I’ve been waiting to write this piece for years

I’ve been waiting to write this piece for years.

No, really.

My very first Barefoot Investor column 16 years ago campaigned for practical financial education to be taught in schools.

And that’s why the Victorian Government’s decision to ban school banking, and replace it with practical, independent school-led programs, is a massive step forward.

See, for far too long schools have outsourced teaching this essential life skill to banks.

And what have they done?

Well, they’ve mostly used it as an advertising play: signing up students as customers, and putting them into their sophisticated marketing database that spits out credit cards when the kid turns 18.

(And that’s when the real education begins!)

Let me be clear: having banks teach our kids about money is like having Ronald McDonald teach them about food nutrition.

Moreover, the result is that our young people finish school scoring an ‘F’ for finances.

And, as a result of that, they often go on to make really poor financial decisions. (ASIC research tells us that some of the most financially illiterate people in Australia are young people who have just left school.)

If I had a dollar for every deep-in-debt twenty-something who told me they ‘sucked at money’ or ‘weren’t good with numbers’, I’d have enough money to buy shoes for my bare feet.

Now, here’s the thing: you and I know that once your financial confidence is shot it’s bloody hard to change. And once that belief takes hold, it ends up colouring your entire life.

In my work, I sit across the table from people who have made a lot of money mistakes.

And often there’s a frightened little kid that comes along with them.

And that is why the announcement from the Victorian State Government — to teach truly independent financial education in our schools — is so freaking important.

This is a very good day for every Victorian kid. Every Victorian parent. Every Victorian taxpayer.

After all, we all have a dog in this fight.

Creating financially confident young people will have positive long-term effects on our society, and our economy. Let’s hope the rest of the states are watching this, and taking notes ...

Barefoot’s Favourite Things

Last week we discussed what to buy kids for Christmas, so this week let’s deal with the oldies.

See, years ago, I cracked the Christmas code: I buy people books.

Gifting a book says, “I think you’re smart”. And it’s a smart deal for me too: books cost under $30, they don’t require a separate card (I simply scribble a Merry Christmas message on the inside cover), and my local bookstore will even gift-wrap them for me.

Job done!

So, here are the books I’ve got in my Santa sack this year:

The Obstacle is the Way

Has life knocked the stuffing out of you?

That’s good!

The obstacles you’re facing provide an opportunity for you to become tougher, calmer and more successful.

This ain’t a new-agey self-help book. Author Ryan Holiday draws on the ancient wisdom of the Stoics and shows you how to turn your trials into triumph.

This is a great present for anyone who’s been upended by 2020, particularly struggling small business owners and young people looking out for their first job in a recession.

The Deficit Myth

Are you concerned about all the money-printing that’s happening around the world right now?

Don’t be, says Stephanie Kelton in her bestseller The Deficit Myth.

The book serves as an introduction to Modern Monetary Theory (MMT), which is the hottest argument in economics right now. Essentially it argues that governments should embrace huge debt in order to grow the economy.

Seriously, how sexy a theory is that?

Especially for politicians who love spending other people’s money and winning votes!

While I loved the book, I don’t agree with the theory. Instead, I see MMT as a justification for the situation we find ourselves in, and a free pass for the monetary madness that will come because of it.

Still, it’s a fascinating read, and a great present for anyone interested in the future.

Ben Hogan’s Five Lessons

Have you ever tried your hand at golf and failed miserably?

Me too.

Golf pro Ben Hogan wrote this book in the 1950s, and since then it has taken on an almost reverential regard.

Self-help guru Tim Ferris described it as “the most perfect how-to book I’ve ever read”.

Maybe. Or maybe I’m a middle-aged white guy ... so, well … golf.

A great present for anyone in your life who wants to crack 80.

And finally ...

You guessed it. I’ll be giving away a serve of double happiness: The Barefoot Investor: The Only Money Guide You’ll Ever Need and The Barefoot Investor for Families: How to Teach Your Kids the Value of a Buck.

The bulk of my sales come from people gifting it to their family and friends. Why? Because the Barefoot Steps work, and they keep you safe. And that’s a pretty cool Christmas present to give, right?

Tread Your Own Path!

Underage Drinking

Hi Scott,

I am a 16-year-old boy, and I love your work!

Recently, after browsing Investopedia, I was targeted by an advertisement promising a guaranteed 8% return on a $10,000 investment. The investment opportunity is in whisky and is being offered by Coburns Distillery.

This investment is being offered with no risk, allowing for an 8% return for each year plus cost price after 5–7 years. It is also being marketed as ‘SMSF approved’, which suggests to me that unsuspecting middle-aged superannuation investors are being viciously targeted.

These unsuspecting investors are likely to be enticed by the mention of valuer Knight Frank suggesting that exclusive whisky has seen a 580% return — which will most certainly not be occurring with this non-exclusive whisky from Burrawang, New South Wales. Would seriously love to see a piece by you on this. The wider public needs to be aware!

Regards, Brett

Hi Brett,

You’re my type of teen. At an age where many kids would be working out how to raid their parents’ liquor cabinet, you’re warning oldies about the potential financial hangover from these (lubricated) investment schemes!

I agree, it sounds too good to be true. In fact, it sounds a lot like another outfit, Nant Whisky, that I uncovered a few years ago. They too were touting high returns and encouraging SMSFs to ‘invest’ in barrels of whisky which (they promised) they would buy back after the maturation period.

The problem wasn’t with the whisky — it was awarded as one of the world’s best — but that they sold more barrels than they’d actually created.

ABC News stated:

“The ensuing scandal of Nant’s collapse would wipe out small investors who ploughed in up to $20 million. It would spark the largest fraud investigation in Tasmanian history.”

Will Coburns Distillery suffer the same fate?

I have no idea.

Whisky aficionados give things a good hard sniff before they imbibe. That sounds like wise advice to me.

Finally, the fact that a 16-year-old wrote this warning warms the cockles of my heart ... like a fine old aged whisky.

Scott

Mortgage Wars

Hi Scott

I just had to email you to say thank you and that I love your book. I have just rung my bank and followed your script, and was able to get a 0.49% discount on my home loan. I am a single mum and have been so stressed, having recently lost my job. This little win has given me a boost and I just needed to let you know I appreciate your advice.

Linda

Hi Linda,

Sorry to hear about your job, but congrats for making the call!

And for any mortgage payers reading this, you need to follow Linda’s lead. Today.

Here’s why:

Earlier this month the Reserve Bank of Australia cut the cash rate to a new record low of 0.1%.

Even better, the RBA said rates are going to stay low … for at least the next three years.

You know what that tells me?

It tells me just how big a hole the economy is in, and how tough they expect the next few years will be.

Yet that’s a bit of a downer, so let’s focus on the upside.

It’s like the RBA has got the tequila out and is wearing one of those ridiculously oversized hats.

They’re telling us it’s time to part-ay … and hit our bank for a rate cut like it’s a piñata.

If you have a ‘3’ in front of your mortgage rate, it’s time to get out the lemon and salt: shoot for a rate that’s below 2.5%.

There are some amazing fixed rates on offer (even below 2%), but the old Barefoot rule is to only fix your rate if you’re struggling to put sausages on the table. Everyone else should be reading the script from my book, getting a lower variable rate, and smashing their debt.

Olé!

Scott.

Switched On

Hi Barefoot,

Just wanted to show you a pic of my son’s Spend jar purchase. He saved $300 to buy himself a Nintendo Switch Lite — by buying and selling stuff from the recycling centre (!) and using his pocket money. Little did he know Mum and Dad had paid an extra $160 to buy the bigger version. The kid nearly cried when he walked out of the shop holding it, and told us for about a week that he thought he was dreaming! A huge thank-you for your books and for helping us to be able to do things like this.

Jodie

Hi Jodie,

That face!

That is a life-changing moment right there: he’s worked hard, saved hard, and got the reward.

(Psychologically, it’s the opposite of ‘buy now pay later’.)

You and I know it’s not really about the money — it’s about the behaviour, and the character traits it builds.

You Got This!

Scott.

Cheap Pressies for Kids this Christmas

So this year I’m playing the role of Santa and the elves.

Reason being, Mrs Claus is heavily pregnant, with an official due date of … Christmas Eve.

“What a wonderful Christmas present!” gush people who clearly don’t already have three kids under the age of seven.

(My crew are understandably a little suspicious of the ‘present’ Mummy has been carrying around in her sack.)

Ho! Ho! D’oh!

So here are three stocking-fillers I’m getting my kids which may provide some inspiration for the kids in your life.

The Famous Five

Every night I tuck the boys into bed and read them two chapters of Enid Blyton’s The Famous Five.

Honestly, it’s the best 30 minutes of my day, and easily the best thing I’ve done this year.

Now Enid Blighton may have typed these tales nearly 80 years ago, but her stories of adventure still nail it.

Better yet, there’s plenty of ’em: 21 Famous Five books, plus another 17 in the sister series The Secret Seven.

Soup and Baked Beans

My kids know that I made a major life change this year and now work in the community helping people who are stressed and broke. They also know that many of my clients have kids ... who often don’t have enough food to eat.

And so the festive season throws up plenty of opportunities to expose your kids to the gift of giving — to charities like Foodbank, or even serving up Christmas lunch at a shelter.

Okay, so technically this isn’t a stocking-filler. (Can you imagine? Santa got me … a can of minestrone soup?)

Still, setting an example for your kids, showing them how to be humble and kind, is important … and never more so than on what for many is the loneliest day of the year.

Trees

Yes, trees.

Over the past few years I’ve literally become a ‘tree hugger’.

My kids and I plant a tree together and take a photo: it’s done and planted in 10 minutes flat.

My grandfather did it for me when I was a little kid; I vividly remember the fun of planting it with him and then quickly racing off to play with my toys (which are now buried in landfill).

My grandfather is long gone, but when I’m back home I make a point of visiting that tree. Every. Single. Time.

Okay, so let me level with you: Santa will also be bringing pink bicycles, nerf guns and spy sets.

Yet the truth is that these three stocking-fillers are as much for me as for the kids.

They’re what memories are made of.

Tread Your Own Path!

Investment Wars

Hi Scotty,

I am 19 and considering investing in NEOM, Saudi Arabia’s new $700 billion ‘mega-city of the future’. Considering it is being built in an area that may be subject to wars, is this a stupid investment?

Billy

Hi Billy,

If I asked my five-year-old son to design a mega-city, this is what he’d probably come up with:

“There’s going to be a dinosaur park! And flying cars! And robot maids! And glow-in-the-dark sand! And, and, and a giant artificial moon!”

Sounds good, huh?

Well, these are just some of the wild ideas Saudi Crown Prince Mohammed bin Salman (age 38) has dreamt up from his sandpit.

No seriously.

However, reports in the Wall Street Journal have raised doubts that this mega-expensive project will ever see the light of day.

Billy, before you invest in this, I’ll give you the same advice I give my five-year-old: “Go into the contemplation corner and think about things for a moment.”

Don’t get a snag from Bunnings — buy this instead

Today I’m going to tell you about a $69 purchase from Bunnings that’ll keep your family’s finances safe.

Given we’re at the start of fire season, it’s important to have all your essential documents in one place.

Like what?

Well, I have a system I write about in The Barefoot Investor for Families called the Fearless Folder. The book lays it all out, but at a base level you want to get copies of your will, powers of attorney, bank accounts, investments, insurance policies and login details.

And then you stick them all in a First Alert Fire Safe and Waterproof Protection Chest, which costs $69 at Bunnings.

What I like about these chests (other than the fact that they’re fireproof and waterproof) is that they’re small enough for you to pick up by the handle if you have to evacuate your house.

Here’s the thing: we lost everything when our house burned to the ground … except our important documents. Having all those docs made the process of rebuilding our financial lives that much easier.

Yet this year I decided to go bigger.

I was scrolling through Gumtree and I saw an old heavy-duty safe with a spinning combination lock and brass keys.

A few days later it arrived at the farm, and it was so big we had to use the tractor to move it.

I parked it at the shearing shed until I’d decided what to do with it.

Yet the next day my five-year-old son (who’s going through a ‘super spy’ phase) started … playing with it.

Later, he provided this statement of events to Senior Sergeant Dad:

“Look, I was just playing and spinning around the lock, and then I closed the door ... and then it wouldn’t open up.”

It turns out he’d actually managed to reset the code. And then locked the door.

With the only set of keys inside.

And so, with my tail between my legs, I begged my local locksmith to fix it.

He took one look and announced: “It’s locked for good.”

“Oh, there must be something you can do”, I protested.

He shook his head.

“Mate, it’s a 95-year-old safe. Once it’s shut, it’s shut. The only thing we could do is oxy a hole in the back, but that would destroy it. It’s now a nice piece of furniture. Haw! haw! haw!”

The locksmith got in his car, still chuckling at his gag, and started his engine.

Yet just as he was about to leave he wound down his window.

“You know, there is this one bloke I’ve heard about who gets round the traps. He’s a … safecracker.”

Bewdy!

The next day the safecracker arrived.

“Will you be able to crack it?” I asked.

“Yes”, he said with an unsettling amount of conviction.

It’s a rather unusual trade, so I didn’t ask many questions, and just pointed him to the shearing shed.

And after a couple of hours — and $300 — he’d cracked the safe.

Learned my lesson: it’s better (and cheaper) to stick with the $69 portable safe!

Tread Your Own Path!

Confessions from the Dark Side

Hi Scott,

I have a confession to make. For years I have been drawn to the ‘dark side’ — working as a finance broker putting people into ridiculous high-interest-rate loans (up to 29.9%). When I started I was shocked that people would buy these loans, but it soon became the ‘norm’ and I even trained other people on how to sell them. This is something I am not proud of as I have been following the Barefoot way myself the last three years, which has really helped my wife and me. Now I want to right the wrongs I have done and help people, especially young people who do not have a clue. With my knowledge of the dark side, I want to become a ‘finance Jedi’. Where can I best help?

Bryan

Hi Bryan,

You should consider becoming a not-for-profit financial counsellor.

No other job in finance comes close to matching the impact you have on people and their families.

You’ll deal with the same clients, though instead of preying on them you’ll go home at night and pray for them.

It’s mentally draining. People turn up and dump decades of stress on your lap. They tell you heart-breaking stories.

In the spirit of being candid, let me give you a confession of my own:

Financial counselling is the toughest job I’ve ever had.

So why do it?

Well, when I first got into finance my old man gave me one bit of advice that stuck with me:

“Just don’t be a wanker, look after the battlers.”

Turns out to be the best advice I ever got.

Good luck.

Scrooge McDuck

Sir Scott,

I see your dread and fear of low interest rates, and will slay this with my positive outcome. My investment property in Queensland, which I bought cheaply, is positively geared and is reaping the rewards. I bought it in 2018 and interest rates have continued to decline each year. I feel this is a much better approach then just letting money sit in the bank earning next to nothing. I am quite shocked as to why you never encourage investment property purchasing when there is affordable housing across Australia. I feel you coach people to be Scrooge McDucks.

Pete

Hi Pete,

As they say in the classics, where do I start?

Whenever I talk about cash, I’m talking about short-term savings: money you’ll need in a pinch.

You suggesting that an investment property is an ‘alternative’ to saving money in the bank is weird.

They are not the same.

There are three things your 18-month journey into property investing hasn’t taught you yet:

First, interest rates may be the lowest in history now, but remember you are taking on a 25-year mortgage.

Second, properties are expensive to maintain. Something costly almost always goes wrong when you least expect it, and that will eat into your return.

Third, when speculators without Mojo go bust, it’s not pretty. And it happens quite a bit, especially in the go-go Queensland apartment market. Wait a few more years and you’ll probably see it.

Look, it’s not about being Scrooge McDuck, having money for money’s sake. That’s the opposite of my message. Rather, it’s about having a financial cushion so you can say “I’ve got this” no matter what happens to you.

And that gives you the ultimate return: sleeping well at night.

My ‘Free’ Land Cost Me $140 Grand

Barefoot,

My brother and I — both in our sixties — did a land swap, with no money changing hands. The aim was to facilitate generational change (when we eventually die). Now I have now been hit with a $140,000 capital gains tax bill! Is there anything I can do about it, even though I received no money at all?

Jamie

Hi Jamie,

No, you’re screwed.

Had you spoken to your accountant beforehand, they would have explained that (a) the ATO data-matches everything, (b) capital gains tax (CGT) is triggered when an asset changes hands, and (c) they’ll want their money regardless of whether or not money changed hands.

Yet there is something you can do: talk to your accountant to see if they can arrange a payment plan with the ATO.

Mum Makes 400% on Share Market

Scott,

You’ve made it no secret you are not a fan of AfterPay. I, however, am a massive fan. It has helped me to budget bigger (and smaller) purchases, Christmas presents and (now) essentials for our first baby. I love AfterPay so much that, when the coronavirus hit the share market earlier this year, my partner and I decided to enter the share market — and AfterPay shares were the first thing we bought. Those shares have increased by around 400% over the last six months, in comparison to a 20%‒60% increase for the other shares we purchased. I’m surprised, I’m elated, but I’m confused. Why have they increased so greatly? When will it stop?

Anna

Hi Anna,

Hee-haw, now that is an epic story.

Good on you!

Now let me zoom out and give you some perspective:

Over the last 50 years, the Aussie share market has returned an average of 9.5% per annum, including dividends.

In other words, rookie, you’ve made out like a bandit!

Now to your questions:

The sharemarket has rebounded so strongly for a few reasons:

First, because interest rates are as low as they have ever been in history, and that has forced many investors to take on more risk (most can’t pay for their sausages on the interest they earn from cash or fixed interest).

Second, because we’ve seen an unprecedented amount of financial support: trillions of dollars have been printed to help prop up ailing businesses and consumers.

Third, and most importantly, because shares were panic-sold on the way down … and then hot stocks like Afterpay ricocheted right back up. And it went up like a slingshot … or maybe a shotgun. AfterPay is up a staggering 1,000% since March, despite the fact that it’s never turned a profit.

What happens from here?

I honestly have no idea ... and that’s kind of the point.

When you’re investing in the stock market, you’re giving up control of the outcome, at least for the short term.

All I can do is point you to the 50-year return of 9.5% per year and tell you I’d be very happy if I achieved that over the next 50.

You Need to Know the Truth About Oprah Winfrey

Hi Scott,

I have been a fan of yours for a long time, but you lost me with your column last week. Great story about Chuck Feeney, the billionaire who gave away all his money, but to reference Bill Gates, and also Oprah Winfrey, shows that you are right in with the mainstream media. (Scott writes: At this point Tanya makes a great deal of unfounded accusations about a number of politicians and famous people, all of which I have kept out). I am just an average person, but I knew shortly after this whole plan-demic started that something was not adding up and that is when I started researching. Trump is the only president of America who is trying to drain the swamp and (Scott writes: again, Tanya makes some pretty wild conspiracy claims I won’t go into as they’ve been debunked).

Best wishes,

Tanya

Hey Tanya,

Look, I didn’t like Windows 8 any more than anyone else, but what you’ve written is ‘person randomly shouting on the train’ wild.

And yet, judging by the cacophony of conspiracy emails I got this week, the train is chock-full of shouty people.

To be honest, I wasn’t ready for the craziness unleashed by last week’s column on a humble businessman called Chuck Feeney donating his fortune. Apparently, when one (even briefly) mentions Donald Trump and Bill Gates it rings an alarm in some people’s heads that makes them write furiously about conspiracy theories.

The only thing crazier than my inbox this week was the US election.

Oh, and have you heard the latest conspiracy? Oprah Winfrey will run for president in 2024.

Ridiculous, right?

As if a TV celebrity could ever be president.

The Simpsons is showing its age

The Simpsons is now 32 years old ... and it’s starting to show its age:

You know the opening credits where Homer hears the hometime whistle at the power plant?

That’s actually a throwback to the 19th century, when very few people owned watches, so factories used whistles to signal to workers the start and end of their shift.

In other words, Homer got paid to belt uranium sticks until the whistle blew, at which point he’d race out of the joint so fast he’d end up running over his son each night.

These days, of course, our bosses don’t have whistles … or even a workplace!

And yet you and I know people who think they can still get by simply showing up and whistling away the time.

Well, that may have worked 32 years ago in cartoon land, but it won’t cut in the era of COVID.

For the first time in a generation we’re facing a recession, and most businesses will be looking to cut the fat.

Scary thought, right?

Well, let me introduce you to one person who I guarantee won’t get D’oh’d!

Her name is Melanie, and she wrote me the following message last year … before COVID:

Hi Scott,

In the ‘Grow’ chapter of your book, you advise people who are preparing for their annual performance review to narrow their position description down to three fundamental tasks, and then write ambitious goals to work on for the next 12 months. Well, I actually did it, and not only was my boss impressed that I had prepared for the review, but he decided to give me a pay rise right now because of the contributions I had made to date! Before reading your book, I would never have had the confidence to take control like this. I’m off to celebrate — now I can afford a $15 bottle of wine!

Melanie

I know what you’re thinking.

You’re thinking, “That was last year. Now I’m not looking for a raise ... I just want to keep my job.”

Agreed.

But if you want to keep your donuts, you need to do exactly what Melanie did:

Decide on three ambitious work-related goals, tell your boss about them, then set a diary reminder to do one small thing each day that gets you towards those goals within the year.

Simple, right?

Sure. But not easy. That’s why few, if any, employees ever do it.

And that is exactly the point: it’ll make you stand out in a very good way. And if things go nuclear at your workplace in the next 12 to 18 months, you’ll be in a stronger position than your co-workers — all in the time it takes to watch an episode of The Simpsons.

Toot! Toot!

Tread Your Own Path!

I’m Rich! I’m Really Rich!

Hi Scott,

As a result of recently selling our (multi-generation) family business, my husband and I are now $34 million wealthier (after tax). We have gone to see a firm that specialises in helping ultra-high net worth families like ours. The portfolio they have recommended is not open to the general public (it’s only for sophisticated private equity funds and the like). There are multiple fees that add up to around 1%, though they say they will have stronger returns than we could expect from the share market. My husband thinks they sound great, but I am not sure. I told him I was writing to you for your opinion, and he laughed!

Janice

Hi Janice,

Congratulations on the sale — that’s a life-changing amount of money!

And now for the bad news: being filthy rich won’t buy you higher investment returns.

Really.

A good example is Harvard University’s $42 billion endowment fund (built up over many years by donations from Harvard alumni). Harvard has literally got some of the smartest people in the world managing their nest egg. Over the years they’ve deployed high-octane trading strategies, invested in private equity deals, bought natural gas pipelines, even ventured into exotic investments like forests in Latin America. They literally scour the earth to make money.

And yet their returns have failed to match a no-frills index fund over one, three, five, 10, 15 and 20 years.

All that hard work and effort, all that stress, all the millions of dollars in fees, to end up with less than you’d have by simply buying a broadly diversified, set-and-forget index fund.

So what would I do in your situation?

Well, understand that my opinion is worth roughly what you’re paying for it (nothing).

Yet my thinking would be that you’ve already made your fortune. So I’d focus on simplifying your life, not making it more complicated by paying an advisor 1% — which in your case amounts to $340,000 a year — to farm out your investments.

Instead, I’d think of your wealth like owning a farm: focus on harvesting dividends … you’ll earn close to $1 million a year. And just like farming there will be good years and bad years (and there will be 2020!). Yet over the long run there will be more good years than bad. And if you never ‘sell the farm’, you and your loved ones can sit back and reap a harvest for generations to come.

The hero (living in a rented apartment)

“In America, anyone can become president … and that’s the problem!”, quipped comedian George Carlin.

I don’t know about you, but I’m a little over the Punch and Judy show — watching two cranky old blokes beat each other up, with the last man standing becoming … the leader of the free world.

Are these two really the best the ‘greatest nation on earth’ has got?

Well, let me introduce you to another old bloke who might just restore your faith in the US of A.

His name is Chuck Feeney.

Chuck is 89 years old, and lives with his wife in a small rented apartment in San Francisco.

He will die flat broke.

And yet Warren Buffett, Bill Gates and Oprah Winfrey call him their ‘hero’.

Chuck was born in the Depression, and as a young man answered his call of duty. Yet it was during the war that he started a little side hustle, selling duty-free booze to fellow US soldiers stationed in Europe.

When Chuck got back from the war he continued bootstrapping his little business, working night and day. And a few decades later he’d built it into the largest duty free shop empire in the world.

Here’s where the hero part comes in.

Chuck is the exact opposite of Donald Trump: he’s a real billionaire who is both humble and kind.

Question: What does a down-to-earth bloke who wears a $10 Casio watch, owns one pair of shoes and flies economy do with his wealth?

Answer: He decided to give it all away.

Even better, he did it anonymously.

Yes, for decades Chuck secretly gave away his billions. And he’d have continued along that way, except that when he sold his business in 1996 a dispute with a business partner exposed him as one of the biggest philanthropists in history.

Yet his story gets even better.

After the news broke, he was invited to a secret billionaires dinner in New York City.

Oprah was there. So were Bill Gates, Warren Buffett, and several other billionaires around the table.

Chuck spent the night telling his story and encouraging his fellow billionaires to follow his lead and “give away your money while you’re living … I’m sure you’ll like it”.

Over the course of that dinner, Chuck inspired Bill Gates and Warren Buffett to kick off their Giving Pledge, which so far has convinced 210 billionaires to commit to giving away at least half their net worth.

“He is my hero. He is Bill Gates’s hero. He should be everybody’s hero”, says Buffett.

Back to comedian George Carlin, who said: “When you’re born you get a ticket to the freak show. When you’re born in America, you get a front row seat.”

Well, right now Uncle Sam is putting on a helluva freak show.

Yet, for all its faults, the US has an amazingly entrepreneurial culture. No tall poppy syndrome. And when they make it big, they give big.

Tread Your Own Path!

Are We Insane?

Hi Scott,

My partner and I have $30,000 saved up. I have come across a promising opportunity to buy a juice and coffee trailer with an exclusive trade permit in a popular hiking and tourist spot. Is it insane to relocate and spend the majority of our savings on a business instead of a home? I always wanted to work for myself, and it would be a great opportunity for my unemployed partner to run it. And I would still keep my current part-time job for financial security at the start.

Tab

Hi Tab,

Is it insane to spend the majority of your savings on a business instead of a home?

Well, I don’t think I’d do it, even though I do officially make ‘the world’s best smoothie’.

(Seriously, you can ask my kids. Every dad needs to be the world’s best at something, so I claimed it early on.)

Okay, so what’s your worst-case scenario?

Well, that you end up buying yourself a hospitality job with no access to super or guaranteed minimum wage.
And the best-case scenario?

That you’ve stumbled on a gold mine where hungry and thirsty hikers line up all day, and you earn a good return on the money you put into it.

So, is it a good deal?

Well, I can’t imagine that a coffee trailer would be very expensive, so it’s likely you’re paying a premium for the ‘exclusive trade permit’.
So the first question I’d ask the seller would be: “How did you come up with your selling price?”

Then zip it, and listen to what they say.

Unless they can provide a track record of audited figures, they’re probably delivering you a sales spiel.

And if that’s the case, it’s time to wake up and smell the coffee.

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!