It’s time for home truth on debt from partner’s credit-card spending

A CANCER battler needs to tackle her partner and his credit-card spending before sorting out her finances, writes Scott Pape.

A CANCER battler needs to tackle her partner and his credit-card spending before sorting out her finances.

TINA ASKS: I’m in my 50s, and have just battled cancer. I foolishly helped out my partner with $112,000 on credit cards that he put in my name over a 10-year period. Now I’ve beat cancer, I want to fix this up. I have consolidated against my home to lower the massive credit card repayments. My partner isn’t repaying the loan but instead wants me to buy a bigger home for us both. With 80 per cent debt now against my place, I can’t see this happening. Should I sell up and buy cheaper?

BAREFOOT REPLIES: I’ll just come right out and say it (since you, dear reader, are no doubt thinking this as well). What the hell is going on with your partner? You’re battling cancer, and he’s racking up six-figure credit card debts in your name? Then, you get him off the hook, and instead of paying his way, he wants you to buy a bigger home? Why am I ending each line with a question mark?! Because if you were my sister, I’d be telling you that before we sort out your finances, there’s one more cancer you need to beat: your partner.

Postscript: This question annoyed me so much I called Tina and offered to help her personally — on one condition: that she throws this scumbag out on his ear. She’s thinking about it.

 

DON’T FOLLOW HERD

PETER ASKS: We’ve been looking for a small Australian-based investment to have a dabble and came across the sale of S. Kidman & Co Ltd.

 

BAREFOOT REPLIES: I love the idea of owning a part of one of Australia’s most iconic cattle companies. As a kid from the country, the Kidman empire — which spans 100,000sq km — is the equivalent of the Playboy Mansion for me (OK, just with different heifers). Would I invest my own money in it? No. History shows that investing in agriculture businesses are essentially commodity plays with very little pricing power. And the commodity in question, beef, is at record highs right now. A very good time to be selling Australia’s biggest capital empire. My view is there are better investment opportunities to be had owning businesses that are operating higher up the economic food chain.

LIKE IT OR LUMP SUM IT

BRENDAN ASKS: Can you help me negotiate for a better deal with my superannuation provider? I’ve already asked them to reduce my fees twice, but they seem reluctant. Surely the whole industry cannot be sewn up like this? It seems incredible that they won’t work a little harder to keep my business.

 

BAREFOOT REPLIES: I like the way you think. A US study by Morningstar found that the best predictor of success didn’t come from a funds past returns, or their investment style, or even Morningstar’s own “star ratings”; it all came down to fees. Over the long term, the funds with the lowest fees earned the best returns. However, there’s a better chance of the Reserve Bank Governor rapping his next interest rate announcement “Yo, we’re keep’n the cash rate at 2 point ohhh!”, than you do getting your super fund to change its asset-based fee. That’s just not how their systems are set up. You have two choices: if you have $500,000, you can open an SMSF, and invest directly in shares, Listed Investment Companies and Exchange Traded Funds (ETF). Or, you can hunt around and find an ultra low-cost industry fund.

 

BE WARY OF POLICIES

KATH ASKS: I’m a single self-employed professional. I took out income protection insurance (and the full suite including trauma, total and permanent disability and life insurance) when I bought my first house, with CommInsure. With all the recent media coverage I’m feeling unsure that my premiums are good value for money and I will get a payout if I ever need to claim.

 

BAREFOOT REPLIES: The 4 Corners story on CommInsure (the insurance business of the CBA), uncovered serious cultural flaws in Australia’s biggest bank. The bank’s chief executive, Ian Narev, came across as a complete and utter banker. The truth is that a lot of CommInsure policies are sold in much the same way that Maccas sells fries: as a juicy upsell on another transaction. In your case, you got a side serve of insurance your mortgage. I’d talk to a financial adviser to ensure that you have adequate cover, and have them review your policies to ensure that in the event of a claim, you’ll be covered. What the 4 Corners investigation showed was you can’t trust the CBA to do the right thing.

 

TRUST AN EXPERT

ANDREW ASKS: Do I need to pay my accountant to set up a family trust and a bucket company (fees circa $500), or is it relatively easy to do myself? If you suggest doing it myself, what are the pitfalls?

 

BAREFOOT REPLIES: You could do surgery on your dog by watching a few YouTube videos, but I wouldn’t recommend it. I’m joking, of course (but not about the dog). I’d want good asset structuring advice from an experienced accountant. As part of the conversation, tell them you can set up a simple bucket company and family trust via a website. Quote the fees, and ask them how much they charge to do the same thing.

 

A SUCCESS STORY

MATT SAYS: This isn’t a question, it’s a thank you. I just turned 30 and after spending my 20s in debt with no financial clue, I am now in the green after Mum got me your book two years ago. I made a spreadsheet, put $2k in a high-interest account, paid off my credit card and threw it in the blender, paid off my car loan, and smoked cigars with friends to celebrate. Future is bright.

 

BAREFOOT REPLIES: Thanks for your kind words, you made my grandmother’s day.

 

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 It’s time for home truth on debt from partner’s credit-card spending