Stay sharp after getting axed
IF you have a burning money issue, or you want to win a fight with your spouse, put your questions to Barefoot Investor.
Barefoot Investor
Don't miss out on the headlines from Barefoot Investor. Followed categories will be added to My News.
QUESTION My husband was unexpectedly laid off and will receive six weeks’ redundancy pay.
It may take a few months to find another job considering the job market and Christmas — great timing. We currently live off his wage and invest 100 per cent of my part-time salary in shares every month. So should we stop the investing, live off my wage and save the payout? Or invest half and save half? We’re not really sure what to do and would love your advice.
Amy
ANSWER Getting the can this close to Christmas is a shocker! Right now you’re in crisis mode until he finds another full-time job. So yes, you should pause your investing, tighten Santa’s belt, and live off your wage (if you can). When your husband gets another job, keep the frugalness going until you have three months of living expenses up your sleeve in your Mojo (online savings) account. Then make sure you get back to the investing. You’re a superstar!
ALARM BELLS, NOT JINGLE BELLS
Q We have a fairly risky building decision to make — should we use the equity we have in our family home to buy an apartment in the city off the plan? We have a home loan of $220,000 and a car loan worth $20,000. The house is worth about $500,000. We are renovating our house, working two to three days each and have two children. We have been doing some research and met an investment company and they gave us a 10-year property investment goal. I would like to invest in property but am concerned about the mortgage on our family home if we do.
Steve and Tash
A Can you hear that? It’s the alarm bells ringing very loudly at Barefoot HQ. Let me guess: their “10-year investment goal” involves you borrowing as much money as you possibly can, to buy as many apartments that they can flog to you? That’s a stinker of an idea. If you have the skills to renovate, you’d be better off buying homes, renovating them, and selling them free of capital gains tax. That’s sounds like a much better (and safer plan) to me. Why risk your family’s future on an outcome that you can’t control? There may well be honest, independent, property investment companies that sell apartments off the plan, but in a dozen years I’ve never come across a single one.
MOJO FITS THE SHORT-TERM BILL
Q I have my Mojo in an ING term deposit that matures in the near future. The only problem — ING has changed its rules and if I want to access my funds I need to give 31 days’ notice. Would I be better keeping a week’s worth of Mojo in a high-interest account and placing the rest in shares?
Drew
A Right now I don’t see any point in locking your money away in term deposits — there’s just not a big enough premium compared with online at-call accounts. And most share market investments are far too risky (in the short-term) to park your savings. Here’s how I manage my Mojo (and I’ve got three months of living expenses, plus an additional three months of business expenses, set aside for emergencies). Some say that’s very conservative — and they’re right.
The bulk of my money sits in a Ubank “Ultra” savings account, which pays 4.02 per cent per annum so long as I deposit $200 a month, which I’ve set up to happen automatically. A few years ago I took a small percentage of my Mojo money and invested it into a listed property play called Bunnings Warehouse Property Trust (BWP), which at the time was yielding about 7 per cent. It’s admittedly much riskier than cash — though safer than shares — and so far the investment is up 50 per cent! Unfortunately, the ship has sailed on BWP, it’s too pricey at the moment, so for the time being cash is king for your Mojo money.
WORK LONGER, EARN MORE
Q My hubby is 67 and he wants to spend less time working. He is thinking of scaling back to a 20-hour shift which would make him about $400 per week. We’re at the end of our working lives and we are really worried we don’t have enough to last us. We owe $23,000 on our home, and he has $110,000 in super (I’m 58, earn $450 per week, and have $87,000 in super). So my question is this: should we downsize our home and put the money into super as a lump sum? And should we continue putting money into super or live off our part-time incomes?
Kath
A Here’s the bottom line — you both should work for as long as you possibly can. Working longer will make you wealthier in the long run. And here’s the good news — because your husband has reached retirement age he can access his super. So he should take out a lump sum and clear your mortgage pronto. After your husband has moved to part-time work he should apply to Centrelink for the age pension. The income test applied to the part pension is pretty generous, so you should be able to get a good benefit. And here’s a present that’s better than anything in Santa’s sack — if you downsize your house after you get a Centrelink concession card, you should be able to save a substantial amount on your stamp duty.
Originally published as Stay sharp after getting axed
Why all that glitters is not gold
The price of gold may be on the rise but it’s not quite as shiny as it seems. When it comes to long-term gain, it pays to follow the golden rule — only invest in things that regularly put money back in your pocket, writes the Barefoot Investor.
Don’t get high on the short-term sugar hit
Despite the COVID crisis, money questions have been flooding in from readers about how to buy and trade stocks, or even gold. Maybe it’s down to raiding super, or the government stimulus, but the key to financial control is first to get out of debt, writes the Barefoot Investor.