Scott Pape: Sort out your any debts and savings before considering the housing market

THERE’S no point thinking about getting into the housing market if you are saddled with debt. Fix that first and build your savings, writes Barefoot Investor.

Take charge of your finances before thinking about trying to buy a house.

THERE’S no point thinking about getting into the housing market if you are saddled with debt. Fix that first and build your savings.

CHRIS ASKS: I have a terrible credit rating. I’m 45 and only have a couple of thousand dollars in savings, and $6k in super. I also have $15k in credit card debt. I earn $800 a week. My question is, when is the right time to enter the housing market?

BAREFOOT REPLIES: You’re like a middle-aged tubby little fella limbering up to have a crack at the NBA! Dude, you’ve got no savings, 15 grand in plastic, and you’re earning below the average wage. Right now you’ve got as much chance of buying a house as being drafted to the Chicago Bulls. So let’s keep it real. You first need to increase your income, then knock out your debts, build up your savings, and only then will you be ready to shoot for the stars.

 

FAMILY MATTERS

MEGAN ASKS: My dad has gone guarantor on a loan for my sister and her partner, so she could buy a property worth over $1 million. I know she has at least two other properties that dad probably does not know about, all of which she could have sold to overcome her “financial woes”. She has been conning the family out of money for years. It is highly likely Dad will not outlast the life of the loan. My question is: can the bank hold up the process of settling the estate because of the guarantor thing? Dad’s plan was to evenly split his estate between all his children and give some to charity but there won’t be anything left if my sister has her way!

BAREFOOT REPLIES: To answer your question correctly, I’d need to read both the bank guarantee that your father signed, and his will. Yet that’s a job for a specialist estate planning lawyer, who can take into account all of these issues and plan your father’s wishes accordingly. The only problem is, a lot of men don’t like thinking about their wills (some believe it’s tempting fate). So you need to give your old man a bit of motivation. If I were in your shoes, I’d give him the heads up — as it currently stands the reading of his will may resemble a scene from Game of Thrones. Gently explain to him that it will be much better if he sets everyone straight now once and for all … no matter what he decides to do with his money.

 

TEAM EFFORT

JESSICA ASKS: I am 25 years old, newly married. I am the worst spender I know. I have about $8k debt that my husband doesn’t know about. We want to start a family but I’m worried I’ll get stuck as a stay-at-home mum and be in debt forever. I can’t control my money. I want to pay off my debt and get my finances into order but I don’t know where to start. I really need your help.

BAREFOOT REPLIES: Where do you start? You’ve already started, by admitting what’s going on in your head. Now you need to share it with someone who can help you — your husband. The way you’ll get out of this mess is to ’fess up to the man you married, and tell him what you wrote to me: that you’re worried about being stuck as a stay-at-home mum, that you’re depressed, and that you self-medicate by spending (okay, you didn’t say that — I did). The good thing is that you’re fronting up to him with an $8000 debt. That’s not a lot of dough in the scheme of things. If you work together as a team, you can pay it off by the end of the year. However, let me give you this warning: if you continue to keep this a secret from your husband, things are going to get a lot worse. Your debts will grow in line with your depression. The truth is that your current financial situation is a symptom of what’s going on in your head. Luckily for you, you have a bloke that loves you, and wants to help you. Let him.

DATE NIGHT SUCCESS

DANIEL WRITES: I just wanted to tell you about my latest Barefoot Date Night. Like you advised, I rang the bank, followed your script, and they reduced my rate from 5.35 per cent to 4.54 per cent, all in a six-minute phone call! I was sceptical at first, but now I’m over the moon on the outcome of the phone call. Thanks again, mate!

BAREFOOT REPLIES: Well done, man! And to encourage everyone else to follow your lead, here’s my “$22,064 Phone Call Script” from my book:

You: Hello, my account number is ______. I’ve been with you for ___ years, but I’ve applied to refinance with UBank. Their rate is ____ per cent, which is a full ___ per cent cheaper than you’re charging me. Given our longstanding relationship, I’d like you to match the offer — or send me the forms I need to switch to UBank.

Bank rep: One moment, please.

(You’re bluffing, of course. However, the bank’s sales team have strict targets, backed by incentives, that they have to meet — one of which is giving profitable customers discounts to stop them leaving.)

Bank rep: We can’t match the rate you have quoted. However, we understand you are a valuable customer, so we would like to offer you a 0.15 per cent discount.

You: That’s not good enough. I’ve already got conditional approval … so in order to stay I need at least a 0.5 per cent discount. Could you please speak to your supervisor? I’m happy to wait.

Bank rep (a full six minutes later): On reviewing your case, we can offer you that 0.5 per cent discount on your current rate.

You: Brilliant! Please send me an email confirming the new rate and confirming that it will be applied as of start of business tomorrow.

Read more:

Owning your home gives you freedom to invest in finance — and family

Why paid social media posts aren’t for me

Don’t take on long term debt by marrying into a family in denial

Love can lead to a dumb call on shared finances

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