Save your cash, buy the book
IF you have a money issue, or want to win a fight, put your questions to Barefoot Investor.
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QUESTION: I’m seriously thinking about getting into forex trading with a company, which offers trader training. What this company teaches really interests me. Is it advisable? It’s not free, but good things never are. I have the time and money to do this. Would love your opinion.
Marcus
ANSWER: Have you Googled this type of company? I just did, and I found pages, and pages, and pages of very upset people who’ve apparently dealt with them. Seriously, Tony Abbott gets better press than these companies. So before you plonk down your $7000 (or whatever they charge for their super-duper trader training), I’d strongly encourage you to do the same. Then I’d recommend you buy a $25 book on how to trade forex (or, better yet, maybe Fifty Shades of Grey — after all, you’re chasing the same feeling), and then buy $6975 worth of Warren Buffett’s Berkshire Hathaway. You should Google him too.
KEEP YOUR CASH IN THE BANK
Q: I have all my money in cash, interest rates are going down, and I don’t know what to do. I’m 79 years old, and all my money ($120,000) is in a term deposit paying 3.5 per cent a year. I want to take out $20,000 and invest in Argo so I have some money in 10 years’ time (I own my own home, worth $800,000). Perhaps it’s not as safe as the bank, but it’s almost there. What do you think?
Jeff
A: I feel for you. Retirees have been right royally rogered by the current interest rate settings, and things only seem to be heading downwards. These low rates are causing a bubble in asset prices; it will eventually burst, causing a crash in share and property prices. The only question for me is when it’ll happen. So I agree with you. Shares are not as safe as cash — not even close. And that’s why I wouldn’t bother putting $20,000 into shares. At best you’ll earn an additional $500 a year in income, but you’re opening yourself up to market risk. If you continue with the age pension, and gradually draw down on your term deposit, then your money should last you until you’re 95!
T’S TIME TO TIGHTEN THE BELT
Q: We’ve made some bad decisions and need help. We’ll be struggling until we sell off an investment property, but we don’t know what will happen if we do. If we sell now, we’ll come out with a loss of somewhere between $15,000 and $40,000. We owe $225,000 on the property altogether. We also have other debts — $30,000 on a car loan, and $18,000 on a personal loan. Together my husband and I earn $98,000 a year, with $220 per month coming in from the investment property as well. Right now we pay $300 a week in rent. We have three small children; I work extra hours when and where I can. We don’t know what to do, and need some help!
Michelle
A: It’s really common sense. Your biggest problem isn’t the investment property, it’s the fact you’re not earning enough, and you’re spending too much money on repayments for things that have no value. I’d like you to focus on getting your personal debts sorted before you sell the investment property. First, save up $2000 in a Mojo account, while paying your minimums. Next, save up the shortfall for the difference between what you sell your car for and the debt you owe on it, and then I want you to buy a decent $8000 Toyota Camry. Get a second job. Use that money to begin aggressively paying down your personal loan. Then sell the investment property, but not before you spend your weekends making cheap but effective cosmetic changes (painting, gardening, cleaning) to boost the sale price.
GOOD NEWS FOR HOME ACCOUNT SAVERS
Q: With the first home saver accounts closing at the end of this financial year, I am wondering what the heck to do with the $25,000 I’ve managed to save over the past four years. Without it, I doubt I would have 25 per cent of that to my name. I have investigated 12-month term deposits at 3.8 per cent, but I wonder whether I can do better. It feels underwhelming coming from 17 per cent in the FHSA. I’m 23 and living at home. In terms of buying a house, I’m at least 12 months away from being ready. What should I do with the money until then?
Garth
A: Yes, it totally sucks that the Government ditched these accounts, but congratulations on making it work for you. Like you, I doubt there will be such a sweet deal again: a 17 per cent annual bonus, plus interest, all taxed at just 15 per cent. But given I’m responsible for encouraging thousands of people into FHSAs, I’ve been doing my part, behind the scenes, with the banks to get a good deal for savers post July 1, when you can take the money and run. As of this week, the only bank that’s come back with more than “it’s actually on the bottom of our agenda, just up from getting sparkly streamers for the office Christmas party” was ME Bank, which is determined to keep as many account holders as possible. It is planning a new version of the first home saver account which, the bank tells me, it is planning on launching later in the year. Interestingly, they’re hoping to make their product tax effective, so they’re in discussions with the Australian Taxation Office. They have assured me that as soon as the product is ready to launch, I’ll get to kick the tyres. And rest assured I’ll kick them pretty hard.
Originally published as Save your cash, buy the book
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