This Will Get Me in Trouble

Today’s column is brought to you by short-term lender MoneyMe.

Look, I’ve been writing this column for 21 years. 

And this week I received the most tone-deaf, predatory PR pitch I’ve ever encountered.

MoneyMe’s public relations company sent me a press release, clearly wanting me to write a heartwarming story about a Brisbane couple who spent $92,000 on wedding celebrations, funded in part by a MoneyMe personal loan.

Here was their pitch:

Subject: Brisbane bride’s $90K+ double wedding made possible by MoneyMe personal loan! 

Hi Scott,

A Brisbane business manager has shared how she made her dream weddings a reality at 62, while navigating the rising costs of modern celebrations. Tanya says she doesn’t do things by halves. After a year-long engagement tour, two weddings, and two honeymoons, the celebrations cost her and husband Bruce around $92,000. 

“I’ve definitely felt the impact of the cost-of-living crisis. We spent more than we imagined … but we wouldn’t trade the memories for anything.” For their honeymoon, they spared no expense, spending around $38,000 travelling through Italy, Spain, and Bali.

The pitch came complete with selfies and a That’s Life-style backstory of the fairytale romance of Tanya and Bruce. (I’ve chosen to change their names and not use their photos.) These poor bastards are being pimped out as promotional props for a loan shop.

Yet here’s where it gets gross. 

Enter MoneyMe CEO Clayton Howes: “With cost-of-living pressures, personal loans are helping some Australians hold onto life’s important moments without compromising their financial stability.”

Read that again. Old clanger is claiming high-interest loans during a cost-of-living crisis don’t compromise financial stability!

Uh-huh.

Something old. Something new. Something borrowed (5.99% to 26.99% p.a., $495 establishment fee, $10 monthly fee), and something blue … actually that's year two.

But MoneyMe are smart marketers. They’ve ticked corporate responsibility boxes, snaffling a B Corp certification – a sustainability credential demonstrating commitment to social impact. So, they're using "positive impact" language while encouraging people into debt for celebrations they can't afford. 

Look, there ain't anything sustainable or socially impactful about taking out a MoneyMe loan.

It's the same debt it always was, except now it comes with a B Corp badge and some feel-good language about 'financial inclusion'.

It's like how every processed food now screams 'Contains Protein!' as if that makes it nutritious. The product hasn't changed - just the marketing. It's still the same ultra-processed crap designed to clog your financial arteries while making someone else rich.

The pitch ends with Tanya saying: “The loan gave us the freedom to say 'yes' to the fun and memories, without the anxiety.”

No, Tanya. The anxiety comes later. When you're making those repayments. When the interest compounds. When “manageable” monthly payments stretch on for years.

Financial counsellors tell me MoneyMe can often be a nightmare to deal with when clients get into trouble. Worse than the banks. And while MoneyMe claims to be a financial 'disrupter' taking it to the banks, their share price sits at …

11 cents. 

They're not disrupting anything - they're just a penny stock with a big marketing budget.

I genuinely feel for this couple. They seem lovely. But MoneyMe knew exactly what they were doing, packaging this story for journalists. 

Beware what you wish for.

Tread Your Own Path!

Trust Fund Kids Blow Up

Scott,

I’m 72 and have had hard-won success in business. I’ve got four adult kids aged between 23 and 35. They’ll inherit around $80 million when I die, but none of them are serious about money. My son lost $100,000+ on crypto. My eldest has been in and out of rehab. My daughter wants me to fund a fashion label, despite having zero business experience.

I love my kids, but I was too busy making money. I thought they’d learn through osmosis. Clearly not. I don’t want to rule from the grave, but I’m terrified they’ll blow it all within a few years of me being gone. Yet, if they could be convinced, they could grow the pie and live off it forever. My question is, should I hand it over to advisors to work with them now?

Anonymous

Hi Anonymous,

If you hand it to advisors to manage, there’s a good chance they’ll be sacked the day after your funeral. I’ve seen it happen. Your kids will fire their financial babysitter the first chance they get.

They’re like lotto winners. What they really need to learn is how to keep the money they didn’t earn, and that’s a skill very few trust fund kids ever master.

Take Cornelius Vanderbilt. In the 1800s he built one of the world’s great fortunes, worth roughly $200 billion in today’s money, and warned his kids not to blow it. Within a few generations they’d built mansions bigger than hotels and couldn’t afford the plumbing bills. By their 1973 family reunion, not one was even a millionaire.

That’s the curse of unearned wealth. It doesn’t just get spent badly, it often destroys the people who inherit it.

I don’t know your kids. Maybe your daughter will build the next Zimmermann, and maybe your son has learned his crypto lesson. But history says the odds aren’t good.

So here’s what I’d do.

I’d buy each child a modest home, say up to $1.25 million including stamps. That gives them security, but they still have to get out of bed to pay the rates. That’s $5 million total, which is life changing, but not life ruining.

Then I’d make your real legacy the next decade. Spend time mentoring them. Get them involved in your business, fund their study, have them run small charitable projects, maybe even that fashion label, but with you watching closely.

After that, leave the rest to a cause you care about. You could involve your kids in it, but tread carefully. I’ve met plenty of trust fund kids who resent giving away what they see as their money.

Warren Buffett put it best: “A very rich person should leave his kids enough to do anything, but not enough to do nothing.”

The hardest financial lesson for your kids isn’t learning about compound interest. It’s that choices have consequences. And that’s a lesson money can’t buy.

Scott

The $30,000 Pussy

Barefoot,

Our cat got bitten by a snake. $30,000 later she’s alive and well and having a great life. Pets, to some, are their family. They’re not replaceable. The 30 grand I spent wasn’t just for a cat’s life … it was for my children’s happiness, it was so I didn’t have to be eaten up by guilt for the rest of my life. I look at this little cat now and wonder … what if I hadn’t spent it on her, what if I’d gone to Europe for a month-long family holiday instead. Would I be happier? I think not. 

Jane

Hi Jane

You’re triggering me.

I almost got cancelled last year for advising a broke woman not to spend $60,000 on her sausage dog.

I got absolutely savaged: bitey emails from dog lovers. I was mauled on social media, and the CEO of the Australian Veterinary Association published an open letter criticising my views (and justifying the cost of Range Rover Sport-level bills). 

So … here  we go again.

No parent wants to break a child’s heart (though my kids barrack for the Melbourne Demons, so there’s that), but I get where you’re coming from.

Look, I live on a farm, where the circle of life is on full display: the ewe prolapses and dies. The lamb gets pulled and bottle-fed by the kids. The fox breaks into the chook shed and kills the lot.

It’s hard – but it teaches them.

So I asked my eldest:

“If one of our cats got bitten by a snake, would we spend 30 grand to save it?”

He didn’t even blink:

“Don’t be ridiculous.”

“And what if Granddad got bitten by a snake?”

“Well … how old is he?” he smirked.

“Stop it – you’re scaring me.”

Still, you asked: What if I hadn’t spent the money?

So let’s go there. What if you’d put that $30,000 into your mortgage? Or invested it in shares for your kids’ future? Or wiped out your credit card debt?

Well, you’d have something else: financial peace of mind. And that’s not nothing. 

I’m not saying you made the wrong choice. You saved your cat, your kids are happy, and your guilt is gone. But next time (and there’s always a next time when it comes to pets) have a plan before the tears and vet bills start flowing.

Because, while pets feel like family (and they often are!), your actual human family needs you to make clear-eyed choices, especially when it comes to money.

Scott

Mouldy, Desperate Parents

Hi Scott,

We’ve spent the last seven years stuck in a financial and emotional loop, paralysed by fear of making the wrong decision for our family. Here’s our situation: we have five young kids, two of whom have special needs. The only school that caters to their needs is a two-hour drive in the morning and up to four hours in the afternoon – every single day. We’re barely managing with jobs, kids and constant driving. Meanwhile, our house is nearly paid off, but it has mould, making it a health hazard. It’s also worth only a third of homes near the school. 

We’ve inherited $900,000, but it’s tied up in property – meaning we can’t use it to ease day-to-day stress or invest elsewhere. If we sell and buy closer to the school, we risk losing all our financial security. If we stay, we continue to struggle. If we rent, we burn cash but get closer. If we knock down our house and rebuild, we risk sinking into debt. Every option feels like a mistake, so we’ve done nothing for seven years. Meanwhile, property prices keep rising. Scott, how can we break free from this paralysis and make the right move for our family’s future? We’re desperate!

Linda

Hey there Linda,

Ever heard of the boiling frog analogy?

Well, you and your husband have been simmering away in that pot for seven years! You’ve got five kids (two with special needs), a six-hour daily commute, and you’re returning to a mouldy home?

You must be ready to croak!

Here’s my take:

You’ve already set yourself up well: your house is nearly paid off, and you’ve got $900,000 to work with. So, why are you still stuck in this pot?

It’s time to jump.

Here’s what I’d do:

First, sell the house.

Second, rent near the school for now – even if it’s for the next 12 months. Think of it this way: you’re buying back 1,200 hours of your time each year. Six hours a day, all for your family and your mental health. That’s the most important investment you can make.

Should you buy in the new area? 

Maybe. But don’t stress about it right now. Renting buys you time to decide. You can always make the long-term decision when the time’s right.

Don’t get stuck obsessing over the price of rentals. Think of it this way: the price of your rent is worth every hour you’re getting back with your family. And that is the smartest investment you can make right now.

Finally, I want to tell you this: I have a huge amount of respect for you both. You’re holding it all together for your kids, and that’s no small feat. You’re tough. But remember, kids grow up fast, and the time to invest in them is right now. Don’t waste another minute.

Eat the frog!

Scott

Bill Now, Pay Later?

Hi Barefoot,

As I was scrolling through my Facebook newsfeed drinking my morning coffee, I spotted an ad for Deferit. There are lots of ‘buy now, pay later’ schemes these days, but this is the first I’ve spotted for paying bills and splitting them into instalments. Although I don’t use these types of services myself, I know a growing number of people who do — so curiosity got the better of me and I had a look at what they claim to do. They claim to have no interest or late fee charges. They pay your bill up front and get you to pay it back in four equal fortnightly instalments. It appears they only charge a monthly fee when you utilise their service. My question is: is it really that transparent or is there a catch?

Sarika

Hi Sarika,

They’re basically Afterpay with a different logo.

Yet, instead of splitting $150 to get some bro-tox (why should the ladies have all the fun?), they’re suggesting you do it with your day-to-day bills.

Ding! Ding! Ding!

All these fintech bros have convinced themselves they’re saving the world. Heck, Afterpay still claims they’re a ‘budgeting app’, and so does Deferit.

Bulldust!

They’re out for themselves. The reason they encourage people to use money to pay for things is because their business model relies on it.

True budgeting advice – say, from a free financial counsellor – would get to the guts of the matter by sitting down with you, working through your budget, and looking at your capacity to pay your bills.

And this may reveal that you’re in over your head and need more than a fortnightly bandaid. Or it may help you negotiate a short payment plan with your billers so you can pay your bills with cash on time. And that will allow you to stand strongly on your own two feet.

Scott.

Pressing Problems

Hi Scott,

I am a single mum of five children and I started my own ironing business one year ago. I would like your advice on how to stay on top of things, as all the money I make goes towards paying bills or buying groceries. I don’t have any credit cards, because I hate the idea of buying things with money that doesn’t belong to me. I’m trying to work out how to be financially healthy and become a good role model to my children. Can you help?

Jane

Hi Jane,

Let me iron out the wrinkles that you seem to have in your self-confidence:

You’re not a good role model for your kids, you’re an excellent one.

Let me count the ways.

First, you don’t spend money you don’t have.

Second, raising five kids on your own is a full-time job: many people in your situation wouldn’t work at all.

Third, you’re not only working, you’ve been smart enough to build a little business that allows you to parent and earn an income from home.

The only thing you need to do is to tell your kids what you’re doing. The old advertising rule of thumb is that people need to be exposed to a message 20 times before they’ll remember it. Same goes for you and your kids. You want to tell the humble legend of Jane, working hard for her family against the odds.

In time they’ll appreciate what you’re doing for them. One day they’ll be really proud of what you’ve done.

I’m going to send you a free audio version of my book so you can listen to it while you iron. Work your way through the Barefoot Steps and you’ll never look back.

You Got This!

Scott.

I’m 19 and Have Already Blown My Credit Rating

Dear Scott,

I am 19 years old. When I turned 18, I applied for multiple loans, not knowing that doing so would affect my future. I have recently tried to get a phone plan through Optus in my own name but they rejected me because of my history. Now I am starting to save for a home loan. I have checked my credit rating on Credit Savvy and it’s 631, and I want to bring it up to the highest it can be. But how do I do this? I have been googling for days but nothing useful has come up.

Eryn

Hi Eryn,

True story: when I was 18 years old, my mates and I thought it would be a fun idea to buy a bottle of Jim Beam and mix it with home-brand cola. And then …

Bingo, bango!

I don’t remember much about the night, though I do remember the next morning … violently.

Here’s the killer: since that day I’ve never drunk bourbon (or any spirit for that matter).

Yes, that’s right: all these years later, and I still can’t bring myself to do it.

Which is actually not a bad outcome!

Eryn, that’s how I’d frame your bad credit rating: you messed up when you were still a teenager (like we all do). However, you’ve shown me that you’ve learnt from it. Seriously, how many 19-year-olds are saving for a house deposit, and writing to the Barefoot Investor?!

Think of it as a good thing — you got it out of your system early.

So here’s my advice: aggressively pay down your debts, and then commit to saving for a deposit. Don’t worry about your credit score; it’s a vanity marketing metric from credit agencies, not banks, and therefore about as important as your Uber passenger rating.

What really matters to a lender is having a history of savings and a clean credit report. And there’s the rub … there are things you do as a teenager that stick with you for life … like, say, getting a tattoo. However, a bad credit report will legally drop off in five to seven years, which coincidentally will be about the time you’ll be hunting for your first home.

Bottoms up!

Scott.

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!

My Financial Planner Hates You

Scott,

We’ve just come back from seeing our financial planner, and I am a little rattled! Our super fund is competitive in terms of earnings but its fees are 2% pa. When I questioned the fees (our pension balance is $1.1 million, so around $22,000 each year), he said that what matters is returns, not fees. And when I mentioned that I had read your book, he got quite angry and dismissive. He said that it is not so hard to beat the averages (because index funds hold lots of dud stocks). He waved away my concerns and said there were numerous errors in your book. He got a little worked up, so we did not want to push things with him. Just wanted to let you know! 

Jeff

Hi Jeff,

I totally understand his reaction.See, I wrote the second best-selling book ever in Australia (the first was Fifty Shades of Grey). And my book also delved into bondage, dominance, and sadism — of the financial fees variety. I showed the masses how the game is played (and how they’re played).

Here’s the rough sum: a balanced portfolio will provide an income of around 4% per annum. That means, in your case (paying 2% in fees), you’re losing around half your potential investment income each year.

And remember, you’re taking all the risk.Also remember that actively managed funds (like the ones your advisor is hawking) fail to match simple low-cost index funds over the long term after fees, according to every study that’s ever been done on the subject.S

o it’s not surprising he’s being defensive: remember, the fees you pay are his income.

Look, I’m not anti-advisor. In fact, I say repeatedly in the book to seek out a financial advisor who’ll give you personal advice tailored to your situation.

My motivation for writing the book was to empower my readers to ask the right questions (which you did). And the truth is, the best advisors want their clients to be educated and informed.Maybe it’s time you found one.

Scott

How a Teenager Works 5 Hours … and Gets $1,500

Hi Scott,

I am an 18-year-old and have been laid off from my job at a swim centre because of the coronavirus. The company had applied for the JobKeeper payment, which I have tagged along on. I just found out that, even though I only worked five hours a week, I will be getting $1,500 each fortnight! How do I go from managing $150 to managing $1,500? I was thinking of keeping the $150 I normally make and saving the rest. What would you do?

Sabrina

Hi Sabrina,

Now that’s what I call Corona Cash!I have to tell you, as a taxpayer, I’m a little peeved about this.

But, as the Barefoot Investor, I’m proud of the fact you’re contacting me to do something smart with it.

Most 18-year-olds in your situation would go to Bali!

(Oh actually, you can’t do that, can you? Ha! Well, at least you can go take a trip on Bendigo’s world-famous Talking Tram, so long as you adhere to social distancing ... only four people per carriage. Rock on!)

Still, you’ve got the right idea: keep living off the income you’re used to, and use the rest to set yourself up financially.

My advice would be to stash away $2,000 in a Mojo account, for when it’s time to move out of your parents’ place.

Then, set up your buckets (including one you nickname ‘Sabrina’s House Deposit’) and start saving for your own place.

You may feel that’s a long way off, and it is.However, each time you flick open your banking app you’ll see it slowly growing.

Thanks for making my tax dollars actually do something productive!

Scott

Pilot Gets Grounded

Hey Scott,

Last time I emailed you, I had a well-paying job as an international pilot, the share market was at a record high, my super was doing brilliantly, I was investing every month and we were planning a holiday to Greece. I wrote to thank you for changing our lives. Now the share market has plummeted, my super has been smashed and, thanks to COVID-19, I have no job. Now I am writing to REALLY thank you. Healthy Mojo, no credit cards and low-fee banking have prepared us well. More importantly, this is an opportunity to show our three young adult boys a real-life example of living within your means, and that the world does not end when hard times hit!

William

Hi William,

Dude, you’re facing your own financial fire with all the Alpaca attitude you can muster!(Non-Barefooters won’t have a clue what I’m talking about, but you will.)

You may be down, but you’re not out.

The thing I’ve learnt as a parent is that kids don’t always listen but they always watch:

And they’re watching you rise to a challenge.You Got This!

Scott

Should I Pause My Repayments?

Hi Scott,

I haven’t lost my job due to the coronavirus (I have a stable public service job), but I’ve seen an option from my bank to freeze my home loan repayments. Would it be a good idea to build up a bit of extra cash in this uncertain climate?

Adrian

Hi Adrian,

You’re right, banks and other lenders are offering their affected customers the ability to stop making home loan repayments for up to six months. I’ve seen some people describe it as a ‘pause’ or a ‘repayment holiday’.  It is neither. It is the financial equivalent of being stuck in a taxi while in a traffic jam: You’re not going anywhere, but the meter’s still running.

The interest on your debts, and the fees and the charges, are all still ticking over.  Tick, tick, tick. Understand this: your debt is growing higher each and every day you delay.

My thoughts?

Now is not the time for you to forget about where you’re going, suck your thumb, and look aimlessly out the window. Instead, it’s time to focus relentlessly on your final destination: getting the banker off your back and becoming debt free!

So, if you’re still employed, you should consider making extra repayments.

Here’s why: As a result of this crisis, the Reserve Bank has slashed interest rates to the lowest level in history. Even better, they’ve said that they could stay at these ‘emergency levels’ for the next three years. In other words, this is an amazing opportunity for you to smash a huge amount of debt over the next few years.

Just remember that when it comes to the banks there’s no free ride, mate!

Scott

Help! I'm with 28 Banks

Hello Scott,

I am with 28 different banks (including credit unions). Some charge monthly, some are purely online. I was wondering what you would recommend as a single bank — who I’m probably with already — to consolidate it all together. I am also with MyBudget, who are helping me with my unpaid bills. I am 35 years old and earn $82,000. What should I do?

Brad

Hi Brad,

You seriously have 28 different banks?!

What do you use for a wallet — a suitcase?

People see you down the street: “There’s Brad at the ATM again, rifling through his suitcase of debit cards ... trying to remember which one has the money on it.”

Then again, some people collect stamps, or tattoos, or husbands, so whatever floats your boat.

Now you can have 28 banks if you really want … but one MyBudget is way too many.

MyBudget is just awful.

If you’re broke and can’t pay your bills, you sure as hell can’t afford to spend thousands of dollars a year on a glorified budgeting app. (I wonder if MyBudget suggests that their expensive ongoing fees are the most important bills that need to be paid?!)

Now, after years of promiscuous banking, you want my advice on being a banking bachelor?

Well, you should give your rose to whichever bank you want. After all, all authorised deposit-taking institutions (ADIs) are covered by the Government’s deposit guarantee up to $250,000, and none pay any interest worth crowing about these days. Yet if you really want to get a handle on your money you need to focus: after you’ve chosen your one and only, set up different savings and spending buckets, and begin banking on yourself.

Scott

The $32,000 Couch

Hi Scott,

Ten years ago I got a ‘buy now, pay later’ $4,000 ‘living room package’ at a retailer (couch, TV, coffee table). Actually, the deal was that they gave me a GEM Visa with a $6,000 limit … so another $2,000 credit, which I stupidly spent. Fast forward 10 years and I am still struggling to pay it back. I am a single mother with a chronic illness, and while I really want to work I just haven’t been able to. Yet so far I have paid back $32,000. Last year, while I was in hospital, my debt was sold to another group, Lion Finance. They arranged a $10-a-week payment plan, but my debt has increased by $1,000 in the last year. I need your help!

Lisa

Hi Lisa,

Your email makes me sad, and incredibly mad. (So today I’m going to be a little bad.)

What a bunch of … bankers.

The business model of these institutions is basically to take advantage of people like you who don’t understand the complex contracts they’ve signed up to.

Yet you have acted honourably: you made a 15-minute mistake and have steadfastly paid a huge price for 10 years because of it.

Now you’re probably thinking to yourself, “Well, I’m just a single mum on a disability benefit, there’s nothing I can do … these finance guys have the upper hand”.

No, they don’t.You have the upper hand.

Together, we’re going to get this debt wiped -- to zero.

Don’t get me wrong. Generally, I’m in favour of people paying back their debts, but you’re in a special situation:

First, you’ve repaid the principal plus more than your fair share of interest over the past decade.

Second, the Lion Finance deal is disgusting: you’re repaying $520 a year, yet your debt rises by $1,000! On a Centrelink income, you’ll never, ever, clear it. They’ve effectively trapped you for the rest of your life.

And, finally, what are they going to do if you stop paying?

Well, they’ll probably huff, and puff, and threaten to blow your house down. But the truth is they can’t do anything: you don’t have any capacity to repay the debt, and you have no assets.

So this week I want you to call the National Debt Helpline on 1800 007 007 and ask to speak to a financial counsellor. Tell them your story, email them the paperwork, and request a debt waiver.

Time to stand up to the bullies.

Scott

I Spent $2,000 on Powerball Last Night

Hi Scott,

I spent $2,000 on Powerball last night and apparently did not even win my tickets back. I feel pathetic.

On my way to work this morning, I began to listen to your book (for the second time) on Audible and decided to write to you — and be honest with you (and myself). My husband and I are both 33. Not young, not old. We have three home loans and a car loan, and plan to have a baby soon. I also have a hard copy of your book on my desk and feel I am on my way to financial freedom, but it seems a long way to go.

Bridget

Hi Bridget,

I’ve answered thousands of questions, but I have never had someone tell me they spent two grand on a lottery.

Powerball? Is that even still a thing? I remember it looking like some tricked-up vacuum-cleaner spitting out coloured balls. The odds of winning Division 1 Powerball (according to their own website) are 134 million to 1.Here’s you: “Yeah, but you gotta be in it to win it, right?”

Here’s me: “Yeah, but if you think that way, make sure you steer clear of vending machines.”

(Statistically, you’re more likely to be killed by a vending machine falling on you — 112 million to 1.)

Okay, enough of the gags: there’s something deeper going on here.

You’re either an addicted gambler, in which case you should get professional help, because it’s an illness that won’t go away untreated (call Gamblers Help on 1800 858 858), or you’ve got a feeling of hopelessness about your situation.

Either way, there are no shortcuts to anywhere worth going.

Yet know this: you don’t have to hit the jackpot to feel good about yourself or your financial situation.

Instead, when you see a path out of despair (and hopefully my book can help you with this), each step you take will build your confidence.

From there, it’s just a matter of time: you’re already free. 

Scott

My Baby Sent Me Broke

Hi Scott,

Over the last two-and-a-half years we have had two babies and a wedding. Our first baby came earlier than planned so it wasn’t covered by private health, and we made the silly choice to pay for it out of pocket. Then, over a couple of years on one income ($240,000), we have accumulated two credit card bills totalling a hefty $60,000. We have now read your book and managed to pay off two large loans using your method, but we do not know how to get these credit cards paid off. Please help!

Katie

Katie,

Look, I’m all for blaming my kids for everything (especially on a Sunday morning), but $60,000?

Seriously?

The cost of having a kid in a private hospital, assuming no complications, is about $10k.

Other parents have weddings and babies, but they don’t have $60k on the never-never.

You’re earning $13k a month in the hand, but you’re broke.

Why?

Because you’re spending too much.

If you’re looking for a magic wand, you can go to MyBudget (see above).

But if you ask me, you’ve already proved to yourself twice that you can pay down debt, so three times is a charm.

Besides, you guys are high income earners ‒ you could have this debt paid off within the year.

Even better, you’ll set a great example for your kids.

Scott

Cancer Can’t Beat Me

Dear Scott,

One minute I was living the high life at a business awards night in Cairns – two weeks later I was diagnosed with breast cancer. I heard the big ‘C word’ and felt the walls come crashing in around me. What followed was six months of high-dose chemo, an operation, eight weeks of radiation, and another six months of preventative chemo. Yet I am happy! I am living in the present moment, and above all else my finances are in order — no credit card debt and only $80,000 left on my mortgage. The trick was that (before my illness) I’d read your book, many times in fact. You have saved me so much worry, Scott. I have also had the courage to put all my financials in order for my family. Thank you, sending positive vibes your way!

Janelle

Hi Janelle,

In a week that’s been dominated by front-page doom and gloom finance headlines, your story stands out like a shining star. People waste a lot of effort thinking about things they have zero control over, but putting off the things they have total control over, like getting your own situation sorted. Here’s to your continued health and happiness Janelle. You Got This!

Scott

He Threatened to Kill Me

Hi Scott,

I read your column on scams and wanted to share my story. I got a call a couple of years ago and knew straight away that it was a scam due to the guy’s funny accent, but I decided to play along for fun. I said yes to all of the questions and pretended to be really excited. After about thirty minutes I jokingly offered my credit card details and even the password to my online banking. I wish I hadn’t.

The guy on the other end of the phone was furious at being mocked. Straight away he went from nice to nasty and told me he was going to slit my throat! I was a bit unnerved but chuckled and said “but I thought we were friends now”. He began to threaten me by saying he knew where I lived and that his ‘boys’ would be around shortly. I doubted this but was still crapping my dacks a little.

I said I had to go now and hung up. The bloke proceeded to ring back about ten times in a row. I answered once again and tried to laugh and pretend I wasn’t worried. He told me I was the winner of the ‘Golden Casket’, along with a few more threats of throat slitting. So now when I get these calls I’m not a smart alec and say politely “not interested, thank you”.

Jason

Hi Jason,

Don’t think of them as harmless scammers.

There are reports of Australians who have been murdered in Nigeria trying to get their money back.

The truth is that they’re highly organised crime syndicates that are (collectively) making billions of dollars a year, and they have little patience for being messed about.

In the week after I registered my number with the scam website Bitcoin Profits, I received dozens of phone calls at all hours of the day and night. They’ve even worked out how to make it appear like they’re calling from an Aussie landline. Regardless, each time I politely said: ‘I know this is a scam, please never call me again’ and then I’d hang up. After a week they gave up.

Scott

How to Find a Great Accountant

Scott,

I am 51 and newly divorced, and for the first ever I feel the need to get some tax advice from an accountant. But how do I find one who is trustworthy and not just after as much of my money as they can get?

Janelle

Hi Janelle,

The cost for basic compliance work -- like tax returns and SMSF auditing -- has fallen dramatically.

Why?

Because pretty well everything is now data-matched and automated, so there’s honestly very little value they can add.

However, in your case it sounds like you’re looking for an accountant who can act as a money mentor as you start your new life. That’s a very smart idea (even better, unlike many financial advisors, accountants charge by the hour).

So how do you find one?

The same way you find a good hairdresser: ask your friends.

That being said, bad tax advice is worse than a bad haircut, so I’d also suggest you jump on to the Tax Practitioners Board website (www.tpb.gov.au) and search for a few accountants in your area.

When you have a few options, send each of them the following email:

Hi,

I’m looking for a caring, experienced accountant. I’m newly divorced and need help making sure my tax and assets are structured correctly. Moreover, I need you to explain the basics so I can have a better understanding of the financial decisions I make. To make sure we’d be a good fit, I’d really appreciate you replying on the following:

First, could you send me a short bio about yourself.

Second, could you send me an engagement letter explaining your terms and how you charge: is it by the hour or can you provide a fixed-fee quote — and what is and is not included in this fee?

Then you wait.What do you want to see from their response?

That they get back to you quickly (preferably under 24 hours), that they sound polite and professional, and that their expertise lines up with your needs.

Good luck.

Scott

Prisoner’s Last Chance

Dear Mr Scott Pape,

My name is Peter. I am 59 and I have four years left to serve on a five-year prison term. As a prisoner I do not have access to a phone or the internet, so writing this letter is the only way I can get in contact with you.

I have spent most of my life in institutions, from boys’ homes to jails. I have only got a very low level of education ‒ I think I may have finished Grade 6 (am not sure). I need a lot of help with my reading and writing as well as my spelling. Yet recently I read your book and was able to understand most of it. Now I am hoping you could help me.

I have come into some money (just over six figures) which I want to invest while I am doing time, but I am having problems with my bank, NAB. They will not allow me to do electronic transfers from one bank to another while I am in jail. Yet I am afraid to close the account because if they send me a bank cheque it could go missing (that is not unusual for prisoner property).

I do not have any family or friends outside prison who can help me, either. I would love to invest at least $90,000 for the next four years before I get out of jail. My goal is to have enough money to buy my own home before I die, with no debt and maybe some savings. After all, isn’t that every man’s dream? Please help me and write back.

Peter

Hi Peter,

Good on you for learning about how to manage your money.

Having financial security is one factor that will help you stay on the straight and narrow when you get out (and I’ve donated many copies of my book to prisons across the country for this very reason).

Now, I spoke to NAB on your behalf, and they’ve suggested that you write a letter to NAB’s special service:

NAB Resolve
Reply Paid 2870
Melbourne, Victoria 8060

I’d suggest you transfer your money into a term deposit and time it to mature when you get out, and in the meantime spend the next four years mastering an employable skill.

Good luck!

Scott