Barefoot Investor Scott Pape: Paleo cafe plan should not be on the financial menu
THE Barefoot Investor Scott Pape answers those burning money questions.
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MY SON has been warning me to put all my super into a cash account. He believes we are headed for a catastrophic global economic crash that will cause a great depression like never seen before. Do you think there is any likelihood of this? My daughter and I were hoping to buy into a paleo cafe franchise, but my son is saying we shouldn’t, due to his predictions. - Fiona
BAREFOOT SAYS: You’re a smart (dairy free) cookie. Don’t think I can’t see your angle: when we enter into the “great depression like we’ve never seen before”, the hunter-gatherer paleo diet will move from being just a fad for tubby, white, cashed-up suburbanites to being the only way we can eat (what with the collapse of civilisation and all). That’s when your cafe will make a killing, right? You should tell your son to get off the gluten, Fiona, because he’s talking out of his paleo.
SHOULD WE FOCUS ON OUR SON, OR OURSELVES?
We’re in a dilemma: should we focus on our 10-year-old son, or our retirement? I’m 44 and my hubby is 54. We are now mortgage free (home valued at $950k), with $190k combined in super, $15k in CBA shares and $10k in a Mojo account. We earn $150k per annum combined. We would like to invest in our son’s future and have him go to university, but we’d also like to invest for our retirement. What would you advise? - Claire
BAREFOOT SAYS: Help out your son by letting him live with you. But, personally, I wouldn’t bother making upfront university payments for him. As it stands, you only get a 10 per cent discount, and it’s still an income-contingent loan, indexed to inflation. Instead, I’d focus on making before-tax contributions to your super. Because your husband is over 50, he can contribute $35,000 a year — you can contribute $30,000 a year (both figures include your employers’ contributions). If you continue working into your 60s, your combined super could grow to more than $2 million.
HIDING FROM PARTNERS
I really enjoyed your recent article on domestic violence. I know at least six women who are financially controlled by their husbands. They all want out but don’t know where to start. I’ve suggested putting money into a “getaway fund”, but they’re too scared their husbands will find out. In all cases the husband does the tax return, which means that any interest in their accounts will be flagged by the ATO. Do you have any ideas on what they can do? - Caroline
BAREFOOT SAYS: I don’t believe anyone that’s married should have a “getaway fund”. You should share everything down the middle and have an equal say. That’s what being married is all about. Keeping money on the side “just in case” is tantamount to leaving the backdoor open on your marriage. Go hard or go home, I say. If what you’re saying is true (that all these men are so controlling and crazy that they’d track the interest earned on a tax return), then your friends don’t need a getaway fund, they need to get away — first to their bank to withdraw $10,000, and second to their family solicitor.
BIGGER BETTER FASTER
On your advice, I sold my car, got rid of my loan, and implemented your Serviette Strategy. Thanks to you I now have a reliable car, $5k in Mojo, $12k in savings, and a very small investment portfolio. However, I feel I need to turn the tap! My wealth is growing too slowly for my liking. How do I speed it up? - James
BAREFOOT SAYS: Well done for getting your backside into gear. The only way to speed things up without crashing is to focus on increasing your income, spending less than you earn, and investing the difference in good-quality shares. You’re already treading the right path, now just enjoy the scenery.
NINE-YEAR-OLD ASKS … SHARES OR INTEREST?
I have $2200 in my bank. I am nine years old. Do you think that I should invest in WPL, BHP, LTD, CBA? Do you think these shares will go up or down? Is it better off keeping $2200 in my bank and continuing getting 50 cents every day for interest, or should I invest in the companies? - Jonathan
BAREFOOT SAYS: While I like these companies, you don’t have enough money (yet) to invest in four of them individually. However, there is a way to access all four with just one investment: buy some shares in the Australian Foundation Investment Company (AFIC). Not only does it (currently) pay a 4 per cent dividend, but you can tick a form and have the company automatically reinvest these dividends into buying more shares. Better yet, you’ll buy the shares at a slight discount to the current share price, and you won’t have to pay brokerage fees. It’s known as a dividend reinvestment plan, but a better name is “compound interest”. You rock!
Originally published as Barefoot Investor Scott Pape: Paleo cafe plan should not be on the financial menu
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