Handouts are no help for men who are still ‘boys’
A LOVING, caring mother needs to be convinced that she is causing her grown-up sons harm by giving them money every time they ask, writes the Barefoot Investor.
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A LOVING, caring mother needs to be convinced that she is causing her grown-up sons harm by giving them money every time they ask.
TINA ASKS: Interesting article you wrote on National Fraud Week. Your article hit home. I have two brothers: one living at home (aged 42) and the other (aged 50) living just around the corner. Being from an Italian background, my mother will not kick out the one who’s living at home. Both are constantly asking for money, which she hands over, feeling sorry for them. Mum is on the age pension and has $70k in a savings account. What do I do?
BAREFOOT REPLIES: It sounds like your mother is a wonderfully kind person. But this situation is totally her fault. She’s the one who’s enabled this behaviour with your brothers. And as a result they’re basically little boys living in grown men’s bodies. It’s all very … sad. I wouldn’t expect the “boys” to have the ability to change — we’re a few decades late for that. The only way anything will change is if you can convince your loving, caring mother that she’s causing her sons harm by enabling this behaviour. She’s not helping them, she’s hurting them (and herself). That’s the truth.
CAST OFF THE DEBT
LUCY ASKS: My husband works full time on his own business and I am a stay-at-home mum to three kids. We recently finished building a unit in our backyard and we have not subdivided yet, so they are on the one title. The back unit we own outright, and we owe $160k on the one we are living in. Hubby wants to rent both out and hope the bank will lend us enough money to buy our dream home. Maybe we would be better selling both properties and living debt free. What do you think?
BAREFOOT REPLIES: First, the statement “the back unit we own outright” is irrelevant, because if they are on the same title the bank will hold both as security. Second (even though I don’t know the value of the units), your hubby’s plan sounds terrible. You’d be living in a home with a big mortgage while renting out two units with only $160k owed. I agree with you. Sell, use the proceeds to buy your dream home, and live debt free.
EDUCATION PLAN
KAREN ASKS: I have just read your opinion on the Australian Scholarships Group and we have two kids in it (aged 7 and 9). Should we get out ASAP and do our own education investment, or would we lose by bailing early?
BAREFOOT REPLIES: Australian Scholarships Group, or ASG, is the largest provider of educational scholarship plans in Australia. I like to think of ASG as the Indian-made Tata Xenon ute of the finance world. As one motoring enthusiast said: “The Tata jitters like a caffeine addict even on seemingly smooth roads, and reacts to craggy rural tarmac with the restraint of a red-cordial-infused child on a pogo stick.” ASG’s scholarships are just as bloody awful: their fees and charges are incredibly high. I know this because I read through their Product Disclosure Statement (PDS). The cover has a picture of a boy and a girl holding hands on their first day of school. Cute! And the next 25 pages are full of complex, incomprehensible legal mumbo-jumbo, the likes of which I haven’t since Eddie Grove’s ABC Learning 2007 annual report (which was their last report). Now to your question. ASG has two main scholarships they spruik. If you’re in the Pathway Fund, you can bail now and get your money back, plus maybe some of the investment growth (though their fees will take a fair chunk of it). If you’re in the Education Fund, you get back only what you put in, less their whopping fees. (They keep any upside, thank you very much.) So ditch them, and do something smart. Invest your money in the Australian Foundation Investment Company, in the lower earning spouse’s name. A few weeks later they’ll send you out a “dividend reinvestment plan” form (meaning that instead of getting dividends, your money will automatically be ploughed back into more shares). Tick the box, then let compounding work its magic.
ADVICE AVAILABLE
JANET ASKS: My husband, Trevor, has recently been diagnosed with a terminal condition. He will get a super payout of less than $100k. I work full time but am currently on leave caring for him. I have about six months of leave left. We have no debts, rent our home, and have recently used our savings on a final overseas holiday while Trevor is still well enough to travel. My question is, what is the best way to invest his modest super payout while still ensuring we can access it if needed?
BAREFOOT REPLIES: I’m so sorry for your situation. You’ve got a chance to sort out your financial affairs together, which will give your husband the peace of mind that you don’t have to do it on your own. So I’d like you to review his will and any accounts that are in his name. Then I’d like you to call a FISO (Financial Information Service officer) on 132 300, who’ll be able to advise whether you’re eligible for a carer’s allowance. The FIS is a free government service. Finally, in answer to your actual question, if you have any debts you should pay them down as a priority, then keep three months of living expenses in an online savings account (I call it “Mojo”). Any left over should be invested in shares, preferably through your super fund. This is something you can ask the FISO about as well.
DOUBLE TROUBLE
CHRISTINE ASKS: I bought two apartments off the plan in the Pilbara. We paid $1 million, and they are now worth maybe $500k. Even worse, one is in a trust/company structure. Our cashflow can handle the costs, but we are left with no ability to invest. Who do I go to for advice? Accountants do not “advise” and there is no money in it for financial planners. I want to get my family out of the mess I put them in!
BAREFOOT REPLIES: There are two questions here. First, you want to know whether you should sell the properties. The only advice I can give you is common sense: time never turns a dud property investment into a good one … just an older one. So I’d suggest you offload them. But only you can pull the trigger — it’s your money, after all. Second, if you do sell them you’ll incur a capital loss (in both your personal name and the trust/company name), which you’ll be able to bring forward and offset against the capital gains you get when you do make some better investments in the future!
QUESTIONS FOR BAREFOOT?
HAVE you just got your first job? Are you looking to make your first investment? I’m looking for money questions from school-aged children. Head to barefootinvestor.com, shoot me a question, and I’ll do my best to answer it in next week’s newspaper column.
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 Handouts are no help for men who are still ‘boys’
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