Barefoot Investor says: Just like the adage, if it sounds too good to be true it probably is

TURN $1000 into $4500 overnight! Just sign up two friends! Is it too good to be true?

AFRIEND of mine has offered me the opportunity to turn $1000 into $4500. She says all I have to do is sign up two friends and I’m set. I thought it sounded like a pyramid scheme but apparently she invested in May and has now received $4500. The company, Intergold, sounds legit — they have a website and a Facebook page. What do you think?– TERRY

 BAREFOOT SAYS: Donald Trump has a website and a Facebook page, but that doesn’t mean he’s legit, does it? This is a pyramid scam. How do I know this? Let me count the ways: One, because I typed “Intergold” into Google and the suggested keyword was “scam”. Two, because I bothered to press “enter”, and Google returned 41,900 results on an outfit called Global Intergold, which changed its name from Emgolddex to avoid its previous bad publicity as a scammer. Three, because I read about the money people have lost, and the government warnings against the scam. And four, because your buddy is offering to turn $1000 into $4500 for nothing more than roping in two more dopes. Anyone reading this would think you’re as deluded as Donald Trump. The truth is that Scamwatch.gov.au says that last year 45,000 Aussies lost $45 million in scams. And that’s just the people who reported it. The real number would be much, much higher. Don’t add to it.

 WHERE THERE’S A WILL, THERE’S A WAY

I AM 52 years old and happily single, after two failed marriages. I have two kids from my first (aged 16 and 14) and one from my second (aged 8). Most of my income goes to them, as they’re all at private schools. I have been absolutely bled dry by lawyers, so I am utterly opposed to paying one to draw up a will for me. Are the wills that can be downloaded, or purchased in newsagents, legal? – HARRY

BAREFOOT SAYS: Yes, they’re legal. However, I don’t recommend leaving your (complicated) financial legacy to a fill-in-the-blanks document. The reality is that you could, and probably will have to, work for another 20 years. That’s more than enough time to accumulate a significant estate. So I’d sit down with a solicitor and craft a will that takes into account your wishes. It should cost you less than $1000. If you need any motivation, picture both your ex-wives contesting your will (which is likely to happen). Next, picture their lawyers drawing out the process so they can line their own pockets.

PREPARE FOR UNIT BOOM TO COME

HELP! I’m 27, I’m still living with my parents, and I have to get out. I’m desperate! I have $50,000 in savings, another $5000 in AFIC shares, and no debt. I’d love to move into a one-bedroom apartment in Melbourne but I’m scared of making the wrong decision when it comes to renting or buying. What’s the smartest choice financially? – KAREN

BAREFOOT SAYS: Living with your parents past 25 is just weird. But, you don’t have enough money to buy a place right now. If you continue saving hard, in three years you’ll have enough to put down a 20 per cent deposit on a two-bedroom unit. And that’s perfect timing, because 2018 is the year I’m predicting the Melbourne CBD apartment boom will collapse, and you should be able to buy a place at a steep discount. (The real estate industry doesn’t like admitting it, but right now the official figures show that around 18,000 apartments in the CBD are selling at a loss … and things are only getting started). See, across Australia, roughly one in five CBD apartments currently under construction has been financed by a 10 per cent deposit. Many buyers will find it difficult to settle on their apartments (which they’re contractually bound to do) as banks increase the deposit required and revalue the property downwards. This is what leads to sharp falls in values — as one panicked seller drops their price, the value of all the other apartments in the block are affected. Good luck.

SHOULD WE HELP OUT OUR KIDS?

IS it ever wise to go guarantor for your children? – GRAHAM

BAREFOOT SAYS: No.

THE $166,000 QUESTION

I’M not happy with the charges and performance of my current super fund. I am 29 and have a balance of $41,000, with $1000 taken out this year in fees. I’m worried the fees will add up to a lot over the next 40 years of my working life. I was just wondering if there is a particular super fund Barefoot recommends. – NIGEL

BAREFOOT SAYS: You’re certainly getting the rough end of the pineapple from your super fund. On those numbers, you’re paying roughly 2.5 per cent of your assets away each year, which is totally insane. (The reason the finance industry likes charging in percentages is that they look and sound small — and few people can convert percentages into real dollars). This is how the finance industry takes working people like you, and turns your money into theirs. Over the next 40 years of your working life, sticking with this fund will cost you $166,000 in fees. I’d suggest you transfer to a low-cost super fund charging you under 0.75 per cent per year — about $300 on your current balance. Bonzer.

 

The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice.

Originally published as Barefoot Investor says: Just like the adage, if it sounds too good to be true it probably is