I Want A Credit Card Too!

Dear Scott,

I wish to make a complaint. I am currently working through the ‘Domino Your Debts’ section of your book, and I feel I am missing out. I have never had a credit card, and the only debt I currently have is my HECS-HELP loan. I want to experience the joyful fulfilment of cutting up a credit card and burning a final statement but, alas, it is not to be. Should I sign up for a credit card just so that I can cut it up?

Linda

Hi Linda,

Yes, you should. But only for the rewards points. (Just kidding.)

You Got This!

The Trouble Began When My Sister and Her Husband Were Murdered …

Hi Scott,

My sister and brother-in-law were murdered in 2013. I have spent seven years and a lot of money fighting for their orphaned kids — my nephews and niece. I bought your book and am slowly getting myself out of debt. I have also been fighting the federal government and will be hopefully getting $750,000 for the kids. I want them to make the most out of the money in 10 years. So should I buy them a property? Shares? What should I do?

Renata

Hi Renata,

What an absolute tragedy.

My heart goes out to your entire family.

I don’t have enough details to give you a considered opinion, but I’d caution you not to jump to the final step of ‘where to invest the money’ too soon.

First things first. I’d have a lawyer set up a trust structure that specifies what the money can be spent on (like short-term needs or education) and the age the children will gain access to the money.

That will dictate what you invest the money in, though I’d suggest you focus on easy-to-manage, diversified investments that can be sold quickly and cheaply. In other words, I personally wouldn’t buy an investment property.

Generally, I’m a fan of limiting access to lump sums until children are in their late twenties, when they’re a bit more settled in life. Inheriting large amounts of money when you’re immature, or not mentally prepared, will often do more harm than good.

Finally, I’d work on educating the kids about money so they know that, when the funds are eventually released, they’ll be able to use them to honour the legacy of their parents.

You Kicked Me in the Guts, Barefoot

Scott,

I was really disappointed by your comments last week to Melanie.

While I agree that framing the husband’s gambling expenditure as “what else could that money be used for” was a good idea, the way you said it felt like a kick in the guts to women:
 
“After all, he’s got a 1-in-140 million chance of winning the jackpot … but if he saved up his money and splurged on  a romantic night away with you (without the kidlets) … well, I’ll leave it up to you to explain his odds of hitting the jackpot.”

She is not an object to be bought or gambled upon. You have objectified her and mailed that out to your many followers. Her ‘putting out’ as a reward for attention and money is also playing into an old and damaging trope of women’s power and value only being in the pleasure we provide for men. It stinks of misogyny. You can do better, and Melanie (and the rest of us) deserve better than that.

Sally

Hi Sally

I’m sorry for offending you.

You need to know that you are not alone — I have been offending people for years.

(Recently I was accused of misandry — hating men — so I am at least an equal opportunity offender.)

In fact, these days I often run my column past my wife, just to make sure I edit out, in her words, “the country boy”.

(This one must have slipped through the cracks.)

So here are my thoughts.

One of the most difficult things about being in a relationship is managing money. That’s why I’ve written into my plan monthly Date Nights, so couples can talk about things over a nice meal and a wine and stay on the same page.

Perhaps I should have just said that, and left it at that.

Still, I’m a lover not a fighter, and I’ll gamble (almost) everything for love.

So I’ll just apologise and thank you for writing.

Daughter Teaches Mum

Hi Scott,

My husband and I have been doing the jam jars with the kids since your Barefoot Families book came out. A few weeks ago, we went to Kmart and my eight-year-old daughter found a hat that she wanted for $6. She said she would save up and come back with the money the following week. Well, we came back the following week and realised she had looked at the price upside-down — it was actually $9. I said, “You know what? You have been so good lately that I will put in the extra $3.” She said, “No, Mum, how will I learn to save properly if you just give me the money?” I was sooo proud!

Jenny

Hi Jenny

With kids there’s a lot of slamming doors, tantrums, and “Why are you making me do this!?”

It can feel like there’s not a lot of wins — but you, Jenny, have won the parenting cup!

Your story reminds me of the infamous ‘marshmallow test’ — where young kids choose between one marshmallow now or two later. And it’s been shown that kids who can delay gratification for small things now have the ability to do it in the future with big things. In other words, show me the girl at 8, and I’ll show you the woman at 28.

She Got This!

My thoughts on ethical investing

You want to hear something crazy?

The most popular investing question I’m asked has nothing to do with making money.

True dinks.

The investing question my readers have asked me continuously for the past 16 years is:

“What ethical investing funds do you recommend?”

Now, truth be told, I don’t like any of the so-called ethical or responsible stock-picking funds. They always seem to be heavy on the woke-y marketing schtick, which they use to justify slugging their customers with high fees.

For me, it’s the investment equivalent of paying $12 for a kale smoothie, served with one of those ridiculous paper straws that go soggy after the third suck.  

Suck, suck, suck. (No juice.)

Thankfully, low-cost index investing has turned the ethical investing game on its head.

In fact, just last week Australia’s largest listed Aussie share fund, the $18 billion behemoth Vanguard Australian Share Index Fund (VAS.ASX), gained a woke sister-fund with the launch of the Vanguard Ethically Conscious Australian Shares Fund (VETH.ASX).

Let’s compare the pair.

Both funds charge rock-bottom fees and give investors exposure to the largest companies in Australia.

However, the Ethically Conscious Aussie Shares Fund filters out companies from the index that are involved in fossil fuels, nuclear power, alcohol, tobacco, gambling, weapons and adult entertainment. 

It also filters out companies that have been involved in ‘severe controversies’ relating to labour rights, human rights, environment, corruption and the like. A good example would be Dreamworld’s parent company, Ardent Leisure, which was found guilty and fined over the 2016 water-rapid ride tragedy that killed four people.

(And while Vanguard may be the world’s largest index manager, it’s not the only player: BetaShares, State Street, and VanEck also have low-cost local and international ethical investment offerings worthy of a look.)

Ethical investing in Australia is so hot right now, and we’re recognised as some of the wokest investors in the world. However, know this: your super money is not automatically invested in ethical options straight off the bat.

Investment house SuperRatings says that, while there has been an explosion of low-cost ethical options available in super funds, as a general rule they are not the default investment option most people are put into.

So, if you’re passionate about investing your super in businesses that support the future, ask your super fund what ethical index options they offer … and ideally choose low-cost offerings that don’t suck.

Tread Your Own Path!

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

The Name of Your Book Is Wrong!

Hi Scott,

I came to Australia four years ago with hopes of a better life for my family. We knew no one and had just $8,000 dollars -- that was a stressful time. Then I stumbled across your audio-book. Fast forward four years: I have three months of Mojo and we recently bought our home with a 20% deposit. I have increased my income by 33% and am due for another promotion. I have even started volunteering, following your advice -- we do laundry for homeless people. I live a much happier life thanks to your book. You call it a money guide -- wrong! It is a happiness guide.

Mayanka

Hey Mayanka,

Thank you so much for writing.

I get thousands of people who write to me all jazzed up straight after they’ve finished the book. Yet what’s cool is that now, four years since the book came out, I’ve been getting emails from people like you who’ve used it to make some amazing gains.

Congratulations on making your way in the best country on earth. You got this!

My eye-watering returns

When I look at my bank balance these days, I have the same reaction as getting a COVID test up the schnozz: 

Eye-watering pain. 

See, as a lifelong saver, it pains me to see the amount of interest I’m earning on my so-called ‘high interest online savings accounts’: a tearful 1.5% per year. On a lazy 10 grand that’s a whopping $150 a year. 

Ouch! 

But I guess that’s better than nothing, right? 

Actually it’s worse: after I pay tax on the interest, and then account for prices rising (inflation), I’m in the red. 

Yep, the money I have in my savings account is guaranteed to lose me money.

And remember, that’s with me earning a (relatively) decent 1.5% per year. If you’re saving with one of the Big Four, you’re probably not even earning half that. According to comparison site Mozo, over the last six months banks have cut the interest on 1,479 savings accounts and term deposits. And they’re likely to keep cutting, with the Reserve Bank of Australia (RBA) considering another rate cut as early as next month. 

When will it end?

The RBA has said that it expects rates will be low for the next three years. At least.

Pass me a hanky, Daddy’s got a nosebleed!

Yet don’t cry for me Argentina. Of all the people who write to me, there are two groups I feel most sorry for: young people saving for a house deposit, and retirees trying to live off term deposits.  

While they’re at opposite ends of the limbo stick of life, they both ask me the same question: 

“Should I invest some of my savings in the sharemarket?”

You can see their logic. After all, the week after last the share market went up over 5%. 

In a week!

However, my answer is always the same:

Never invest money in the share market that you’ll need — or think you may need — in the next five years. It’s just too risky. Chances are you could lose a chunk of your money. When you think of it that way, 1.5% doesn’t sound so bad after all, right? So keep your short-term cash in a boring savings account that’s covered by the government guarantee (up to $250,000).

Still, I know it sucks.

To deal with the post-traumatic stress of low rates, I’ve had to reframe the role that cash plays in my financial life. What cash buys me most is peace of mind. It gives me options in a time of crisis. And if there’s one thing we’ve learned in 2020, it’s that the world is a very unpredictable place. 

And that’s the rub: interest rates are said to be at their lowest levels in 5,000 years (and remember the pharaohs didn’t even have AfterPay). This is discouraging people from saving, and encouraging them to borrow up big and take risks. History tells me this will (eventually) end in tears.

Tread Your Own Path!

Hitting the Jackpot

Hi Barefoot,

My hubby spends all his ‘Splurge’ account on TattsLotto. And not just here and there — his account statements are littered with TattsLotto purchases. I think this is unhealthy but he is using his Splurge for it, which I guess shows a level of control. Am I just worried about nothing or is this something we should take seriously? I don’t want to be financially controlling, but it doesn’t feel right.

Melanie

Hi Melanie,

What a great question! 

Here’s a better one I’d ask him:

What could he spend his Splurge money on that would give him the best bang for his buck?

After all, he’s got a 1-in-140 million chance of winning the jackpot … but if he saved up his money and splurged on  a romantic night away with you (without the kidlets) … well, I’ll leave it up to you to explain his odds of hitting the jackpot.

And while you’re having a nice romantic dinner, you could do a Barefoot Date Night, review your buckets, and plan on doing more things that’ll make you both smile.

Fear and Loathing in Lockdown

Scott,

We need your help! We implemented the Barefoot strategy a few years ago and since then have paid off all our debt, amassed a healthy Mojo and will soon tick over $100,000 in shares. The problem is --  is this really it!? We are desperately unhappy. We live in a tiny, affordable home because we do not want to be ‘postcode povvos’. Our car is a bit Pete Murray (it’s seen better days). And I’m getting sick of our card declining when we have blown our ‘Blow Bucket’ for the week. We are hustling, but to where? Maybe COVID lockdown is getting the better of me, but we kind of want to enjoy our one precious life.

Jane

Hi Jane,

I hear you, this lockdown has been rough.

As a result there are a lot of Victorians suffering with their mental health ... and it shows up in the questions they send me.

Personally I’ve got it good: I’m in regional Victoria with (slightly) more freedom, living on a farm where I can do a three-hour walk and not see anyone, and I can work from home. The toughest thing for me is that I haven’t had a haircut for five months. My sheep have better bangs than me!

I can only imagine what it’s like for you being locked down in a cramped house, with kids homeschooling for months while you try to work from home, or waiting on welfare to be allowed back to work.

It would totally suck.

So let’s make it not suck so much by playing a game:

I want you to imagine what 2020 would have been like for you before you read my book:

Lots of credit card debt. No emergency fund. No shares. 

It’d be awful, right?

Instead, you two have single-handedly eliminated the number one stress that families have. 

That’s bloody amazing!

Now we all suffer from what psychologists call ‘hedonic adaptation’, which is a fancy way of saying we get used to things quickly, and eventually feel no better than we did before. (It’s as true for getting out of debt as it is for trading in Pete Murray’s car.)

Still, I’m all for doing a (socially distanced) Date Night (when it’s allowed) and coming up with a new and exciting plan: it could be a house, a holiday, whatever. Everyone needs something to look forward to, and you guys have proven that you can nail your financial goals. You are absolutely right, life is for the living!

A Magical Mystery Tour

Ben, 

I’m a Kids Superhero Magician - taxable income about $80K a year … or I WAS until Covid GRRR. After reading your last column about that smart single mum with cancer who set her life insurance in place, I followed your advice and have been looking at raising my life and TPD through my living super insurance - but  the premium was $5600 a MONTH!  Is there a good life insurance place that you would recommend? Any advice around this topic?

Steph

P.S - I went into Woolies last month and your book was half price - I went to the counter and the price on the tills was wrong so I told them AND GOT YOUR BOOK FOR FREE (Woolworths weird policies). 
P.P.S - I love you! But don't tell my partner snoring next to me.

Hi Steph,

First, I have no idea who Ben is, but I’ve been called worse (like Magoo), so let’s go with that.

Second, it’s common to get ‘bill shock’ when you attempt to increase your insurance.  You should call your super fund and see what options they have where they can offer financial advice and wholesale rates (without the hefty commissions). This is one area where you really want to pay to get expert advice that is specifically tailored to your situation.

Finally, let’s talk about that ‘smart single mum with cancer’ who inspired you to boost your insurance: Emma.

As a recap: Emma wrote to me a few weeks ago, thanking me for reminding her to boost her TPD insurance. She explained that just last year she was ‘a fit and healthy 42 year old single mum with two boys aged 10 and 7’ … yet she’d been diagnosed with cancer, and her insurance really helped her out.
I found out last week that Emma died.

The greatest respect I can give Emma is to put her story in front of my community of Barefooters. And I’ll say it again this week. Check your insurance. Make sure you have enough. Do it for Emma. Do it for your kids. Do it TODAY.
 

Barefoot’s Lovely Aunty shares a shocking story

Hello Magoo!

I’ve been doing a kitchen renovation. My builder, who I’ve known for many years, emailed me his invoice. What I didn’t know is that a scammer had intercepted the builder’s email and changed the bank details. I transferred the money, and kissed goodbye to my $11,000! The bank has not refunded me. Something good has to come from this, can you please share this with your readers?

Aunty Barefoot

Hi Aunty,

That is truly shocking!

It’s even more so when you consider that you live in a small country town, that you’ve known the builder for years, and you were expecting the bill!
This is known as a phishing scam, and it’s much more common than you’d think. 

Right now scammers are targeting people’s super -- signing up for the early release payment.

If you’re not in the habit of checking your super balance, it could be years before you cotton on...

So, here’s what you should do:

Take out your phone right now and check your MyGov account, and make sure that no applications have been made on your behalf and that your contact details haven’t been changed. That’s how the scammers are doing it.

Second, verify every large bill you get. Take 30-seconds to call the person up and check that you have the right bank details. Businesses may be shut down in this pandemic, but it’s Christmas time for crooks!

Barefoot Budget Will Send Us Broke?

Hi Scott,

I was reading about this week’s budget and there was an article saying that you thought the Treasurer was going to send us all broke. I assume it was referring to all the spending and government debt, but thought I’d go straight to the horse’s mouth and check.

Jim

Hey Jim,

Yes, it was clickbait.

While much of the budget commentary was the predictable ‘yay for a tax cut!’, yet my thinking is that if you’re struggling right now (as many are), then you should squirrel away the (on average) $40/week saving and use it to pay down debt or build up your Mojo, rather than spend it. 

Some headline writers suggested that meant I was sticking it to the government. Not true. All I was saying is that if you follow my lead, and follow a plan that has a bedrock of savings, rather than spending, over the long-term you’ll build up both your resilience, and your financial confidence.

That’s good for you, and good for the economy.  

Apple cash

There’s been a few times in my life that I’ve looked at a product and thought to myself, ‘this is the future’.

I got that feeling when Steve Jobs first pulled out the iPhone (okay, and when I first tasted Wizz Fizz).

And I got the same feeling when Apple released the latest version of its Apple Watch a few weeks ago.

In and of itself, the watch was a minor upgrade to the last Apple watch.

What got me (a father of three, almost four kids) excited was a service Apple launched called ‘Family Set Up’.

Basically, it’s an Apple Watch for your kids, that’s controlled by the parent’s iPhone, and I think it could transform the way families manage money:

Parents can instantly text their kids money via Apple Cash. 

The kids, in turn, spend that money by flashing their watch at a store. 

And when they do, their parents get a notification on their iPhone alerting them to what they just bought. 

Seriously, I could see this becoming how families could do pocket money.

There’s just a few things standing in my way:

First, the idea that I’d give any of my farm-reared kids a $400 watch is absolutely insane.

(What’s the time Mr Wolf? *Shrugs shoulders* WHERE’S YOUR BLOODY WATCH?!). 

Second, Family Set up is only available in America … for now.

Futuristic, huh?

Well, Apple may be vying for your wrist, but Billionaire Jeff Bezos is groping lower.

Yes, right now you can walk into one of Amazon’s Seattle convenience stores and pay for your stuff simply by scanning the palm of your hand as you walk out. 

It’s called the ‘Amazon One device’, and it uses biometrics (the lines, and veins in your hand)  to create a ‘unique palm signature’ that’s matched to a card that Amazon has on file. You’re done and dusted in 300 milliseconds. 

High five!

(At this point you’ve got to feel for those geeks who jumped the gun and had microchips injected into their bodies).

Amazon said it chose to use palm-scanning because people ‘consider it more private’ than say eye-scanning or facial recognition. Still, I’ve got sweaty palms about giving up my privacy.

My view?

You don’t need to be a palm reader to know that COVID has sped up the inevitable death of old-school, analogue cash and coins. Yet in the future, we’re all going to have to balance our privacy against our payments.

Tread Your Own Path!

A Mother with a Message

Hi Scott,

A year ago I was a fit and healthy 42-year-old single mum with two boys aged 10 and seven. Your book has helped me get on top of my finances, and every year I re-read it (well, listen to it on my commute). When I read it in October 2019, I realised my death and TPD  insurance wasn’t anywhere near the 10 times annual salary you recommend, so I bumped it right up. 

And I am so glad I did. Last December I was diagnosed with a rare terminal cancer, and my insurer has now paid out nearly $1 million. I have been able to pay for specialist treatment not covered by Medicare, see off the mortgage, and set up a trust to support my boys when I am not here. So much of how well I am doing is because I have the financial freedom to just live. Everyone should have this freedom. So thank you, Scott, for the work you do — you are saving lives.

Emma 

Hi Emma,

Just wow.

The greatest respect I can give you is to put this in front of my community of Barefooters.

If you’re a parent, you need to follow Emma’s lead and act on this.

The ‘10 times your salary’ figure is a very rough guide of course — you should speak to your super fund’s financial advisor (in the first instance) about what’s right for their family.

Do it for Emma. Do it for your kids. Do it TODAY.

Barefoot Sales Spiel

Scott,

I live in the Northern Beaches area of Sydney. The other day, a real estate agent came to my door quoting you saying that house prices are sure to drop in the coming months and now is the time to sell. I instinctively don’t trust salespeople, but is there any truth that you suggested this?

Sam

G’day Sam,

It’s a little twisted sister for my liking.

A few weeks back I wrote about the NAB CEO’s suggestion that people who found themselves in financial difficulty should sell, yet that was him saying it, not me!

In fact, I specifically said “Please don’t misquote me: I am not saying you should sell your home”.

It sounds like the agent is using my name to make a sale (depressingly, that happens quite a bit to me these days).

My advice?

Shut the door in his face.

The Fortunate Son

Hi Scott,

I like reading your column, but last week’s hit me so very hard. I am currently having the exact experience with my 18-year-old son, who has lost some money through trading. He does not want any advice from his parents, yet still hopes to be a ‘trader’. We read your book as a family and did the three buckets with our kids for some time, but he now wants to manage all his own money (which I understand, as he is 18). But gee it’s hard to sit by and watch him make some not-so-good choices (and hopefully learn from them). Any suggestions?

Linda

Hi Linda,

The fastest growing segment of the gambling industry is young men. That explains those ads on the telly that show young lads gambling and having a roguish, laddy good time on the punt.

What I’d explain to your son is that if he gambles on sports or stocks he’ll end up a loser.

And the reason he’ll lose his money is quite simple: he can’t control the outcome. He has no edge.

He’s a patsy for the big professional investors, who will chew him up and spit him out, just as surely as the gaming industry is sucking dry the accounts of impressionable young gambling-addicts-in-training.

If he really wants to be a big man and chart his own course in life, he should gamble on himself.

Get a job, learn everything he can to start a business of his own, and then double down on starting his empire.

Take on the world and win! 

But do it in a game where he can tilt the odds in his favour.

What’s the deal with zero interest credit cards?

When you’re doing my job, you just never know who’s going to walk through the door.

One day a woman in her sixties sat down in front of me ... and totally blew me away.

“Let’s start with your debts”, I said, pulling out a piece of paper.

“Well, I have a credit card”, she said.

“And how long have you had it?” I asked, biro in one hand, fingers poised on my calculator.

“Forty-four years”, she replied.

“You mean four years”, I said, correcting her.

“No, I mean forty-four years. My mum gave it to me when I turned eighteen ... and I’ve had it ever since.”

Pluck-a-duck!

She’d been paying interest on the balance longer than I’d been alive.

This woman was from another era … the Bankcard era.

In 1974, banks kicked off Australia’s first credit card, Bankcard, with greedy gusto, mass-mailing cards to customers without them even asking for it. For the poor, it was a revelation. Free money from the bank!

Times change.

Today, credit cards are viewed like cigarettes: expensive, unnecessary, and lethal if you get hooked.

Sure, there are still some poor bastards who can’t quit and continue smoking (and paying credit card debt), but the majority of people avoid them, especially young people.

Why?

Two reasons:

First, like smoking, we now know the truth. Credit cards are a rort; the majority of cards haven’t budged from charging nosebleed 20% rates despite interest rates being basically zero.

Second, as a consequence of this, young people have moved on to alternatives like Afterpay, which to me are the equivalent of vaping. 

(And, like vaping, Afterpay claims it’s (financially) much healthier for you — which explains how they’ve managed to slip through the responsible lending provisions — yet where there’s smoke, there’s financial fire.)

And that brings us to today, with two old bankers, NAB and Commbank, recently launching ‘zero-interest’ products in a last-ditch effort to make credit cards cool again.

CommBank called theirs the ‘Neo MasterCard’ (hey, the kids like that Matrix film, right?).

NAB called theirs ‘StraightUp Card’. 

Really? 

This from a company that admitted to the Royal Commission that its customers’ money all too often accidently fell into NAB’s pockets.  

Straight up.

Both cards promise “no interest payments, no late payments, no foreign currency fees, ever”.

So what’s the catch?

Well, these cards only offer small amounts of credit, up to $3,000.

And they charge a monthly fee, from $10 for a $1,000 limit up to $22 for a $3,000 limit.

The rub is that the banks charge the monthly fee regardless of how much you spend (unless you don’t use your card at all — in which case you don’t pay the fee that month).

Yet in some cases the monthly fees can often work out to be … almost as much as a regular credit card.

So what do I think?

I think we should view all of these products as coming from cigarette salesmen.

Here’s the rub: all of these products train young people to spend money they don’t have.

And that is a terrible way to live your life long term, and often leads to disastrous consequences.

Case in point: my sixty-something client.

She’d spent the last four decades working two jobs … just to pay some banker’s bonus. (Bonuses.)

I looked at the budget we’d just written out, which showed about half her pay was going in interest.

“I just don’t see how this works”, I said bluntly, leaning back in my chair.

She pursed her lips, looked down at the floor, and said nothing for a long while.

And then, in almost a whisper, she said: “Well … sometimes I don’t eat … eating is expensive.”

Tread Your Own Path!

My ‘Fake Rich’ Life

Hi Scott,

I started reading your book when I was lying by a five-star pool in Dubai, which I had booked on my credit card. I was living a ‘fake rich’ life, holding down a high-paid job but living week to week. I had $23,500 in credit card debt, a loan for my Lexus, and no savings. You opened my eyes and forced me to stop kidding myself. I set up my buckets and started paying off the debts one by one. I sold my car and started cycling everywhere. A house is in touching distance and I cannot wait for everything else to come, because I am now READY!

Nate

Hey Nate,

Well done.

The hard thing about money is that it works the opposite of fitness:

If you’re unhealthy, your muffin-top is on show for everyone to see: there’s no hiding it.

Yet with money it’s often the financially fattest people who look the fittest!

And that explains why I don’t watch reality TV … though my wife loves trashy shows like The Bachelor.

The other night I was walking past her and I casually mentioned, “Hey, did you know one of those reality stars wrote to me asking for advice?”

It was the only time that evening she took her eyes off the TV.

“OH MY GOD, WHO WAS IT?!” she yelled.

“Huh? I don’t remember. As soon as they wrote that they were an Instagram influencer, I deleted it and moved on.”

She just stared at me for a second, then went back to watching her show.

(No rose for me.)

I’ve always said that the hard life is living week to week, desperately trying to keep up appearances.

Being broke drains you of your energy and self-confidence, and clouds your opportunities.

Gaining control of your money gives it back, and then some.

You Got This!

They’re Coming Out of the Woodwork

Hi Scott,

I’ve just read your article entitled “The Horses”. My wife was tricked into buying an almost identical funeral insurance policy from Insuranceline. We estimate we have paid $35,000 in premiums since 2007, with a payout cover of just $6,000 each. My wife and I are now in our seventies, with the age pension as our only income. And, as you know, they keep increasing premiums as we get older. I’m stressed. What can we do?

Ted and Eileen

Hello Ted and Eileen,

I’m used to getting a lot of emails.

Yet I’ve been blown away by the number of people who’ve written to me in a similar situation to you.

Your wife entered into this financial transaction not out of greed but out of kindness and selflessness:

She didn’t want to be a financial burden on her family.

Sadly, too many insurance companies manipulate this emotion for their own gain.

The problem is that, in some cases, if you stop paying the rising premiums you can lose your cover (though you should definitely check the wording in your policy, or call a financial counsellor on 1800 007 007 to help you with it).

Yet if you keep paying you may not be able to afford to travel and see your grandkids. Or do Christmas presents.

The irony is that if you were to speak to your family, you’d find they’d rather you spend the money enjoying yourself than living your final years being stressed out about money.

Besides, a private funeral typically costs around $4,000 for a basic cremation, or up to $15,000 for a more elaborate burial, according to ASIC’s MoneySmart.

I’d encourage you to make a formal complaint to the insurer in writing, and if you don’t get an appropriate outcome take it up with the Australian Financial Complaints Authority (ACFA) on 1800 931 678.

Superhero

A father was walking past his 20-year-old son’s empty room when something caught his eye.

A Post-It note was taped to the middle of his son’s computer screen.

“Turn on the computer”, it read.

It took 30 seconds to boot up his son’s computer ... and 10 seconds to turn his life upside-down.

“If you are reading this, then I am dead”, the letter began.

What follows is the true — and tragic — story of a young American university student named Alexander Kearns.

Like many guys his age, Alexander began share trading during the pandemic.

Also like many guys his age, he kicked things off by downloading the Millennial-friendly trading app Robinhood.

Robinhood is the hottest finance app in the world, with 13 million accounts. It not only offers free trades, you can open an account with just a few bucks, which is a big reason Millennials love it. Yet the real reason it’s so popular is that the app has gamified the trading process:

Digital confetti falls onto the screen after you make your first trade.

And the app sends push notifications to your phone to encourage you to keep trading.

For his part, Alexander began trading highly risky options contracts on Robinhood.

The night before he took his life, Alex logged into his account and got the shock of his life: 

A trade gone wrong. Very wrong. $730,165 wrong!

For a university kid living at home with his parents, it was a mind-boggling amount of money to come up with.

Money he didn’t have.

In a blind panic, he wrote his letter, attached the Post-It note to his screen, and jumped on his bicycle ... never to be seen again. Of course, suicide is rarely caused by just one event, yet stressful experiences can be a trigger.               

Robinhood’s mission is to “democratize finance for all … making investing friendly, approachable, and understandable for newcomers and experts alike”.

Well, this week Australia got its own Millennial-focused trading app, called Superhero.

Like Robinhood, Superhero’s goal is to “make investing accessible and understandable for everyone — no matter if you’re a seasoned trader or buying your first stock”.

Like Robinhood, it offers cheap trading, charging a flat fee of $5 per ASX trade, with minimum investments of $100.

Unlike Robinhood, Superhero doesn’t offer risky options trading.

I spoke to their CEO this week, and he seems like a decent bloke who is aiming to simultaneously attract new and younger investors into the market and bring down the costs of trading.

Still, I am not a fan of apps like these.

Yes they’re cheap, yet they encourage often young and inexperienced users to trade, and that is toxic to their wealth. 

Contrast this approach to Vanguard, the largest fund manager in the world, which is owned by its members.

When they unveiled their ‘personal investor’ offering earlier in the year, they gave me a demo.

They had intentionally added in ‘friction points’ in the buying and selling process to dissuade people from actively trading.

And I absolutely LOVED it.

“Make it more boring!” I cheered.

In fact, I suggested that they didn’t need to build an accompanying app: “Just keep it on the daggy desktop. There’s no need to trade shares when you’re on the toilet.”

(They’re in the process of creating an app.)

Still, my idea of a great investment app is something you set up once: a regular investment into various low-cost index funds. In other words, set-and-forget. And that is a plan that would have worked out well for Alexander, a young man with the world at his feet.

Instead, his father sat at his son’s computer reading his suicide note.

His son was distraught at losing so much money, and admitted in his letter that he had “no clue” about trading.

Tragically, he was right.

Even more tragically, Alexander had actually misread his Robinhood account balance: he hadn’t lost the money at all.

Tread Your Own Path!

Rest In Peace, Alexander Kearns

If you or someone you know needs help, contact Lifeline on 13 11 14 or visit lifeline.org.au.