scott

I wanted to get your thoughts on the Acorns app and whether using this would be just as good as, if not better than, using a ‘Smile’ saver account for Mojo. I want to see my money grow quickly but am unsure whether using Acorns is relatively risk-free and worth it?

Tim

Hi Tim,

Hold your nuts Timbo, because I’m about to whack you in the acorns:

You say you want to ‘grow your money quickly’, but it needs to be ‘relatively risk free’?

Whack! Whack!

I’ve spoken about the Acorns app before. Basically, it’s the investment equivalent of putting training wheels on a bike (with a bell and pretty streamers on the handlebars). The app scoops up small amounts of money from your account and then invests it into Exchange Traded share Funds (ETFs) — and charges an extra layer of fees to boot.

It’s a bit of a gimmick, and I wouldn’t advise committing serious dough to it, and I certainly wouldn’t be keeping my short-term savings in the share market. In other words, the Acorns app is a Frown account, not a Smile account.

Scott

You’re Wrong, Barefoot

Hi Scott,

I have been taking you out for Date Nights (well, your book) and I am up to Date Night Number Two, which is getting my super sorted. There’s a problem, though. My ex-boyfriend has said I should not follow your recommendation on the Hostplus Indexed Balanced Fund. He says that it is not diversified enough, that low fees are only one factor when deciding on super, and that there are better-performing funds available. My super is currently with Asgard. What are your thoughts?

Tina

Hi Tina,

First let me say that the Indexed Balanced Fund is what I use for my own money — but if your ex-boyfriend has found a better fund, then power to him!

Yet it seems to me that his reasoning doesn't quite stack up.

I actually swiped my super fund strategy from legendary investor Warren Buffett.

Let me explain:

When Buffett dies, he’s investing his entire estate on behalf of his wife as follows: 10% into short-term government bonds, and 90% into an ultra low-cost S&P 500 index fund, which automatically tracks the 500 largest companies in America.

That’s it!

Your ex-boyfriend’s claim that the Index Balanced Fund “is not diversified enough” is absurd.

The fund invests as follows:35% in 200 of the largest businesses in Australia -- like the banks, BHP, Rio, Telstra, Woolies and CSL.40% in 1,582 of the world’s largest businesses -- like Apple, Facebook, Google, Nike and Nestlé (and the portfolio is partly hedged to protect against currency fluctuations).

15% in fixed interest.10% is in cash.

That’s better diversification than Mrs Buffett will get!

Here’s you: ‘Yeah, but what about property?’

Here’s me: ‘Most Aussies have the bulk of their wealth tied up in very expensive residential property, so it makes sense to balance that out by investing in local and global businesses’.

Here’s you: ‘Yeah, but low fees aren’t everything. I could get better returns …’Here’s me: ‘The Hostplus Indexed Balanced Fund is the lowest cost super fund in the country, and one of the lowest cost funds on earth. It’s pretty simple: the less fund managers take, the more you make’.

Here’s you: ‘Yeah, but what about other funds that get superior returns?”

Here’s Buffett: “I believe the long-term results from (investing in low cost index funds) will be superior to those attained by most investors — whether pension funds, institutions, or individuals — who employ high-fee managers”.

Scott

Reminder: I first wrote about this years ago and highlighted the low fees. Today there are cheaper index super funds on offer. How do I know? Because my readers constantly email me about them! So before you do anything, go to YourSuper.gov.au and compare super funds first.

ScoMo’s $250 million air kiss

Right now Parliament House reminds me of a seedy share house I lived in when I was at uni: no one could quite work out who lived there, or where they came from, and everyone was busy screwing each other.

Poor old Malcolm. With the current state of his house, it’s understandable he hasn’t been able to get his housemates together to deliver on the ‘First Home Super Saver Scheme’.

You remember that, don’t you?

It was announced by our Treasurer, Scott Morrison, on Budget night (way back in May) as a $250 million ‘air kiss’ to housing affordability. As ScoMo crowed on the night, “Most first home savers will be able to accelerate their savings by at least 30%”.

And then … everything went quiet.

Yet I’ve been dutifully following it up … like Pauline chasing a burqa. In July, I called Treasury and asked what the hell was going on. It was clear to me that the Government needed a legislative laxative — the scheme was having trouble being passed into law.

“Not correct”, said a spokesperson for the Treasurer.

Before adamantly adding: “The First Home Super Saver Scheme will be passed in the spring session of Parliament”.

Well, on my farm, spring has sprung, and my lambs have been sold at market.

It’s bah-bah for them, and if they can’t get it passed soon, it’ll be bah-bah for the First Home Super Saver Scheme.

So what can you do?

Start saving for a deposit on your own.

And the best way to do this is to set up your Barefoot money buckets, including a ‘Fire Extinguisher’ online saver account, and then start allocating 20% (or more!) of your take-home salary towards getting your deposit.

Sure, it’s not as tax effective as what was on offer on Budget night, but you can start right now — instead of sitting like a lamb waiting for the grass to grow in Canberra.

Chop, chop, ScoMo!

Tread Your Own Path!

The Scary Stepmother

Dear Scott,

I need help to do a ‘full life’ money plan for my 21-year-old stepson -- and I am getting migraines! Here is how I picture it: he puts 12.5% of his wage into super, gets married at 25, has a good job, takes out a 30-year mortgage, and has two kids (reports show that two kids at private school costs $800,000 by the end of Year 12!). He then retires at 67.5 years old and has a ‘reasonable life quality’ of $42,500 income a year, with around $500,000 saved in super. Is all this possible? Can you help?

May

Hi May,

I just read your question, and I’ve got to be honest … you’re kind of freaking me out right now.

Your heart is obviously in the right place, but you may as well be lecturing him about the danger of venereal diseases.

First, you’re never going to convince a 21-year-old guy that he’ll one day be 67.5 years old.

Case in point: a young Mick Jagger once said, “I’d rather be dead than singing ‘Satisfaction’ when I’m forty-five”.

Second, no 21-year-old bloke wants to have, as you put it, “a reasonable life quality”.

He wants Satisfaction, goddammit!

Here’s what I’d say to him:

Most things don’t matter that much, but there are a couple of things that really do:

Make sure you do well-paid work that you enjoy, and become obsessed with saving money.

Let’s deal with work first: fact is, you’re going to spend 90,000 hours of your life at work. Add in sleeping, Facebook and sitting on the can, and there’s not much time left over. You’ll spend more time at work than you do with your family and friends. So you better make sure you enjoy it, and you better make sure you get paid well.

And saving: if you want to stay poor, do what everyone else does and focus on spending your money. If you want to become wealthy, focus on saving and investing your money. When you have savings, you’ve got freedom. You call the shots. You’re in control.

Then give him a copy of my book, encourage him to work hard, and have him follow the steps.

He’s got this.

Scott

You’re Wrong, Barefoot

Hi Scott

I love your Q&A column, but it’s very shortsighted of you to say “no-one ever regrets the kids they have”. I know many women who had children because they felt they HAD to. Having a child is one of the biggest gambles a woman can make, so please don’t reduce it to nothing just because, as a man, you don’t have to risk your health, body, future earnings and career to do so. I get that you are a family man, but please don’t go around spouting nonsense like this. You’re smarter than that.

Linda

Hi Linda,

The women who work for me (all mums) went crazy over your question -- some for, some against.

I certainly wasn’t suggesting that having children is ‘nothing’. (My wife is currently in her third trimester, coming into a sweaty summer, and our two young boys have worked out there’s an intruder about to enter the house, so our life is anything but the Brady Bunch.)

All I said was “no one ever regrets the kids they have … only the ones they don’t”. And I think the vast majority of parents would agree with that … well, eventually.

Scott

Banker Bait

Dear Scott,

My 18-year-old daughter lives at home, pays no board, works full time, and is saving for her first property. She also wants to buy a new car ($20,000) so she can get a credit rating, which will make it easier to get a home loan. Should she keep driving the old car and put all her money towards the house deposit, or get the car loan and take a bit longer to get into the property game?

Fiona

Hi Fiona,

Congratulations on raising such an ambitious daughter!

Now it’s up to you to teach her some common sense:

Spending $20,000 on a brand-new car will not help her buy a home in any way, shape or form.

Instead, she’ll just end up forking out roughly $30,000 for a car that will only be worth $10,000 in five years’ time.

The idea that you need to take out a loan so a bank will lend you more money is absurd.

Just like Sam Dastyari, the credit reporting agencies have done their darndest to convince everyone they’re more important than they really are.

Now it is true that if you’ve got something bad on your credit file it can be a red flag to lenders. But for a cleanskin, like your daughter, it’s really not a big deal.What is a big deal for lenders is:

1) a stable income that can comfortably meet the proposed repayments;

2) a verified savings history; and

3) a meaty deposit (I recommend 20%).

If your daughter can tick those three boxes, she’ll get her loan.

Scott

Should I Buy an F45 Fitness Franchise?

Hi Scott,

I’m a 26-year-old woman working full time in a job I hate. Quite frankly, I am sick of working for the man! Now, I have never had my own business before, and I am a little apprehensive, but I love fitness, and I also love F45 (a new high-intensity interval training fitness franchise). It is rapidly growing on a global scale, with 750 studios around the world already. The cost to open a franchise is $150,000, plus $1,700 a month in fees (plus rent, wages, taxes, etc). I do not have the capital, so I would also need to apply for a business loan. Do you think this is a good idea?

Mandy

Hi Mandy,

A mate of mine does F45 -- short for ‘Functional 45-minute’ training -- and fair dinkum he never shuts up about it.

But let’s get one thing straight: if you buy a franchise you’ll still be working for the man -- but in this case it’ll be the ex-finance dude who dreamed up the F45 franchise model. I imagine he’s currently lifting gold-plated barbells from all the money he’s making … and good on him too! All I’m saying is that in this equation he’s the entrepreneur -- and you’re the worker.So, would I buy an F45 franchise?

No, I wouldn’t.

And it’s not because I could risk having a cardiac arrest if I actually did F45 -- it’s because I’ve put the franchise through its paces, just like I would with any investment.

So let’s you and I do a money workout:

First, let’s look at the sector. Australia’s gym market is one of the most competitive and saturated in the world, according to IBISWorld. (Why are we so fat, then? Is it the chicken or the egg? Or maybe it’s the chicken and egg sandwiches.) Simply put, there are a lot of businesses fighting it out for our fitness dollars.

Second, one of the key selling propositions of the F45 franchise is that there’s not a lot to it -- two trainers, four walls, and a bit of equipment. Easy to start … and easy for potential competitors to start too. And what about when ‘F6’ comes out? (Seriously, I could totally blitz 6 minutes of training.)

Third, while F45 is going bananas right now -- the business is just five years old. What will it look like 10 years from now? Fitness is a faddish industry (hello Zumba, Tae Bo, and pole dancing fitness). Heck, F45 is itself a gentler version of CrossFit, which is now reportedly starting to run out of puff.

So, here are a couple of questions you need to ask yourself:

How quickly could you earn back your upfront costs (a $150,000 loan plus $1,700 a month)?

Even better, could you avoid borrowing (which always ramps up the risk and makes life more complicated) and instead -- as we Barefooters call it -- ‘swing on the trapeze’. That is, keep your day job, start a morning and weekend fitness bootcamp, and make a go of it for the next 12 months to test it out. If it’s a winner, quit your job and go for it!

Scott

If you’ve got an ING card, read this

The other day, ING sent me a mass-marketing email with the subject line:

“Scott, refer a friend and you can both get $100.”

Now, given that my book recommends setting up a couple of ING accounts …

And given that my book has sold over 500,000 copies …

And given that ING has just announced they’ve achieved “a record 50% jump in customers this year” …

… why the hell am I even writing to you? Why aren’t I sipping a Bacardi in the Bahamas?

Oh that’s right — old dumbo here doesn’t accept any kickbacks.

To be serious for a second: I have no allegiance of any kind to ING. My only allegiance is to my readers, and I only recommended those ING accounts because they have zero account fees and zero ATM fees, and they pay a (relatively) high rate of interest.

Why am I telling you all this?

Because I feel a responsibility to keep these bastards honest.

And this week ING announced some changes to the accounts.

So I feel it’s appropriate to check them out:

First, they’re now offering zero ATM fees globally (speaking of the Bahamas). Coupled with the fact that ING already offers the wholesale exchange rate from Visa without a clip — which is why I’ve found I get a better rate than with cards from other banks.

Second, and more importantly, they’ve also eliminated international transaction fees on all overseas purchases — a saving of 2 per cent. Big news if you buy online (which somebody in my house seems to do quite regularly).

The fine print is that you need to deposit $1,000 a month into your account and make five transactions — in other words, make it your everyday account. And why wouldn’t you? It’s an all-in-one ripper: good for everyday banking, good for buying crap online, and good for holidays overseas.

Just be warned: do not take their upsell on their sleazy new credit card … after all, that’s what’s cross-subsidising all this fee-free generosity!

Tread Your Own Path!

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.

Can I Trust My Parents-in-Law?

Hi Barefoot,

My parents-in-law (both in their 60s and retired) have put a proposition to my boyfriend, and I am very uncomfortable about it. He is in serious debt, with credit cards and personal loans. In two months they will lose their cheap rental home (they’re renting from a friend, who is now selling the place).

So they want my boyfriend to buy a home in his name for them to live in. They say they will pay him $5,000 a month and cover all other costs. For income they have four pensions -- two for themselves and two ‘carer payments’ they receive for having two people in their 80s living with them. They say it will not cost him a cent, so he can pay his debts and, when they all die, he will have a house. They all think it’s an amazing idea, but alarm bells are ringing for me!

Abbie

Hi Abbie,

Ding! Ding! Ding!

I’m hearing the same alarm bells!

I could be wrong, but it sounds like your parents-in-law have been moved on from mooching off their mate … so they’re looking around for their next meal ticket, which just happens to be your boyfriend.

Make no mistake, they’re looking out for themselves -- not for their son.So, at the risk of being the party-pooper, let me poop all over this plan:

First, retired pensioners can’t underwrite a mortgage -- especially when part of their income is supplemented by carer payments which may go to God at any stage.

Second, it sounds like your boyfriend would have trouble qualifying for a mortgage, given you say he is in ‘serious debt, with credit cards and personal loans’. And even if he can score a loan, it doesn’t mean he should.

What could end up happening is your deeply-in-debt boyfriend becomes your deeply-in-debt husband, and you both end up on the hook providing a home for his deeply dependent parents for for the next 30 years.

Ding ... Dong … don’t do it.

Scott