Don’t give up your freedom by trying to match your partner on spending and lifestyle

MAKE sure that you don’t try to keep up with your partner by living a $100,000 lifestyle on a $40,000 income, writes the Barefoot Investor.

A strong woman understands that a man isn’t her financial plan.

MAKE sure that you don’t try to keep up with your partner by living a $100,000 lifestyle on a $40,000 income.

ELLA ASKS: I’m 24, and have been living with my boyfriend for the past couple of years. We have separate incomes and bank accounts but have joint accounts for rent, groceries and bills. I earn $40,000 a year (working fulltime in child care) and he earns around $100,000. Even though I am a Barefooter, I am struggling to keep up, because a dinner out or a grocery shop is a huge chunk of my pay, whereas it does not impact him as much. However, he does have an investment property and a car loan, which I don’t. Is it fair for me to ask him to contribute more than I do because he gets paid more?

BAREFOOT REPLIES: No, I don’t think it’s fair to ask him to contribute more. If he chooses to buy you something, or maybe shout you the occasional dinner, that’s just him being a chivalrous dude. There’s no ring on your finger, and you don’t have kids, so you’re essentially friends with benefits. The bottom line here is this isn’t about him, it’s about you. You need to make bloody sure that you don’t try to live a $100,000 lifestyle on a $40,000 income. Trust me, it won’t work — and it will only lead to you eventually giving up your freedom — either by getting into debt with a bank, or incurring an emotional debt with a bloke. So the answer is to say it loud, and to say it proud: “I can’t afford it.” There’s power in saying those words. Not in a whiny, teenager life-is-sooo-unfair tone — but in a strong, confident, I’ve-got-my-stuff-together tone. Ella, there’s nothing sexier than a strong woman who understands that a man isn’t her financial plan. That’s the sort of woman guys want to marry. In fact, that’s the woman I married.

HIGH EARNER

ANDREW WRITES: I am 32 years old and earn a good wage ($225,000 p.a.). I have decided it is time to start contributing more to super, and my plan was to increase my contributions to 15 per cent as you recommend. However, in doing so I go over the concessional cap of $30,000 and will have to pay my full income tax rate for the extra contributions over that amount. My question is, does your advice change under these circumstances? I feel at my age the money is better invested outside of super if I am paying the same tax. Would appreciate your thoughts. Thanks, Andrew

BAREFOOT REPLIES: You’re spot on, cobber. You should reduce your salary sacrifice contributions so that the total of your employer guarantee including your salary sacrifice contributions does not exceed the pre-tax limit of $30,000 per year (note this will reduce to $25,000 p.a. from 1 July 2017. D’oh!). The balance should be invested outside of super, preferably through a family trust into good quality shares.

 

17-YEAR-OLD

MILLIONAIRE

DARRELL WRITES: I have a 17-year-old son who has a part-time job. He has saved over $1000 and would like to start investing, but CommSec says he has to be 18 to buy shares. So how can he enter the share market with as little help from me as possible, as it is his money and he has worked for it? He is looking at buying Coca-Cola Amatil — I said that, as he drinks enough of it, he might as well own part of it. Or is he just too young to get started? It’s funny — my wife and I have accumulated more than $2 million in shares and we are still not sure how to get him started!

BAREFOOT REPLIES: Take a bow, mate, it sounds like you’ve raised a financially fit kid! Most 17-year-olds are more interested in buying Jim Beam and Coke, than shares in Coca-Cola Amatil. Now while you can buy shares in your name, in trust for your son, I don’t think it’s a good idea. What happens if he buys Coke and it loses its fix? It would be the ultimate aversion therapy! If he loses money it could scare him off shares for life. So, my advice would be for you to encourage him to keep saving, and to experiment on your portfolio. Why not challenge him to select a couple of shares that you invest in? Then the two of you can follow them, and even do some field trips to check out the company’s products and services. This is a bond that you can share with your son. When you talk to your kids about money and investing it lasts a lifetime — trust me.

SELF-HELP BOOKS

BEN WRITES: I do not have a question ... more of a suggestion. I am a 29-year-old, self-employed electrician and I just finished reading The Barefoot Investor. Great book! Down to earth and no “BS” like you get in most money books. I would love you to write another book aimed at people who are self-employed, showing them how to manage their money. Nearly all the books I can find on this subject are 1) hard to read, 2) full of big words, and 3) wanky. Any chance? Peace, Ben

BAREFOOT REPLIES: Truth be told, I only chose your question so I could humblebrag. To the amazement of my publisher (and the entire publishing industry, I’m told), my little finance book has been the No. 1 best-selling book for the seventh week in a row. Finance books are supposed to be seen and not heard (or read). What the industry doesn’t know is that it’s people that read this column who are buying it by the bucketload for their family and friends. So to all of you who have supported me, humbly, thank you. And to answer your question Ben, the Barefoot Steps that my book is built around work just as well for a self-employed or small business person as an employee. Common sense never goes out of fashion!

The Barefoot Investor: the only money guide you’ll ever need (Wiley $29.95). heraldsun.com.au/shop

barefootinvestor.com

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 Don’t give up your freedom by trying to match your partner on spending and lifestyle