No Credit Card for You!

Hi Scott,

Today I opened accounts with ING Direct and applied for a credit card. I also transferred money from my current bank to ING. With my credit card request, it was denied because I am retired and do not get a weekly payslip. My wife and I get over $40,000 a year tax-free, own our home, and have very little debt. Their decision to refuse me, even though I have an exceptional credit history, smells of discrimination to me. Your thoughts?

Doug

Hi Doug

Yes, it sounds like the bank is discriminating against you … though is that a bad thing?

Given you’re retired and living off $40k a year, it could be argued that you can’t actually afford a credit card.

If you don’t pay it off each month, the interest bill will make everything you buy 20% more expensive. And if you are paying it off each month, why bother?

Rewards points, right Doug?

Unfortunately rewards points are ‘so 2016’.Analysis from comparison site Mozo has revealed that the big four banks have slashed the value of their rewards points by a whopping 96% since 2016. Here are the figures: if you spend $24,000 a year on your credit card, you’ll receive, on average, just $12 back in rewards.

And if you forget to pay your CBA credit card bill you’ll be hit with a $20 fee, plus backdated interest.

How’s that for discrimination?

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.

Public Versus Private

This week was the cut-off for enrolling our oldest son into Primary school.

It’s been a highly stressful time for my wife, who’s been agonising over our choices: public, private, Catholic.

Not me.

I’m a big fan of public schools, especially for primary school. And so, when I went along to the open day for our local public school I asked just one question:

“Who is your school banking with?”

My wife rolled her eyes and then proceeded to warn me against writing about this highly contentious topic:

“You shouldn’t write about public versus private schools … you’re going to to upset a lot of parents who’ve already made their choice.”

Excellent point. But I’m a finance guy ‒ and I don’t give a semicolon.

So here goes:

In Australia, around 35% of kids go to a private school, which is one of the highest percentages in the world.

And it’s bloody expensive. Private school fees have been growing at twice the rate of inflation. Australian parents spend, on average, $50,000 on their kids’ education, according to a report by NATSEM (the National Centre for Social and Economic Modelling).

And many parents can’t afford it. The Australian Financial Review recently reported that a quarter of parents borrow for their kids’ private school education, and one in seven run up a credit card to pay for school fees.

So is it a good investment?

Well, multiple long-term studies have proven that there is zero correlation between school fees and academic results (if you want to get a real eye-opener, read Free Schools by David Gillespie).

Still, some parents argue that if you send your kid to a private school they won’t be hanging out with a bad crowd. Then again, the best drug dealers go to private schools (or at least they did when I was a teenager).

So if school fees aren’t a predictor of a child’s success, what is?

Well, the biggest predictor of your kid’s happiness and success in life is how much time you spend with them.

Here’s the point: parents are often forced to work longer hours just to pay the ever-increasing fees. Personally I’d rather dial down the cost and spend more time with my kids, which would make me less stressed to boot!

So our son has been enrolled in a local public school. I think he’ll be fine. After all, I’m going to put my hand up to teach the school’s financial education class.

Tread Your Own Path!

A Total Disaster

Hi Scott

I am a 50-year-old widow with an eight-year-old. After nursing my partner through cancer (he lost his battle on Boxing Day), I have just refinanced my house to consolidate some credit card debt. I have also borrowed an additional $100,000 to invest. My financial planner suggested this as a way of getting my mortgage down. Now I am starting to panic about maybe doing the wrong thing, but I don't see any other way of reducing my debt quickly and setting myself up for retirement. I am really nervous.

Rachel

Hi Rachel,

I’m really sorry for your loss.

Now I don’t know your personal situation, only what you’ve written. So, like everything I write, this is general advice from a guy who doesn’t have a vested interest in flogging you anything.

I’ve had the privilege of working with many widows over the years, and if I was sitting across from you there is absolutely no way I’d advise you to borrow $100k to invest.

Why?

Because your partner just died, and you have a young child. This is not the year to be making major financial decisions. It’s the year to hold on and grieve.

Yet I totally get that you’re clutching for security when your life has been turned upside down.

However, this isn’t the way to do it. The truth is that debt always makes life more complicated. It always makes life more stressful. And heaping on more stress right now is the last thing you need.

You have 20 years (or so) before you retire ‒ so there’s no need to panic. Amazing things can happen when you work diligently towards a commonsense goal, but the first thing to focus on is getting yourself right.

Scott

Should We Refuse to Pay?

Barefoot,

My husband and I (stupidly) bought a timeshare in Vegas back in 1997 ‒ we had just got off a plane and were feeling very jet lagged! We have tried a gazillion avenues to offload it ‒ we even offered it to a number of charities for free. My question is: if we stop paying the maintenance fees, will that affect our ability to get into the US when we travel there (we have family there)? Alternatively, do you know how we can offload it?

Melanie

Hi Melanie,

You’ve been paying this timeshare for 21 years ‒ you’d get less for murder!

It’s like an ugly chihuahua ‒ you can’t give these things away.

As for payment, I’m afraid you signed up to Hotel California: you can check out any time you like … but you can never leave.

In other words, you signed a legally binding contract to continue making payments, and timeshare operators reserve the right to sue you for payments you fail to make, and they often do in Australia.

As for overseas operators, well, I’d think it’d be unlikely they’ll chase you, but I’d definitely seek legal advice as to what the ramifications are.What a nightmare!

Scott

You’re Being Unfair, Barefoot

Dear Scott,

I read your article last week on Wyndham timeshare, and I think what you said was a little unfair.

We have been with Wyndham for around 10 years, and it has been great for us because we were able to pay without borrowing, and we enjoy great holidays. The accommodation is actually really good – large rooms with modern accessories and plenty of facilities (pool, gym, mini-golf, tennis court, etc).

We did the numbers, and in our situation and on our package we believe we will be ahead after 30 years. So we took the chance that we will live beyond 60 and have free holidays thereafter, plus other benefits. It is not incredibly great value, but it has suited us and we are happy to lock in holidays for the rest of our lives (health permitting).

Max

Hi Max,

You sound like you have “Stockholm syndrome” (definition: “Feelings of trust or affection felt in many cases of kidnapping or hostage-taking by a victim towards a captor”).

Did you really sit in that high-pressure sales seminar, doing your sums, and say to your wife:

“Honey, by my calculations we’ll be ahead in … 30 YEARS … let’s do this!”

You’ll only be ahead if you totally disregard the time value of your money ‒ and you don’t mind staying at the same hotel chain for the next 62 years. Consumer complaints have prompted ASIC to review timeshare holiday schemes. Let’s hope they rub these shonks out, because they’re a complete rip-off.

Here’s why:For consistency, let’s say you pay the same fees as I described in last week’s column: to get 12 nights’ accommodation in their hotels, every year for a lifetime, it’ll cost you $122,909 over 62 years … though likely significant more because they can jack up their ongoing fees by as much as 5% a year.

The same money invested in a share fund would be worth $3.7 million. And the true value of the upfront timeshare payment is less than $10,000, which is what other timeshare hostages are trying to sell them for on Gumtree.

Scott

Ground zero of the mortgage crisis

Let me take you to ground zero of the mortgage crisis.

Right now the National Debt Helpline (1800 007 007) is receiving so many calls that they’re at breaking point.

The helpline refers people in the most dire situations on to community-based financial counsellors ‒ yet the demand is so intense that the wait time for someone to actually sit down in person and help has stretched out to three months!

(And it’s only getting worse. As I reported last week, a study has suggested that one million people may find themselves in mortgage stress if ‒ when! ‒ interest rates move upwards by just 0.1%.)

Hang on, who are the financial counsellors and what do they do?

These guys are the unsung heroes of the financial services industry. They’re free to use. They’re independent. And in your darkest hour they’ll stand shoulder to shoulder with you and fight for you when no one else will:

For the guy who’s just been diagnosed with a terminal illness …

The mother who grabbed her kids and fled from her violent husband in the middle of the night …

The young woman with a brain injury who doesn’t understand the (deliberately confusing) payday loan contracts …

The father who was laid off from work and is just trying to keep food on the table …

Yes, the ongoing Banking Royal Commission has shown us ‒ over and over again ‒ that we need these heroes.

Yet the truth is that the financial counsellors are having their own financial crisis: there are not nearly enough of them on the ground. I believe so passionately in what they do that I’ve donated 10% of my book royalties to the Financial Counselling Foundation … yet it’s a drop in the ocean.

There is only one man who can truly help: Dan Tehan.

Dan is the man, because, as the Federal Minister for Social Services, his portfolio funds the community-based financial counsellors. Dan has made recent announcements on financial counselling funding, but this only extends existing funds and doesn’t grow the services to meet demand. You need to fund ’em, Dan … it’s a growth industry!

So here’s my call to you, Dan Tehan. The financial counsellors need someone to stand shoulder to shoulder with them and fight for them when no one else will.

Now’s your chance, Minister. Make us proud.

I’m on My Way!

Dear Scott,

I’ve just closed the last page of your book (I read it in one sitting, couldn’t put it down). I left an abusive relationship and my three kids and I live on the very edge of poverty. I can tell you now that if it wasn’t for my kids I wouldn’t be here. A big part of that is living hand to mouth and being afraid of not making the rent.

I felt like my kids had the worst draw ever when it came to me. Tonight is the first night I have felt positive in a very long time. Your book is uplifting and amazing, and I feel I suddenly have a clear path lit up for me. I have booked my first ‘date night’ for this Saturday (by myself at home, but I’ll make something nice!).

I’m taking the very first step right now. I will write again in a year. Thank you!

Dina

Hi Dina,

Thank you for writing … and for talking to me on the phone just now.(I called Dina up after I read her letter.)

The entire Barefoot community is looking forward to celebrating your story when you update us in July 2019.

You Got This!

Scott

The Reality Check

Hi Scott,

I’m in trouble. I am 33 with three young kids, and waiting for my divorce. The thing that is holding it up is our family home, which has been on the market for eight months. My kids and I moved out six months ago to live with my parents in Brisbane, so it is sitting vacant. We took advice from our first real estate agent, who said that we could get $720,000. He was hopeless. After five months we did not get one offer!The new agent started out all happy and confident. He convinced us to list it for $670,000. So far the only offer has been $570,000! We have a $660,000 mortgage ‒ I cannot leave with debt. This week he suddenly changed his tune and is now saying the property is at risk of going ‘stale’ and we need to drop our price. I am sick to the back teeth of real estate agents! What can I do?

Fiona

Hi Fiona,

A divorce doesn’t happen overnight, right?

It can take years of bulldust, blaming and baggage before you finally admit to each other that it’s over ‒ and make the decision to move on with your life.It’s the same situation with your home: it’s time to break up … with your price.

It’s been on the market for eight months with two different agents, and the only offer you’ve received is 20% below your original price. That’s the (real estate) universe telling you that your price is too high. Buyers don’t give a toss what the house has cost you, only how it compares with other properties on the market.

So what should you do?Focus on the things you can control.

Your real estate agent’s job isn’t to dig you out of your financial hole.

His job is to go out and find you the very best price in the current market.

Your job (and your ex-husband’s) is to decide what to do next.Houses aren’t like bread: they don’t go stale. However, it is true that, if a home sits on the market for months, buyers may start to think there’s something wrong with the property, or something wrong with the vendors.

And they’ll lower their offers accordingly.

Sitting around waiting to break even sounds like it’s already broken you.It’s time to act.

Scott

The $3.7 million Hotel Room

Hi Scott,

We recently went to an investment seminar where we were offered a chance to buy into a vacation club with international resort group called Wyndham. There are a number of different options, but the one we are looking at is the mid-range offer: we pay $22,146 upfront (financed at an interest rate of 13.15% over five years), plus a $746 annual levy. That entitles us to ‘7,000 credits’, which equates to 12 nights’ accommodation in their hotels, every year, for a lifetime. What are your thoughts?

Jess

Hi Jess

I thought timeshare died out in the 80s, along with windsurfing, mullets, and Reef Oil coconut tanning lotion … but apparently not.

Let’s get one thing clear: this is an investment like a Shane Warne commemorative ashtray is an investment. And the only thing ‘mid-range’ about this offer is the hotel room you’ll be staying at (with the bolted-to-the-floor TV).

I spent an hour of my life that I’ll never get back reading through the Wyndham product disclosure statement (PDS), and by the end of it I seriously wanted to swig some coconut oil.

To the numbers!

After five years you’ll have paid $34,066.

Yet it gets worse. Much. Much. Worse. The real rub of the coconut is that annual fee. The PDS states that you’re signing a legally binding contract that commits you to pay the $746 annual fee until … wait for it … 2080.

**** Regardless of whether you actually use a hotel.

** And the annual fee can be increased every year. Based on a 2% increase (the PDS states they can go as high as 5%, or CPI), the total cost of this timeshare will be $122,909.

*** And there’s all sorts of restrictions around when you can book rooms, and additional fees you’ll be slugged.

Let me put in another way:

If you’d invested $22,146 plus $746 a year over the same period into a share fund, you’d end up with $3.7 million in your back pocket. Yes, you wouldn’t get the benefit of staying in the hotels over the 62 years, but at least you’d have used your coconut.

Postscript:

Wyndham Vacation Clubs Asia Pacific kindly provided me with the following quote, which I’ve edited for length:

“We note this is an investment column, however Club membership is never promoted as an investment choice, but rather a lifestyle product providing a number of benefits to its members each year for the life of the Club.”

It may not be promoted as an investment choice, but it is a ‘managed investment scheme’ that involves entering into a 62-year contract with no termination clause.

However, they are right about their ‘benefits’. Some of these timeshare outfits lure holiday-goers with free tickets to Wet’n’Wild just to get them to sit through their pitch.

And those who sign up get completely hosed, and end up wet and wild: a quick look on Gumtree shows people selling their $22,146 upfront timeshare payment for $10,000.

** ‘Negotiable.’

Scott

Love Me Two Times, Baby

Hi Scott,

I am 24 and earn a good income. My partner and I are getting serious, but she owes $12,000 ($10,000 car loan, $2,000 credit card) and this is annoying me as I have no debt. I am looking to use $10,000 from my savings ($70,000 in total) plus $2,000 from her next paycheque to pay off the debt. I see this as the best option so we are able to save her entire income and increase our savings for our first home. But I am also worried that, even though she says she has learnt her lesson, she will not lose those bad habits. What would you do?

Matt

Hi Matt,

You’re certainly getting serious … 12 grand of serious!

Look, there’s absolutely no way I would pay off her debt. As in none. No way. Uh-uh. Talk to the hand.

First, because what happens if you guys break up?

That’d just be awkward.

Second, because it would rob her of the opportunity to prove how serious she is about buckling down and paying off her debts herself. If she makes a go of it, that’s a good sign. And if she doesn’t, that’s probably a good sign too.Good luck!

Scott

Our Tenant Burnt Our House Down

Hi Scott,

Our tenant burnt our investment property down (has been charged with arson). The property has landlord insurance for $500,000. The insurance company has offered us $309,000, or to rebuild it themselves. They’re also being a bit suss on paying us for lost rental income. Our mortgage is around $380,000, but the block will also need to be cleared. Is there any way we can get the $500,000 we are owed, or close to it?

Tammy

Hi Tammy,

You may be insured for $500,000, but the fine print in your policy may say that all the insurer is required to do is reinstate you to the same condition you were in before the fire. And if they can get away with paying out $309,000 instead of $500,000, that’s what they’ll do. You’ll need to read your policy carefully to see what it says.

Remember though your policy was written by the insurance company lawyers, with the aim of giving them maximum wriggle room. That doesn’t mean you shouldn’t challenge them -- especially on the loss of rental income. You have nothing to lose, and everything to gain.Let your insurer know that if don’t get a satisfactory outcome, you’ll register your complaint with the Financial Ombudsman Service (1800 367 287). After that your insurer has 45 days to resolve your complaint.

Scott

I Feel Defeated

Hi Scott,

I am a 21-year-old single female. For as long as I can remember I have wanted to buy a house, because my family rented and we did not have financial security growing up. I have been conservative with my spending, worked two jobs and managed to save $90,000, but house prices are skyrocketing. This is not even enough for a deposit on an entry-level unit in far outer-east Melbourne. I feel absolutely defeated. Maybe it is better to invest money in ETFs (Exchange Traded Funds) and just rent for life?

Anna

Hi Anna,

You need someone to sit you down and show you just how amazing you are, and that person is me.

You should be really proud of yourself. There aren’t too many people who’ve saved up $90,000 on their own steam. Fewer still who have achieved it at age 21, by scrimping, saving and working two jobs.

There’s absolutely no reason to feel defeated. On the contrary, I’m here to tell you that you’ve already won.

See, financial security doesn’t come from a dollar figure, or buying a house.

It comes from behaviour. It’s the grit to work hard, sacrifice and save, and you’ve got that by the bucketload.

So, after years of doing this, let me make a few predictions:

First, to answer your question, you will buy a house ‒ when the time’s right.

Second, you’ve already changed your family tree ‒ you will never be financially insecure.

Scott

Hey Kids, Let’s Learn about Credit Cards!

Dear Scott

I am a teacher and I just got an email which made me angry, and I have you to blame... or should I say thank? You see, our children are attending a compulsory ‘StartSmart’ lesson once a week hosted by the Commonwealth Bank. I looked at the program for Year 3, and what is the very first concept they mention? You guessed it, credit cards! I will be attending the session with my students and I can already feel the rage inside.

Narelle

Hi Narelle,

They’re talking to eight-year-olds about credit cards?

That’s kind of … shocking.And the concept of compulsory corporate-branded education reminds me of ‘Hamburglar University’.

However, you’re a teacher, which means you can be a force for good. You can stand up and fight for your kids. If I were in your shoes, I’d talk to your principal about kicking the CBA out of your school ... and use it as a financial lesson for the kids.Here’s how you can explain it to your students:

“The CBA has spent millions of dollars of their shareholders’ money buying their way into classrooms.

“Their motivation is to make that money back by signing you up to be their customer.

“One of the bank’s most profitable products is a credit card, and when you turn 18 they’ll likely send you one.

“The bank brings mascots to assemblies, like ‘Cred’, which make credit cards sound normal.

“However, the truth is that you should avoid them.

“This week ASIC released a report that showed that one in six people are caught in what they call a credit card ‘debt trap’. Worse, they found that young people’s credit card debts were ‘of particular concern’, and that they ‘were more likely to be in delinquency, and multiple cards were over-represented’.

“The CBA will never tell you that they’re ‘debt traps’, because it’s how they make their money.

“However, that’s not independent education; it’s really just another form of marketing. And that’s the reason we decided to kick the CBA out of our school.

“Now that would be a fantastic financial lesson!

Scott

When the Bank of Mum and Dad Goes Bad

Can you remember when you got your first credit card?

Mine was automatically bundled into my NAB student banking package when I went to university. At the time NAB said it was a smart idea for students to have access to a ‘low-rate credit card’ for ‘emergencies’ (like bar night).

That card allowed NAB to begin building a marketing profile on me. Through the positioning of minimum repayments on my statements and online banking, they trained me to see their credit limit as my money.

Then they began bumping up my credit limit.

That’s how the game works.

Commbank are doing this right now with their latest advertising campaign, which targets young people to sign up for their ‘low-interest’ Essentials credit card … instead of going through the hassle of borrowing money from their parents.

One CBA billboard says: “Because the Bank of Mum and Dad will probably give you a lecture, and you had enough of those at uni.”

Their TV ads show millennial kids having to suck up to their parents ‒ listening to their dad’s jokes, eating their mother’s terrible cooking ‒ just so they can borrow some money. CBA’s tagline at the end of the ad says: “For when you’ve outgrown the bank of Mum and Dad.”

A spokesperson for CBA said their ads aren’t manipulative in the slightest.

In fact, they’re in it to help young people:

“We believe it’s really important to help young adults develop good financial habits, such as budgeting and managing their money wisely. As they move into full-time employment, their spending and payment habits change, and this includes using credit cards.”

That’s the corporate spin, though there’s no way they actually believe it.

It’s all just part of the game.

(To be fair, the vast majority of CBA employees are hard-working, diligent professionals who care deeply about their customers. It’s just the top brass that are knobs.)

Tread Your Own Path!

Help! I Don’t Want a Tax Bill!

Hi Barefoot,

I am 27 and work as a carpenter with a small construction company. The accountant I have always used (who always got me a good refund) retired at the end of last year, and I am worried I will have to pay tax this year. What can I do to get around it? What deductions can I claim? I just want to break even and not have to pay anything!

Ben

Hi Ben,

Your old accountant was probably a very nice chap, but he didn’t have wizard-like ‘tax deduction’ powers.

He either fibbed on your behalf (highly unlikely) or you simply got what you were entitled to.

So here’s a hack for you:

Download the ATO’s myTax app, via your myGov account.

The myTax app will pre-fill all your information (though you’ll have to wait till August for this). Then you’ll be able to click ‘Calculate’ and see whether you’re due a refund or up for a tax bill.

On past experience, you might well get a refund.

However, if you are up for a bill you can at least extend the time you have to pay it until May next year, simply by lodging your tax return with an accountant. This’ll give you plenty of time to save your backside off.

Yet what can you do to actually lower your tax this year?

Well, there’s not much wizardry on offer now that we’re in the new financial year, I’m afraid.

And it’s not advisable to fudge your tax return. It’s possible to do, since the ATO operates under a self-reporting system, which means it’s totally up to you what you put on your tax return.

It’s a bit like lying to your mother … you’ll be caught out. That’s because the ATO data-matches 640 million separate transactions ‒ cross-referencing bank accounts, share certificates, Centrelink payments and more (which is how they get all your data to prefill the myTax app).

They have the computing power to check the legitimacy of every single tax return.

And they will.

Go to the ATO website and check out their work deduction guide (building and construction employees), and then go through your bank statements to see if there are any purchases you can claim.

Having said that, you can claim up to $299 in work-related deductions without having any evidence or receipts, however you do need to be able to show how you worked out your claims.

Anything over that, however, needs to follow three rules: it must be related to your job, you must have receipts, and it can’t have been reimbursed by your boss.

OK, now it’s time to think ahead — what can you do during the coming year to really save some cash?

The best tip is to get a 100% tax deduction by having your boss pay for some work-related expenses.

You should be able to negotiate extras, like having your employer pay for your phone calls (or cover part of your monthly plan), getting an allowance for work-related travel, or having them pay for a course that will make you a more profitable employee.

This 100% deduction can’t be claimed on your tax. But it’s a much sweeter deal overall than those ‘fully tax-deductible’ purchases you can claim, which really just mean you’re spending one dollar to get 45 cents back (and that’s only if you’re paying the highest rate of tax).

A final tip for the coming year:

The ATO now has an app (called Australian Taxation Office), and it’s pretty good. It allows you to take photos of receipts and enter work-related deductions on the fly. If you’re claiming a car expense, it has a built-in GPS tracker to record car trips. And it feeds directly into myTax.

Download it and get on the front foot for tax time next year.

Scott

You’re a Self-Promoter, Barefoot

Hi Scott

Love your work but am getting a little tired of all the self-promotion of your book. Yes, it’s great and I have bought it, put it to good use and made some gains. I also love reading your column for the weekly advice, but it seems that your every response encourages people to buy your book. Is your column at risk of becoming a grand-scale advertorial and therefore undermining your independent credibility?

Bill

Hi Bill,

I apologise profusely, and I will stop in three months.

Promise.

(Bill, just skip over the next question; it’s only going to make you angry.)

Scott

What About Helping ‘Tweens’ Too?

Scott,

Last night I was reading your book and my 11-year-old son asked me about it. I was reading the chapter about credit cards, so I explained the dangers of them to him. Would you consider revising your book and targeting ‘tweens’ like my son? He is faced with so much more ‘negative temptation’ than I ever was. He talks about an online shopping site called Wish, and he also talks about gambling because of those horrible Lottoland and Sportsbet ads. I think your advice and guidance would help reinforce some good financial messages for kids.

Nikki

Hi Nikki,

As luck would have it, I’m currently writing a new book ‒ The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need ‒ that helps parents to raise financially fit kids of all ages, including tweens. While my last book focused on doing ‘Barefoot Date Nights’, this one focuses on the entire family having ‘Barefoot Money Meals’.

It’s due for release in September. (Calm down, Bill. I told you not to read this!)

Thank-you for reading,

Scott

I Didn’t Get Paid!

Hi Barefoot

Interesting column last week about super not being paid. In my office almost everyone has not been getting super since November last year, and some for 12 months. But, like you said, it shows up on our payslip as being paid. A few people have approached the boss as far back as last year, and as recently as two weeks, and the boss said that there was a ‘glitch’ with MYOB and that the money is in the ‘cloud’.

Mel

Hi Mel,

It doesn’t sound like a glitch ... more like you’re getting stitched.

Times change but the bulldust stays the same: it goes from ‘the cheque’s in the mail’ to ‘the money’s in the cloud’.

Well, after 12 months of not being paid super, it’s about time you made it rain ‒ with your boss’s money!

I’d suggest you go to the ATO website, lodge a complaint, and have them investigate.

Legally, employers have to pay super at least four times a year.If your boss is looking to the clouds to pay your super, it tells me that:

One, the business is struggling. Or two, your boss is a crook.

Neither bode well for getting a gold watch in 20 years’ time.

Time to start looking for another job.

Scott

Here’s What I Really Think About the Acorns (Raiz) app

A lot of people ask me about the youth-focused investing app Acorns.

Its ‘killer app’ is that it collects your spare change and invests it in the share market on your behalf.

The company recently changed its name to Raiz Invest, and this week it had an IPO (initial public offering) and became a public company trading on the ASX (ticker ‘RZI’).

If you’re one of the 160,000 young people who are already a Raiz user, or if you’re just an interested punter, you may be wondering if you should invest in RZI.

Well, thankfully, the difference between being a private company and a public company is kind of like the difference between going on a first date and going on your seven-year wedding anniversary: there’s a lot more disclosure.

So let’s take a look-see.

Raiz states in their prospectus that they make their dough by charging users maintenance fees, account fees, netting fees and advertising fees. Lotsa fees. However, these fees only amount to small beer for the company, because the average Raiz account balance is just $1,234 (not a typo!), according to the company.

Looking at their cash flow statement, it shows ‘receipts from customers’ in FY 2017 was $990,424.

However, ‘payments to suppliers and employees’ for the same period was $3,005,078 (also not a typo!).

Feel the burn, baby.

Raiz has recently launched a super fund version of the app (which is cheap, but not cheap enough for my liking), and is also expanding overseas by targeting kids in South-East Asia, which seems like a very slow ramp-up to me … I’m not sure how much spare baht teenagers in Thailand will have to invest.

So, how did Raiz’s debut on the stock market go?

Not well.

The share price plunged 20% on the first day. Though I don’t think it helped that ‒ of the $15 million the company tapped investors for ‒ $2 million was trousered by staff, including a $1 million cash bonus for the CEO.

So should you invest via the Raiz app?

I think it’s a great introduction for novice investors, which is why it’s been so successful. However, after a certain point the fees Raiz charges are too high for what amounts to a cute index fund app.

So should you invest in the Raiz company itself?

Based on what I’ve read, they won’t be getting any of my nuts.

After all, I’ve always thought of Raiz (Acorns) as being a little like your first teenage love:

Memorable, but you’re not going to stay with them long term.

Tread Your Own Path!

The Billionaire

Dear Mr Pape,

My name is Lachlan, I am 16 years old, and I live on the Gold Coast.I have a keen interest in finance and economics, and through my part-time job I have been able to build a share portfolio worth $3,000, on top of $2,000 in savings. I would like some help on how to best manage my funds as I look to achieve my one life goal: to reach a net worth of $1 billion.I have thought about joining a super fund, but that idea has continuously fizzled out because I am sure I will never need it. If you could provide me with some information about how best I should go organising my finances, it would be greatly appreciated.

Lachlan

Hi Lachlan

Look, I like ambition as much as Malcolm Turnbull ... but your one life goal is to become a billionaire?

Just 0.00002% of the global population are billionaires. I fear you’re painting yourself into a corner, cobber!

Anyway, let’s hear from one of them, Bill Gates: “I can understand wanting to have millions of dollars, there’s a certain freedom, meaningful freedom, that comes with that. But once you get much beyond that, I have to tell you, it’s the same hamburger.”

He’s right.

Being a billionaire won’t make you a thousand times happier than being a millionaire. As Bill says, you can achieve the lifestyle and the freedom you want with a few million bucks ‒ which is still ambitious but, with enough time and the right plan, is achievable.

So your first goal ‒ your only goal ‒ is not to strive for some pie-in-the-sky figure you think will make you happy.

Rather, it’s to focus on finding something that is guaranteed to make you happy.

How do you do that?

My friend Arun Abey, a wealthy man himself, has a strategy he calls ‘the three circles’.

It involves asking yourself three questions:

What am I deeply passionate about?

How can I work, over many years, to become truly great at it?

And, finally, how can I make enough money from doing it?

Fulfilment is found at the intersection of these three circles.

One last thing: you should keep this article and re-read it in 40 years’ time.

Scott