Earn $50,000 a year in your sleep

THE Barefoot Investor answers readers questions about finance, investment, mortgages, retirement, property and more.

Invest in quality shares.

G'day Scott,

I am 22 and bought my own house when I was 21. I put in $260,000 and have a loan for $100,000. I also have $160,000 in the bank. Should I be paying off my home loan, or put some of my $160,000 into an investment property?

Jack

A G'day Jack,

You, my friend, are a financial rock star. You could buy another house - you're young, and so long as you can cover your repayments, and you buy the right joint, it's a decent long-term strategy.

Yet here's what I'd do if I were in your situation. I'd pay off your home so you own it debt free, and I'd mark the event with a mortgage-burning ceremony the day you finally get the banker off your back. Then I'd take the $2000 other people spend on mortgage repayments and invest it in quality shares. Start with the likes of Australian Foundation Investment Company, and build up to a full portfolio.

By the time you're 30, it'll be worth close to $280,000, do it until you're 40 and you'll have more than a million dollars - and be earning $50,000 a year in your sleep.

Fail three-strikes rule

Q G'day Scott,

Is The Trader in Pyjamas trading method just another well-made website to get you into trading without much know-how, or actually not that bad a way to go?

Andrew

A Hi Andrew,

I have a three strikes policy with these sorts of things. Strike one: anyone who promises riches can be made in undergarments. Strike two: anyone who promises riches can be made without much know-how. Strike three: the first entry on a Google search is "Trader in Pyjamas scam".

Relationship costs

Q Hi Barefoot,

I'm 31 years young, and have just come out of a six-year relationship with a man who turned out to be a complete loser: emotionally and financially. As the relationship broke down, neither of us focused on our finances, so we had lots of unpaid bills and debts that were sent to collection agencies, etc.

I've heard you talk about the danger of STDs (Sexually Transmitted Debt) - well I'm pretty sure I've got a couple!

What can I do now I've finally woken up to myself?

Terri

A Hey Terri,

Unlike a real-life STD, there's not many ointments to treat your spots: when you

co-sign for a loan, you don't just have to pay your share - you're on the line for the lot.

If he doesn't pay, you do.

The first thing to do is to grab a copy of your credit history, and see what's on there. Then get independent legal advice on what you can do to push for a financial settlement - do whatever it takes to get your name off any of the debts.

Entitled to asset share

Q Hi Scott,

I'm 46, and for 29 years my husband emotionally and financially abused me.

I finally left him in April with just $500 in my pocket.

I began working to support my 21-year-old daughter. We live from fortnight to fortnight and I am unable to save.

When my divorce becomes final I will not have access to any assets or money from my marriage due to my former husband locking these into a watertight trust.

However, I did manage to save around $2000 before I started supporting my daughter and I would like to invest this. Can you please give me some advice?

Kaye

A Hi Kaye,

The first step in the Barefoot plan is to save $2000 in a savings account for emergencies. So I want you to save it all. But get yourself off to see a free community-based solicitor pronto.

There's no such thing as a "watertight trust", especially given you've been married for three decades. You will be entitled to a share of the assets. And you sound like you've well and truly earned it.