Barefoot Investor: Showbiz in a sensible world of investing
AFTER bursting out of the shadows in 2017 and seducing Wall Street and individual investors alike, can Bitcoin back it up in 2018? Barefoot Investor Scott Pape reveals the winners of his annual end-of-year Fogeys awards here.
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FOR the past 13 years of writing this column, I’ve held my very own end-of-year awards ceremony, which I call the Fogeys.
The Fogeys were born partly out of television’s night of nights, the Logies, and partly out of superannuation, which looks after old fogeys (and us financial types) to the tune of $80 million a day.
I see it as a celebration of the characters who’ve managed to put a bit of showbiz into the all-too-sensible world of investing. So let’s get into the winners for 2017.
Barefoot Investor: The devil with protected equity loans
The verdict on the First Home Super Saver Scheme
BRONZE FOGEY: THE ROYAL COMMISSION INTO BANKING
This one goes out to the hardworking bank lobbyists. They’ve spent years fighting against a banking royal commission … even going so far as to ditch their $2 ATM fees as a token gesture. But a few weeks ago they realised their goose was cooked.
So they switched overnight and demanded a royal commission … and then proceeded to start lobbying the government on the commission’s terms of reference.
Banking Rule #232: Don’t call for a royal commission unless you already know the outcome.
THE SILVER FOGEY: AMAZON.COM.AU
Gerry Harvey described Amazon’s much-anticipated first day as “a lame duck”. Amazon described it as the biggest and most successful launch day in the company’s history. Someone is in the wrong aisle.
My take? Amazon is a bit like Dennis Lillee coming in from a long run-up — they’re only getting started. Just wait till they deliver their mega-successful Amazon Prime membership (two-day shipping of anything, plus all the original online Amazon content you can binge on).
Remember to duck, Gerry!
What you need to know about the Uber hack
Why investing in Bitcoin is like taking a gamble
THE GOLD FOGEY: THE BITCOIN BUBBLE
If you’d bought $1000 worth of Bitcoin in 2010 when it was trading at 5 cents, you would now be worth …. oh shut the hell up! You didn’t buy any (and neither did I). Still, that hasn’t deterred the housewives in my wife’s mothers’ group, who are “seriously considering” buying Bitcoin — now that it is sitting at $US16,634 a pop (well, that’s the price as I write this). And with good reason: if it keeps going up at the rate it has been, in 10 years’ time the price of one Bitcoin will be worth … $50,000,000,000,000,000, 000. That’s 50 million quintillion dollars (for those counting on your fingers and toes).
Pretty hard to wrap your noggin around it, isn’t it?
Well let me try: $50 million quintillion is 55 billion times what Bill Gates, the world’s richest man, is currently worth.
And any investment that can turn a Romsey housewife into the richest person on the planet, is a worthy winner of the Gold Fogey for 2017. Can Bitcoin back it up in 2018? Well, that’s the fun of the Fogeys.
Till next year … Tread Your Own Path!
ALONE FOR CHRISTMAS
LOUISE ASKS: Sadly, my husband passed away seven months ago, and my four daughters and I are facing our first Christmas without him.
At the age of 52, I am terrified at the prospect of being alone and poor! I have a reasonably balanced share portfolio which generates about $24,000 per year, I have a job earning $52,000, and I own my own home.
I am not looking for a “quick fix”, but do you think I am too old to start a property portfolio as well? And what about my girls, who each have a small portfolio (started by my father)? Should we all stick with shares, or think of property?
BAREFOOT REPLIES: My heart goes out to you and your girls this Christmas.
After what you’ve been through this year, you want financial safety and security — I get it. You’ve got your short-term security sorted, by owning your home outright.
Now you need to work on your long-term financial security, and the best place for that is super.
(By the way, I don’t think you’re too old to start a property portfolio, but I’d question whether it’s the right investment for a single mum on a relatively low income. For your daughters, I’d suggest they continue holding and compounding their share portfolios until they need to cash them in and put a deposit on a home.)
So if I were you, I’d keep your living costs low and each year salary-sacrifice up to the maximum $25,000 a year (including your employer contributions) into super — ideally an ultra-low-fee fund.
You could also talk to your accountant about the tax implications of selling part of your existing investment portfolio and transferring it into your super fund. You can bring forward three years of after-tax contributions ($100,000 per year, or $300,000 total) and put it into super. Your aim should be to retire at age 67 with well over $1 million in super.
Do this and you’ll be fine. Promise. You got this!
DREADED EXPENSE
KAREN ASKS: I am expecting I will soon need to pay for a parent’s funeral.
Both are still alive, but they have no savings or access to money for when the day does come. I work full-time, earning $65,000, and have recently cleared all my debts, so I do not have a lot of disposable income either. Out of pride (mine and my parents’), I would prefer to avoid borrowing from the extended family. So should I apply for a bank loan or perhaps a credit card?
BAREFOOT REPLIES: According to MoneySmart, “a funeral can cost around $4000 for a basic cremation to around $15,000 for a more elaborate casket, burial and flowers”.
My view? Funerals are a bit like weddings — no one remembers the finger food or the flower arrangements, and you don’t need to book Elton John for the wake.
Now, if your parents really have absolutely no dough, there are state-based agencies that give grants to cover a basic funeral — but let’s bank on it costing $4000.
Where do you get the money?
Not from your credit card.
If I were in your shoes, I’d do three things:
First, start saving right now, even if it’s $50 a week.
Second, while your parents are still with you, investigate their options:
Do they have any insurance or superannuation?
If they do, it might pay to get the money out now to cover the cost of the funeral, rather than waiting for the death benefit, which can take months.
Are they receiving Centrelink payments? If so, the remaining partner may be entitled to a lump sum bereavement payment, equal to the total of a couple’s payment, minus the new single rate, up to 14 weeks after the partner’s death.
Call Human Services on 132 850 and see what they’re entitled to.
Finally, the most important thing you can do to commemorate their life will cost you nothing: interview them on your smartphone while you still can. Ask them about their life, what they’re proud of, what has made them happy, and if they have any parting words for their loved ones. Play it at their funeral.
ON THE CARDS ...
FELICITY ASKS: My wife and I have accrued a shameful debt of $40,000 on credit cards.
I tried to get a debt consolidation loan with CommBank, as we have most of our accounts with them (well, until I read your book), but they declined.
I earn $71,000 p.a. and my wife earns $55,000. We are renting and do not foresee ever getting out of this hole and saving for a house deposit. I feel smothered — please help!
BAREFOOT REPLIES: CommBank is betting you’re losers.
They’re betting you’ll keep paying their compounding credit card interest.
They’re betting you’ll continue working your guts out for the next 20 years and end up with nothing.
They’re betting you’ll continue living in shame.
The question is, are you willing to bet on yourself?
If you are, let me show you what winning looks like.
OFF THE CARDS
KIM WRITES: Today my hubby and I paid out our two last credit cards and closed them! Citibank was not happy.
We had a cup of coffee and a piece of Lions Christmas cake to celebrate, then danced around the kitchen in front of our children.
Last year I’d never heard of Scott Pape, but each year I buy myself a book for Christmas. The only reason I bought yours was that you are Australian. I went home, started reading, and did not stop until the final page.
The next day I began implementing the Barefoot Steps, with a focus on paying off the blasted credit cards. And today — one year later — they are GONE!
We still have plenty left to achieve, but being done with credit cards makes me plenty happy. Best Christmas present we can give ourselves.
Buying the book is the best money I have ever spent — my kids can expect their own copies for Christmas!
BAREFOOT REPLIES: Well done, Kim!
Now back to you, Felicity.
You and your wife are bringing home $8300 a month after tax … and that’s before you get second jobs.
On these figures you can domino your debts inside two years ... as long as you get some “Alpaca attitude” about you.
Merry Christmas, Felicity, and I look forward to hearing your own success story in two years’ time
The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice
If you have a burning money question, or you want to win a fight with your spouse, go to barefootinvestor.com and ask a question
Originally published as Barefoot Investor: Showbiz in a sensible world of investing