Don’t let your emotions get exploited on financial decisions

GET yourself into a good financial state instead of letting institutions exploit your emotions for their own gain, writes the Barefoot Investor.

Keep a clear head before making financial decisions.

GET yourself into a good financial state instead of letting institutions exploit your emotions for their own gain.

 

BELINDA ASKS: I am a 41-year-old woman, recently separated. I have a good income in a stable job, with $86,000 in super. I have a mortgage of $350,000 (house worth $420,000) and I have $10,000 in credit card debt that I am steadily extinguishing. The thing is, despite the separation, I am very keen to have a child, probably through IVF. But IVF costs $8000 a try and I am not sure how I am going to afford it. Have you heard of SuperCare, who use super for IVF funding? Time is not on my side.

BAREFOOT REPLIES: CareSuper is a legitimate industry super fund with 250,000 members and $11 billion in funds. That’s CareSuper, but, to be clear, you’re talking about SuperCare. Which is like Sydney and South Africa … they sound kind of the same, but they’re very, very different. A bit of background: superannuation is designed to provide for you in retirement. That’s why there are stringent rules against accessing it early. Enter SuperCare — these guys are experts at helping you access (and drain) your super early for “medical needs”. Like what? Well, like droopy boobs (breast augmentation), or a big schnozz (rhinoplasty), or tubby guts (abdominoplasty). Lately they’ve been focusing their marketing efforts on women wanting IVF, which is presumably how you got on to them. Let me be very clear: SuperCare, like all companies, is trying to make a buck. One thing I have learned is all financial institutions will ruthlessly exploit your emotions for their own gain. Don’t do it. Instead, get yourself into a good financial state so you can make confident, clear-headed decisions.

SKY-HIGH TAX SHOCK

CORINNE ASKS: In the past financial year, my husband, who is a pilot, earned more than $300,000 from overtime, night shifts and lots of hard work. I also have a part-time — my earnings are usually no more than $40,000. We have a $400,000 mortgage and $80,000 in the bank. We thought our tax was done for the year, but my husband recently received a bill for $4500 from the ATO. They say that, due to division 293, he needs to pay up. Our accountant says he should reduce his income by buying an investment property or shares ASAP. What to do?

BAREFOOT REPLIES: The Labor Government introduced division 293 under the guise of making super “fairer” — read: slug people earning over $300k a year. with an additional 15 per cent on their super contributions (making 30 per cent all up). Look on the bright side: it’s still a better deal for you than taking the money in your hand and paying 45 per cent. It’s a better deal than losing money just so you can save on tax, which is what your accountant is suggesting. My view? Earn the money. Pay the tax. Roger that.

ONE THING, WITH RING

BEN ASKS: Recently I asked my girlfriend to marry me. She said “yes” ... and I cried I was so happy. Being a keen reader, I saved up the full amount of the ring, just over $12,000. I have now had it valued by a jeweller, who said it is worth over $20,000. The jeweller suggested a company called Q Report to get the ring insured. What do you think? Please help!

BAREFOOT REPLIES: Congratulations on your engagement. Now, you may have paid $12,000, but to the meth head who knocks it off — or to the Cash Converters valuer, later in the day — you’re not getting anything close to five figures. I’ve written about this extensively — the market for a slightly used diamond makes the depreciation on a brand-new Merc look mild. Bottom line: I wouldn’t be surprised if Q Report was slipping your jeweller a carrot for any business they drum up. There’s nothing wrong with that, but it means you’re unlikely to be getting the best deal. It’s pretty standard practice. Instead, check your home contents policy and see if you can specify valuable items. Even if they charge a little extra, it could work out a lot cheaper.

 

DICING WITH RISK

EMILY ASKS: My husband and I are wondering about investing with a property investment group. My husband likes the idea, but I have some concerns after reading around on the internet. There seem to be reports about overvaluations and inflated purchase prices. It is hard to get objective advice, so I was wondering what you think?

BAREFOOT REPLIES: Here’s what I want you to do for me. Sit down with your husband and tell him you’ve decided that the next holiday you two take should be to the war-torn country of Sierra Leone. He will freak out (good, keep going). Yes, there are some reports on the internet of tourists being carjacked and killed — but explain that you have a good hunch about it and, besides, the guy at African Airlines says it’s a bonza spot. Finally, ask him what he thinks and whether you should risk travelling there. When he says that he thinks you’ve gone completely loopy, turn it back on him and say: “No, you’re the loopy one who is entertaining the idea of putting our life savings with a crowd who have a stronger stench about them than a bucket of prawns sitting in the Sierra Leonean sun ... darling.”

 

MONEY TALKS BEGIN

MELISSA WRITES: I cannot thank you enough. Having followed you for years, I have my own finances sorted. But my daughters are another matter. So I gave each of them a copy of your new book, and they have just had their first Barefoot date night with me. Yes, they opened the bank accounts and have located their numerous super funds. It is all happening. I have always told them to put money away — water off a duck’s back — but not anymore! I would like to wish you a huge thank you.

BAREFOOT REPLIES: Any time I can get parents and their kids together to learn about money is a good day. I structured the book around the concept of Barefoot date nights, because I have found that money talk goes better with garlic bread and wine. Well done.

 

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

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