From Average to Awesome

Hi Scott,

I wanted to share a story with you. Two years ago our young family of five employed a money method that many other families use: everything on the credit card, big limit, and spend, spend, spend! Then pay the bill, except not in full every month, with the snowball effect equaling a biggish ($30k) bill every few years that then has to be paid by rolling it into a larger debt like the mortgage. It was not a good picture.

Then we read your book, and implemented it.

In June my husband was made redundant, with no payout and no jobkeeper! Yet we were fine. And why was that? Because of you. Because we thought to buy a book for $25 and read it and learnt. My parents taught me nothing about money other than spending it, my husband didn’t learn much either. Yet we had our mojo ready to go, and in the end, we haven’t touched it because the husband got a new job and started today.

Five months of no employment, and now it’s over. It was awful and stressful but not nearly as bad as it would have been if we had gone into it with our old plan of big, rolling credit card debt. So Scott, I salute you. Thank you from the bottom of our hearts for showing us the right way to manage money and saving us from what could have been a lot worse.

Jenny

Hi Jenny,

Congratulations, you win the award for the longest question I think I’ve ever published!

Your story gives everyone a great insight into how many families with huge mortgages get by: living day-to-day on credit, and then burying the big bill in their mortgage every couple of years. They go to bed each night worrying ... hoping that life could be different. Then they repent and repeat.

Yet it doesn’t have to be that way.

If there’s one gift you could give your family this Christmas, it would be to finally be in total financial control.

Most families that are conditioned to live on credit would scoff at such a suggestion.

Yet you and I know that the feeling of financial control comes before you’ve paid off even a cent of debt.

Rather, it happens when you have a proven plan – a series of steps – that you know will work.

You faced your financial fire and you were able to say “I’ve got this”.

Congratulations, and have a Merry Christmas!

Scott

Barefoot and NOT Pregnant

Dear Scott,

For a decade every penny we have saved has been a prisoner to building financial security for our kids. But, as it turns out, there will not be any kids. One in six couples struggles with infertility – and we are now part of that ‘one’. Being childless has turned all our plans upside-down. We earn a combined $350,000 a year and own a family-sized home in the ‘burbs far from the city where we work. Do we sell our large house? Or rent and buy investment properties? Or buy a penthouse and have a huge mortgage because ‘YOLO’?

Marnie

Hi Marnie,

You may not be having children, but you have achieved financial security for your family.

Here’s my thinking:

Even though you describe the last 10 years as a ‘prison’, trying for kids gave you both a single, clarifying purpose.

Now you’re facing what psychologists call ‘the paradox of choice’, where too much choice can sometimes prove to be overwhelming, and debilitating.

And with a paid off home, $350,000 a year coming in, and no kids to spend it on, you have plenty of choices!

There are three ways to overcome the paradox:

First, give yourself the gift of time – don’t rush into making decisions.

Second, keep a diary on your bedside called ‘choose your own adventure’ and write down plans that come into your head (s) over the next 12-months.

Finally, once you’ve made a joint decision on where you want to live and what you want to do, go all in.

Scott

Pregnant and Petrified

Dear Scott,

My husband and I have now split our finances because he wants more spending money for himself. The truth is, he has not been making enough to split the bills 50/50, and he always has an excuse to not work full time – headache, toothache, anxiety. I am six months pregnant and due to go on maternity leave, meaning my income will not cover our bills. We have a personal loan in my name for $11,000 and no other debt, but I have no idea what to do anymore to keep myself above water. I’m petrified! What do I do?

Steph

Hi Steph,

I can help you with this.

See, my wife is about to give birth too. However this isn’t our first rodeo … it’s actually our fourth.

And through trial and (many) errors we’ve worked out what we need to do ahead of the baby coming.

It’s actually not unlike preparing for fire season: we know there’s going to be many flare ups over the next 12-months, so it’s important to plan things out before the ‘heat’ of a crying baby, sleep deprivation, and a messy house, come to bear.

For you guys it’s focussing on financial preparation: I want you to sit down together and write out a 12-month budget. If he’s resistant to that, call 1 800 007 007 and get a referral to sit down with a free financial counsellor (they may in turn refer you to someone in the agency who is an expert in budgeting).

Factor in spending at least $3,000 or more setting things up for the baby (though you should get creative and see what you can get as hand-me-downs, or second hand). And work through all your expenses over the next year, and see what you can cut -- and what your partner can add to the equation.

Here’s the truth: When the baby comes out you’ll give it all your emotional energy. The last thing you want to do is add the additional stress of fighting with your partner about money.

So, get this sorted pronto, and buckle up for the ride of your life. You got this!

Scott

The 87 year investment

When I first began the Barefoot Investor, I wasn’t married. I didn’t even have a girlfriend.

Today, I have three kids … and in a couple of weeks we’ll be welcoming our fourth.
So, on this my final column for the year, let me tell you how I’m planning for their* future.

(*While we haven’t found out the sex, I’m totally convinced it’s a boy.)

There are three steps:

First, on the day my son is born I’ll buy a newspaper.

While I’m sitting at the hospital, I’ll get a red pen and circle all the terrible, and scary things that are happening in the world right now. And there’s a lot of them: the second (or third?) wave of the pandemic is sweeping the planet, governments are going deep in debt, and we have a fragile global economy. Then there’s the Donald Trump reality show, which is yet to be cancelled.

Second, I’ll invest $1,000 into an international shares index fund, which holds the largest companies in the world (think Apple, Amazon, Berkshire Hathaway, Nestle … and 1,540 large businesses from around the world), and another $1,000 in an Aussie index fund.

Finally, in 21 years’ time, when newspapers are a relic, I’ll pull it out and let him leaf through it.

He’ll be struck at how insanely cheap the prices of things in the ads are.

(‘Hey Dad! Here’s an ad for an iPhone. I haven’t seen one of those things in years!’)

He’ll marvel at how young his old man looks in his column photo.

Yet most of all he’ll understand that all the scary headlines were a sideshow to the real story of human progress.
I encourage anyone who has kids or grandkids to do the same:

It’s a real life lesson on the power of compound interest.

Tread Your Own Path!

Here’s what could happen in 2021

Let’s discuss what could go wrong in 2021, and what you can do about it.

Of course newspapers are chock-full of experts making predictions about “what’s in store for the next year”, so, before I throw my hat in the ring, let me shake the sauce bottle:

How many smart sausages this time last year wrote, “We predict that a pandemic will sweep the planet and lock many of us down in our homes. Our recommendation: stockpile toilet paper in February.”

That’s the err, rub, right?

Well, for what it’s worth, my view is that the next few years could be financially brutal for many businesses, for those workers who are laid off or underemployed, and for retirees who have had their investment income slashed.

However, it’s because of all this misery that things in 2021 could actually get a little … loose.

Here’s the two-hander:

The Reserve Bank has set rates at (effectively) zero to stop you from saving and encourage you to borrow up BIG.

The Government is even attempting to scrap responsible lending laws to get the party in full swing.

Heck, the RBA has given us a timeframe, having all but promised donut rates for the next three years.

What could possibly go wrong?!

Well, lots actually.

Like it or not, we’re living through a giant financial experiment: never has the world had so much debt. Never have interest rates been this low (they’re at thousand-year lows, according to Merrill Lynch).

And so the lesson I’m taking out of 2020, our annus horribilis, is this:

Life is unpredictable.

The truth is we spend most of our lives stressing about things that never happen. And then one day a bat flies the wrong way, and the next day people are going the biff over bog roll.

Think about it: the riskiest things — the ones that knock you on your backside — are often a bolt out of the blue.

For my family it was a fire that burned basically everything we owned.

For others it could be a relationship breakdown. Or an illness. Or an economic meltdown. Or a global pandemic.

So how can you and I prepare for them?

By asking yourself the following questions, today.

Barefoot’s Top Five Questions For 2021

1) “Is my money safe?”

Here’s the bolt out of the blue: you need to access your money quickly, but all your investments have tanked.

If you have money that you need to draw on in the next five years invested in anything other than a bank savings account or term deposit,you may well lose a chunk of it.

Like what?

Like property funds that offer a high rate of interest, or the share market, or cryptocurrency, or any other type of managed investment.

(The share market is not a safe place to hold your money in the next five years. However, it’s arguably the safest place to invest your money over decades, as it will outrun inflation.)

Here’s what you can do about it:

Keep any money you’ll need to spend in the next few years in a bank account (or term deposit) that is covered by the government deposit guarantee (up to $250,000).

Yes, that may sound like overkill, especially with interest rates this low. However, it’s not about the interest you earn (which is pitiful), it’s the sleep-easy factor of knowing you’ve got a backstop. That’s worth more to me and my mental health than any gain I could make in the market.

2) “How long could I last if I lost my job?”

Here’s the bolt out of the blue: your boss calls you into his (virtual Zoom) office on Friday … you’re being laid off.

It’ll never happen to you, right?

Well, I believe the lasting legacy of COVID is to radically change the concept of what we call work.

Think about it: employers have been thrown in the deep-end of the productivity pool this year. Many have had to deal with a reduced workforce who are working from home.

And, now things are getting back to normal, I wonder how many will look at last year and think to themselves:

“Maybe I don’t need all the staff I once had. And, even if I do, if they’re all working remotely … maybe I can hire cheaper workers somewhere else in the world?”

And yet one in five of us Aussies has less than $1,000, according to ME Bank’s latest biannual Household Comfort Report.

Here’s what you can do about it:

Follow the Barefoot Steps; after you’ve set up your buckets, domino-ed your debts and bought your first home (but not yet paid it off), the next Barefoot Step is to boost your Mojo savings to three months of living expenses.

I had a woman write to me in September telling me she thought having three months of Mojo was a total overkill. Yet, when they both lost their jobs, she said, “It was the most important thing in our world. It allowed us to breathe.”

3) “Am I covered?”

Here’s the bolt out of the blue: your house burns down, and you’re not fully covered.

Statistically, if you’re a normal little vegemite you will be underinsured. And the moment you’ll find out is after the fire, or the car accident, or the illness, or … the rats.

(Yes, one of the downsides to living on a farm is rodents. They somehow managed to get into both our cars and eat through $35,000 of interior and electrical work).

Here’s what you can do about it:

Dig out your insurance policies and check what you’re covered for you may need to increase it. If you’re unsure, call your insurer and ask them to review your policy. Life is full of dirty rats, so just make sure you’re fully covered for anything.

4) “Is my partner on the same financial page?”

Here’s the bolt out of the blue: your partner walks out on you.

Relationships Australia tells us the number one reason for relationship breakdowns is fights about money.

Here’s what you can do about it:

The monthly Barefoot Date Night is the cornerstone of my entire plan.

Making a monthly ritual of getting on the same financial page as your partner — and working through the Barefoot Steps — is the most powerful thing you can do to ensure you don’t end up losing half your assets.

If you don’t schedule it, you won’t do it. (We have ours on the first Tuesday of every month, which coincides with the monthly Reserve Bank meeting: how hot is that?)

And remember, money talk goes better with a wine (or taco) in your hand.

5) “If I got hit by a bus, would my family be able to put everything together?”

Here’s the bolt out of the blue: you leave your loved ones with a financial Rubik’s cube of frustration.

Picture your partner (or parents) sitting alone, distraught and grieving, trying to piece together your financial life.

They have no idea how to access your bank accounts, the password to your email and social media, your funeral wishes or even where your will is.

Here’s what you can do about it:

Spend an afternoon getting everything in one place.

At Barefoot we call it the Fearless Folder, and once it’s done you lock it away in a secure safe.

The feedback I get from people who have done it is that it’s Marie Kondo-cathartic to have it all sorted.

What’s more, it’s the final way you’ll say “I love you” to your loved ones.

And there you have it.

Each and every week, I show up and answer your questions.

Yet to really prepare for 2021 you need to ask yourself the right questions, and get the right answers for you.

Tread Your Own Path!

Demolition Debt

Hi Scott

My husband and I run a demolition business with seven full-time employees. Unfortunately, one of them got into financial difficulty and some sharks called Panthera Finance bought his debt. They now have a garnishee order on his wages and harass me (as office manager) to pay the instalments — or they ‘reserve the right’ to order me to pay the entire $25,000. The employee has had a rough trot the last few years, and I have taken less per week from his pay than they are asking for, to keep them at bay without pushing him to breaking point. Is there any advice you can give me regarding garnishee orders or this delightful Panthera Finance crew?

Jane

Hi Jane,

Tell them to bugger off with their bully-boy tactics.

There is no way they can “reserve their right” to order you to “pay the entire $25,000”.

That is total bollocks!

Now, you are required to pay the amount set by the court. However, each state sets limits on how much a debtor can take from someone’s salary, which is known as the ‘protected earnings rate’. In Victoria it’s 20% after taxes.

Why?

Because, while people need to repay their debts, they also need to eat.

Panthera Finance has a reputation of being super-aggressive: in March this year the Federal Court whacked them with a $500,000 fine for undue harassment.

And if they’re getting under your skin, can you imagine what sort of pressure they’re putting on your employee?

The bottom line is this: it’s time to hit them with a wrecking ball. Make a complaint to the Australian Financial Complaints Authority (ACFA) on 1800 931 678. And I suggest your employee call the National Debt Helpline on 1800 007 007 so he has a professional in his corner to help sort out his mess.

Scott

Safe as Houses

Hi Scott,

I followed your advice and bought the Bunnings portable safe that you wrote about in your column a couple of weeks ago. However, when we were faced with our fire I was so panicked I forgot to grab it… however it was the only thing that survived in that room! And because it survived I now have everything I have been asked to produce for insurance, quotes, and house plans. Thankyou for your old-fashioned good advice to this generation.

Jenny

Hi Jenny,

Goodness gracious, great balls of fire!

Still, having all your docs will make the often painful insurance process that much easier (and if you have ‘before’ pics on your phone of your house, that’ll help too).

And, while you’re the perfect case study for the importance of having a safe, I view our safe just as much as a communication device: if something should happen to me, my wife knows that the keys to our financial life (or at least the copies of our keys) are all set out in one place.

Truth be told, I got a huge reaction to my column (especially from the mysterious safe-cracker, who didn’t like me joking that he could come back and open my safe). In fact, many parents wrote to me saying that they plan to buy a cheap, fireproof safe for a Christmas present for their adult kids (though it appears Bunnings has now sold out of the $69 version!). Now that is a practical present … you could even put some gold chocolate coins in them … and a copy of my books.

Scott

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!