I’m Angry With You, Barefoot

Hi Scott,

Being a Barefooter, I am pretty disappointed with how you treated 22-year-old Tina with her question last week about her boyfriend investing $1,000 on her behalf. You basically ridiculed her. The fact that she took the time to ask for your help speaks volumes, but your reply did not offer one bit of advice on what she should do instead. Hopefully she has not lost her investment so far and may be able to put it into something better, should you advise her what that might be!

Justine

Hi Justine,

A recap: Tina wanted to give her boyfriend a grand of her own dough to invest because “he’d made $1,500 in 24 hours”. Yes, I used her question to make a broader point, namely that the stock market has lately become just another place for many young men to gamble.

However, I’m also sure Tina got the message loud and clear that her boyfriend’s day trading would end up in tears — and, Justine, I think that’s valuable advice (heck, I may have even saved their relationship!).

Okay, given the trouble that got me into, let’s double down and deal with another boyfriend question ...

Scott

The NutriBullet of the Bedroom?

Today I’m going to talk to you about something really weird: investing in sleep.

Here’s the thing: you probably spend, at best, two hours a day in your car, but eight hours a day in the sack … yet you’re likely still sleeping on the equivalent of a Datsun 180B, right?

Honk! Honk!

Seriously, when was the last time you upgraded your ride, Captain Snooze?

Look, I’ve got form on this: in my bestseller I wrote about investing in the Rolls-Royce of pillows, the Dunlopillo, so you could “sleep like a billionaire”. (And yes, I’m the only finance guy who moonlights as a bedroom furnishing advisor. Put that in your pipe and smoke it, Alan Kohler!)

Well, today, I have an update for you. It all started a few months ago when a friend recommended I try sleeping with a new type of blanket.

“It’s the new thing … they’re called weighted blankets … they weigh, like, 10 kilos … and they’re scientifically proven to release endorphins and help you sleep”, she gushed.

And I thought to myself: “You are crazy.”

Then, a few weeks ago, another friend was raving about hers.

So I went online and found thousands of glowing reviews, and decided to try one myself.

(To be fair there’s also a bunch of pseudoscience written about the benefits of weighted blankets, which left me very skeptical.)

And so I ordered the cheapest one I could find, fully prepared for it to be the NutriBullet of the bedroom (i.e. destined to end up in the back of a cupboard and eventually thrown out in 2032).

BUT OH MY GOD.

True dinks, the very first night I used it … I slept like it was 2012 (pre-kids, post-marriage).

So how does it work?

Well, it’s pretty simple really: it’s just a standard blanket with 10 kilos of small beads sewn into it. It weighs you down — but in a good, calming way, and I quickly nod off.

Well, that’s my description (and how it works for me). My father would probably describe it as “sleeping with a hessian bag full of sand on you”. And he’s kind of right: it makes absolutely no sense … but it’s helping me sleep soundly in these trying times, so for me it’s a great investment.

Tread Your Own Path!

We Hit the Jackpot!

Hi Scott,

This month, my husband and I will finally be debt free! We owe nothing (though we also own nothing). My hubby used to have an addiction to gambling and a $120,000 debt on credit cards. We have spent the past five years paying every last cent off, while having three children under five, and I’ve also been studying at uni. My question is: moving forward, how can we make the best decisions to create wealth, and is trading shares just a form of gambling?

Kylie

Hi Kylie,

What a truly amazing all-of-family feat.

The fact that you guys bunkered down and paid off all your debts tells me a lot about the people you really are.

Know this: done right, investing isn’t the same as gambling.

You’re saving so you can provide for your family’s long-term security.

That is the polar opposite of gambling.

My advice?

Invest — but do it via your boring-as-hell low-cost super fund. Do it via a regular, automatic direct debit. Never look at the balance. Only check it once a year when your statement comes in the post.

And keep repeating to yourself: I’m not gambling … I’m providing a better future for my family.

You Got This!

Scott

The Hangover

Hi Scott,

My daughter lives with her partner and three children in a property that I own. They have many bills and are unable to pay rent. Her partner is wasting his money on gambling and will not change — he has even stated that he wants to keep his head in the sand. How do I get him to grow up? I have given him your book and my daughter is trying hard and has since started part-time work. However, they have three car loans and have debt collectors visiting frequently. Help! I feel powerless.

Jenny

Hi Jenny

It must be horrible to see your daughter go through this.

Now I know you’re coming at it from a place of love, but giving her partner my book won’t help one bit.

Why?

Because it sounds like he’s in the grips of a gambling addiction. And, if that’s the case, giving him my book is like giving an alcoholic a Panadol for a hangover.

So, what can you do?

A couple of things:

First, as hard as this sounds, drop the judgement.

I’ve learnt to view people with gambling addictions the same way I view anyone with a serious illness.

“When will you grow up?!” is like asking someone with a mental illness “When will you be happy?!”

Him telling you that he “wants to keep his head in the sand” sounds like a reaction to feeling judged.

Trust me, he knows how bad it is.

Second, encourage both him and your daughter to see a financial counsellor. Ideally, it would be a specialist gambling financial counsellor (call Gamblers Help on 1800 858 858 for a referral).

However, if he’s not ready to get help, encourage your daughter to go on her own. Reason being, the debt collectors will not let up, but a financial counsellor will sort them out and stop the calls.

Finally, you’re doing an amazing job providing them with a roof over their head. Make sure they keep getting the basics: food, power and schoolbooks.

You say you feel powerless. Just remember, that’s probably how your son-in-law feels too.

Scott

My Son has a Problem

Hi Scott,

My 18-year-old son has no value for money and thinks I am a human ATM! I still pay for his phone and his car insurance. He completed the VCE but did not want to pursue university. He is working part time at the moment and is also receiving Youth Allowance. However, every week without fail he will ask for a loan of cash on an IOU basis. He still believes it is my responsibility to pay his living expenses, and I cannot get through to him on this. 

Gary

Hi Gary,

I’m sorry but I think you’re wrong.

Your son doesn’t have a problem: he lives rent free in a nice joint, all his bills are paid, he’s getting a bit of money from Centrelink and a part-time job, and when that runs out he has access to cash whenever he wishes.

If I were to sit down with your son, I think he’d tell me his life is pretty sweet. No problems!

Gary, it’s you who has the problem.

So my question isn’t directed at him — he’s set himself up very nicely — it’s to you:

What are you going to do about this caterpillar?

You’ve got a slug munching away your food, and your wallet. The cocoon you’ve made for him sure is comfy!

Here’s the deal: he won’t find his life’s purpose sitting on your couch, eating your food, and spending your money.

If you want him to become a butterfly, he needs to spread his wings and fly off to a low-rent share house that has two-minute noodles as a staple meal.

(Yes, I’ve spent way too much of these holidays reading The Hungry Caterpillar.)

Given he’s still young, let him know that he’s welcome to fly back at any stage, on the proviso that he presents you with a solid plan (study, a trade, or a full-time job).

Good luck!

Scott

My Boyfriend Is Into The Stocks

Holy smokes!

I take two weeks off for the school holidays and my Barefoot inbox goes … to the craps.

Yes, it seems everyone wants to take a seat at the casino that is today’s share market.

And for those who don’t know their stocks from their jocks? Well they ask me … or their boyfriend.

Here’s a question I received last week from 22-year-old “Tina”:

Hi Scott, 

I was wondering who the best companies are to invest in during this pandemic. My boyfriend is into the stocks and has made $1,500 in the last 24 hours, so I have given him some of my own money ($1,000) to invest. But I was wondering what companies you would recommend.

Tina

Tina’s boyfriend is “into the stocks”, and you can bet he’s got a swagger like Jagger over his … 24-hour track record.

“Hey girl, I’m going to make you rich.”

To be fair, for many people shares are just another way to gamble.

And to be even fairer, this is a worldwide phenomenon.

In the US, the three biggest brokers signed up over 1.5 million brand-new customers in the March quarter alone.

In China, trading apps are struggling to keep up as millions of traders “race to seek a quick buck in a surging market”, according to Bloomberg.

And in Australia the number of new investors has increased by more than threefold.

For me, these are worrying signs.

We are in the midst of a deadly pandemic that shows no sign of slowing, and it’s causing real and lasting economic damage.

We are entering into a deep and sustained global recession.

And yet Tina’s boyfriend is making bank, baby!

So, how long will his luck last?

Well, author Matthew Hale Smith wrote in his timely book Bulls and Bears of New York:

“Speculators do not make money, except by a turn as rare as good luck at a gambling table … Of the countless thousands who throng Wall Street from year to year, the great mass of speculators are ruined. Every broker on Wall Street has an entirely new set of customers once in three years.”

Wise words … written 146 years ago.

Tread Your Own Path!

Well Done, Chappy!

Hi Scott,

Thanks to your advice my friends have paid off their mortgage. They are a young family with four children. He is a school chaplain who earns very little but is dedicated to his job and his community. I would be so grateful if you could flick them a quick email of congratulations — it would mean so much to them. His name is David and his wife is Emily.

Wendy

Hi Wendy,

I can do better than that — I can celebrate it with a few million of my fellow Barefooters, right here.

You bloody ripper!

Well done, David and Emily. You’ve achieved a goal that will change your family’s life in more ways than you know.

You’re now on to Barefoot Step 8: ‘Nail your Retirement Number’, which is so much easier when you have the banker off your back. It means you’re able to focus on my favourite step of all, Step 9: ‘Leave a Legacy’. That’s when you know you’re really wealthy. 

Scott

Should I Obey God … or Barefoot?

Hi Scott,

I am halfway through your book (my wife made me read it … thank God). We have $46,252 of high-interest credit card debt and no assets. For the first time I see a glimmer of hope of getting out from this noose of debt. We are following your book and I am going to trust it works, because I cannot see any other way out. The thing is, we go to church and are encouraged to give away 10% of our income. Should we use that 10% to get out of debt instead?

Greg

Hi Greg,

I guess this is the Barefoot confessional!

If you are really committed to tithing and believe in what you’re doing, why are you writing to me about it?

I’m not going to get in between you and your God, or between your bedsheets and your balance sheets.

Some people have criticised me for not being prescriptive enough … but I’m not the sort of person who likes someone telling me what to do.

So you do what’s right for you, your marriage and your God.

I’ll just say this:

Let’s say you’re both earning $60,000 a year. Combined that works out to be $8,000 a month in the hand, and $800 in the Sunday tip jar.

If you paused your tithing and put the money against your debt, it would save you $120,585 in interest, according to the ASIC MoneySmart credit card calculator, and get you out of debt in a few years.

And then you’d be in an even stronger position to do God’s work.

Scott

Help a Stripper Out!

Dear Scott,

Hoping you can help a stripper out! My name is Emmy (stage name Charlotte), I am a 25-year-old stripper from Byron Bay, and I have just read your highly entertaining book. I would love your advice on budgeting. In my line of work, I can never estimate how much money I am going to make each week — some weekends it’s $3,000+, some weekends it’s less than $500. How do I manage this?

Emmy

Hi Emmy

I know what you’re doing … trying to get my attention with that opening line.

And you know what?

It worked.

My first thought is that being a stripper would be the ultimate cash business.

I mean, your clients literally throw money at you!

Then again, you’ll still face the same financial issues as any self-employed person.

My book sets out how I personally manage my own money … I’m self-employed, and it works for me!

That said, you need to do three things:

First, set up a separate bank account and deposit all the cash you receive.

The ATO data-matches billions of transactions, and they target people working in professions where cash is received. Report your tips in your tax return (usually at Item 2: ‘Allowances, earnings, tips and director’s fees’) and claim any legitimate work-related deductions (lingerie and the like), as with any job.

Second, transfer 35% of whatever you earn into a separate tax account so you’ll never be caught out at tax time.

Finally, work out the absolute minimum you need in your ‘Daily Expenses’ bucket and set up your other buckets by following the plan in my book. Any extra you earn after that should be applied to working through the Barefoot Steps, which will keep you growing a little wealthier each day.

People keep telling me that my ‘three jam jars’ system for kids doesn’t work because nobody uses cash anymore … maybe they need to come and see you at work!

Scott

How to Honour Him

Hi Scott,

I am in my early thirties and feel hopeless. Recently I lost my brother to a very long and hard battle with cancer, and in his will he left me $10,000. I was thinking about spending it on a holiday or a nice piece of jewellery to remember him by, but I also have a $20,000 credit card debt that I have struggled to pay off for the past 10 years. Would you put it towards the debt or go on a nice holiday to get away from all the painful memories?

Bec

Hi Bec,

I’m sorry for your loss.

Here’s what I think: I think that losing your brother is a tragic, heartbreaking reminder that life is precious.

Bec, life is far too short to spend it being a slave to a bank.

And make no mistake: while you’re paying them $3,600 a year in interest, you’re effectively a financial slave.

If you keep on paying the minimum, it’ll take you 54 years to be free (and that’s if you stop spending on it today).

I think you should honour your brother, cut up your credit card right now, and live the rich life that he can’t.

Make him proud.

Scott

Should I Buy Shares in a Cruise Liner?

Hi Scott,

I am about to receive money back from Princess Cruises, due to a cancelled cruise. The owner of Princess Cruises,  Carnival Corporation, has just seen its share price hit a record low. With this in mind, I am considering purchasing 10 Carnival shares. This will benefit us, as shareholders get $250 on-board credit for every future sailing of over 13 nights. We are already platinum status members and plan on continuing to build our loyalty. Is it a good idea to buy now?

Dorothy

Hi Dorothy,

So you’re talking about the tub that kicked off the coronavirus in Australia, right?

Just making sure.

Let’s be honest — your motivation for making this investment starts and ends at the minibar. You’re thinking of buying some shares simply to get the shareholder discount.

And I’m perfectly okay with that, so let’s sail:At pre-corona levels, 10 shares in Carnival Corp cost around $850 Aussie.

Today those 10 shares are going to set you back around $280, and you get a $250 credit!

And the more cruises you take, the more shareholder credits you can spend!

Then, when you’ve worn out your sea legs (or hips), you can sell your shares, hopefully at a profit.

Really, the only downside is if the company goes broke. And if there’s a second wave of infection, Carnival Corp could very well sink: the company burned through $US12.9 billion of expenses in 2019 … and post a capital raising they’ve only got $US7.6 billion in cash on their balance sheet.

Yet let’s be honest: if contracting a highly infectious and potentially fatal disease doesn’t bother you, losing a few hundred bucks is the least of your worries. That being the case, if I were in your boat shoes I’d take the punt and buy the shares.

Bon voyage!

Scott

Pardon My French

Hello Scott,

I would like to know if a French version of your books exist please?

Genevieve

Bonjour mademoiselle,

Non!

Cordialement, Barefoot

Scott

I Want to Hit My Dad … Does Barefoot Agree?

Howdy Scott,

My dad and I are just about coming to blows! He has a mate, an investment manager, who is managing his $700,000 in superannuation. The portfolio currently has 15 holdings, all ETFs and LICs, and his ‘mate’ is slugging him $330 a quarter to manage this rubbish. I said I could do this for free, or spend a day explaining the basics so he could do it himself. His response: “I’m happy with how much I am making, plus you don’t know what you are talking about.” Haha! How can I get the message through to him that passive investing will take a whole 10 minutes out of his year to organise? Or should I just let him be?

Pete

Hi Pete,

I actually agree with your old man, for a couple of reasons:

At $330 a quarter ($1,320 a year), it represents around 0.18% per annum cost to his portfolio.

And, so long as he’s invested in decent, low-cost products (no expensive actively managed funds), he’ll be fine.

More importantly, if his ‘mate’ can stop him from freaking out and jumping off the stock market rollercoaster as we do the occasional loop-the-loop, then he will have more than earnt his money.

Don’t feel bad.

My old man talks to me about stocks all the time, but then when he wants ‘real’ advice he talks to my analyst Mike (who then says the same thing as me). It must be something about the fact that they’ve had to wipe our bottoms at one point in our lives.

Then again, their turn will come someday soon. Circle of life.

Scott

Kids Say the Darndest Things

Dear Scott,

My wife and I have been doing the Jam Jars with our two girls for a bit over a year now. I just wanted to let you in on a conversation I overheard this morning:

Wife: “Why don’t you have more money in your Give Jar?”

Six-year-old: “I give it to the people.”

Wife: “Which people?”

Six-year-old: “The people in the tuckshop I get my Icy Pole from.”

Wife: “That’s not what your Give Jar is for, darling.”

Six-year-old: “But I give them money for my Icy Pole!”

Nick

Hey Nick,

You, my friend, have won question of the year. I got a real laugh from this one.

Let’s hope your daughter doesn’t become a lawyer!

Scott

Thank God for the Counsellors

Dear Scott,

I just want to encourage you with your financial counselling studies. I left an abusive 20-year marriage and felt the humiliation of going from being a teacher and university lecturer to a shadow of a woman holding up the supermarket queue as I counted coins for groceries. I should have stayed in our house. I should have had my own solicitor for the divorce. I should have made a claim on my ex-husband’s business and super. But I didn’t do any of these things … I was in trauma mode. My life may have taken a different path if I’d had financial counselling at this critical time. I think you are brave for what you are doing, and I wish you the very best.

Sue

Hi Sue,

You totally nailed why I became a financial counsellor.

A lot of my clients have ‘trauma brain’ which affects the financial decisions they make.It can happen to anyone, even educated, highly qualified people like yourself.

And when you fall into hardship, it’s critical there’s someone in your corner batting for you financially.

Thank you for sharing your story.

Scott

What the hell is going on?

“What the hell is going on?”

It was mid-March — in the depths of the corona panic — and I was in our weekly editorial meeting.

Something weird was happening at Barefoot. While the headlines were full of people hoarding toilet paper, we were seeing a huge spike in people asking me how they could buy … shares? 

A few weeks ago ASIC solved the mystery:

The regulator found that daily share trading volumes exploded during the lockdown, driven by a “sharp increase in the number of new retail investors to the market – up by a factor of 3.4 times”.

The same thing has been happening the world over, as virgin investors try their luck trading. In the US, the three biggest brokers signed up over 1.5 million brand-new customers in the March quarter alone.

Where are they getting their money?

Well, “trading stocks” was cited as among the most common uses for the recent US government stimulus cheques in nearly every income bracket, according to CNBC.

So are they little lambs to the slaughter?

Heck no, these first-time traders are swaggering around like big daddy rams!

This week the S&P 500 had its biggest 50-day rally in history, climbing a staggering 37.7%.

And that’s ...

Despite the largest global economic downturn in our lifetime.

Despite record unemployment in the US, with 40 million people out of work.

Despite rising trade war tensions between China and the United States.

And despite the largest civil riots since the 1960s.

One more time … what the hell is going on?!

Well, share markets around the world are being driven by two acronyms:

FOMO (Fear Of Missing Out), as the US Federal Reserve does everything it can to prop up asset prices.

And TINA (There Is No Alternative), with interest rates low … where else are you going to put your money?

However, there’s one experienced investor who isn’t buying:

Warren Buffett.

The legendary 89-year-old investor has wisely accumulated a billion cash war chest so he can famously “be greedy when other people are fearful”.

And so, when the Corona Crash wiped 37% off the market, we all assumed he’d be buying up big.

He wasn’t.

Instead, he did the exact opposite, dumping his entire holding of airlines, and more recently selling billions of dollars more of his bank stocks.

At the Berkshire Hathaway annual general meeting in May, Buffett cautioned that the $137 billion cash he had on hand “isn’t all that huge when you think about worst-case possibilities”.

Gulp.

The reaction to Buffett’s caution has been savage.

Many pundits have written him off: He’s too old. He’s too cautious. He’s lost his touch. His (short-term returns) suck.

Then again, the last time the press wrote him off like this was at the height of the Dot-com Bubble …

Right before the market crashed.

And in the decade after those headlines Berkshire Hathaway’s book value per share rose by 88%, thrashing the total index return of just 12%.

So, what am I taking out of this?

Well, a couple of things:

I’m still following Buffett’s long-standing advice and regularly buying low-cost index funds.

However, I’m not getting too excited. I believe there’s a good chance Buffett will ultimately be vindicated and we’ll see shares pull back at some stage. 

I’ll leave the last line to the guy who’s delivered a 2,744,062% return over his 55-year career:

“I don’t believe anyone knows what the market is going to do tomorrow, next week, next month, next year.”

Tread Your Own Path!

Terrified of Debt Collectors

Barefoot,

I am a stay-at-home mum with three kids. When my hubby and I moved to Brissie a few years ago, we had barely any money, so we got a credit card (and he also had a personal loan from a previous relationship). We could not keep up the payments, so we went on a debt agreement, but we ended up cancelling it as we could not afford that either. Long story short, we are now around $60,000 in debt. We have been ignoring calls as we cannot afford payments, and I am terrified debt collectors will come knocking soon. Help!

Jolanda

Hi Jolanda,

Your situation sounds … utterly exhausting.

Here’s the truth: feeling terrified is not conducive to making good decisions.The debt industry knows this, and they feed this feeling, because it’s the best way to get more money out of you.

That’s why debt collection companies hound you multiple times a day.

That’s why payday lenders like (Crime Converters … er, I mean Cash Converters) bombard you with text messages on short-term loans.

And that’s how someone signed you up for an expensive magic wand known as a ‘Part 9 debt agreement’.

Often these debt agreements are sold to people as a way for them to avoid bankruptcy … when the truth is that they are in fact an act of bankruptcy. In other words, you paid this mob thousands of dollars (that you didn’t have) for something that didn’t work.So what’s the answer?

It’s time to stop the terror, Jolanda, and get back in control.

Rather than ignoring the calls, it’s time to make a call:

First thing tomorrow I want you to call the National Debt Helpline on 1800 007 007.

They’ll put you in contact with someone like me — a free, independent, not-for-profit financial counsellor.

We can stop the calls from debt collectors, banks and other creditors, and negotiate a payment on your behalf.

It’s time to get you back on your feet!

Scott

A Hot Tip For You

Hey Barefoot,

I’ve got a hot tip for you. When comparing car insurance quotes online, put in your neighbour’s address instead of your own. When I was doing my renewal I gave it a go and, to my surprise, it worked! There was a $350 difference between insuring my car at my house versus five metres over the fence. 

Debra

Hi Debra,

What gives?

Was your neighbour a nice little old lady who only drove her Camry to Church on Sundays?

No, but I’m guessing that, unlike you, she was a potential new customer and your insurer was wanting to entice her in with a sweet deal! As this recession grinds the gears of corporate Australia, you can expect more pineapples like this to pop up.

The ACCC recently released a home loan report which found that “asking their bank for a lower rate, refinancing to another home loan or switching lenders, could result in interest savings of nearly $5,000 in the first year alone for an average sized new loan of $386,000”.

So the real ‘hot tip’ is to negotiate like you’re a brand new customer, and save yourself thousands. 

Scott

From $500 to $15,000

Scott

I do not have a question, I just want to say thank you. Two years ago I walked out of an abusive relationship with $500 to my name and debts that should never have belonged to me. My sister and brother-in-law gave me your book and I quickly decided this was how I would take control again. After two years of hard work and sacrifice, I have paid off all my debts and saved almost $15,000, and I am hoping to buy my first home at the end of 2020. I keep all of your columns in a folder called “YOU CAN DO IT” — and I did! 

Rachel

Hi Rachel,

I love celebrating the wins of the Barefoot community.

Yet I love it even more that right now, hundreds (if not thousands) of people in abusive relationships are reading your story and getting a little inspiration and motivation from hearing about someone who’s done it.

You Got This!

Scott

Should I Bail Out My Bro from a Million-Dollar Mess?

Hi Barefoot,

My dad died three years ago and left his house ($1 million) and super ($200,000) to my brother, and made me the executor. I was self-sufficient, so Dad told me I would not receive anything. Fair enough — I respect his wishes. Now my brother and his adult kids have almost run out of cash and are looking to me to bail them out, the way Dad always did. But I have my own family! How can I help my brother manage his affairs without preaching to him?

Hassan

Hi Hassan,

Plenty of people in your situation would’ve been bitter about not getting any inheritance, but not you. Instead, you were concerned about your brother’s needs, not your own.

That is deeply impressive.

So your next decision should continue in the same vein: it’s all about what’s best for him (and his kidults).

And giving them money is not it.

Your father’s money simply enabled his poor behaviour. It hindered rather than helped him. So deciding to give him more money would be like buying an alcoholic a beer because they’re thirsty.

My view?

Offer to help your brother to set up his basic spending buckets — and even be an ‘accountability partner’. Or, if that’s awkward, support him to go and see a free financial counsellor (call the National Debt Helpline on 1800 007 007).

Your old man understood that you were strong enough, both financially and emotionally, to make it on your own, and that’s why he didn’t feel the need to give you any money. He was right.

Your brother is the real winner, though. You’re not only someone who can be a good money mentor, but you sound like a great bloke too.

Good luck.

Scott