Student in debt cycle should cut his losses

IF you have a burning money issue, or you want to win a fight with your spouse, put your questions to Barefoot Investor.

empty wallet

IF you have a burning money issue, or you want to win a fight with your spouse, put your questions to Barefoot Investor.

Q Hi Scott,

I have a credit card debt of a little over $2000, I'm a student and earn about $20,000 a year.

I came across balance transfer credit cards and I've been wondering if it would be a good idea to transfer my debt on to one. What are the pros and cons of balance transfer cards and what should I be wary of?

I feel like I'm trapped in this debt, constantly growing with interest. I should be able to pay it off in six months but with the interest constantly being piled on it's becoming a choice between food and debt. There's only so many two-minute noodles a student can eat.

Cheers, Declan

A Hi Declan,

You're a bit of a drama queen aren't you? Your credit card interest isn't the problem. At the very most your credit card interest is costing you $400 a year.

You're earning $20,000, most of which is untaxed. The balance transfer merry-go-round is a distraction to what you need to do: cut up your card, start delivering pizzas and pay it off.

DODGING A BULLET

Q Hi Scott,

I recently met a wealth group who were trying to push investment property.

The next day I called them and cancelled the contract we signed with the legal team they provided, and advised them that I was pulling out and therefore did not want to progress with the investment, or with their group.

My concern is they have a lot of our financial information and I am worried what they could do with it.

We signed a number of contracts and I want to know if there is any way to ensure they do not use my financial information for any other things.

Cheers, Matthew

A Hey Matt,

Your family just dodged a financial bullet, well done.

As my mate - property consumer advocate Neil Jenman says, "Don't sign anything", but if you do, make sure you take full advantage of your cooling-off period (which varies from state to state).

Over the years I've seen wealth "gurus" (scumbags) trick their clients into signing waivers for the cooling-off period.

So make sure you take the copies you signed, along with any other documentation and correspondence to a solicitor, immediately.

SELF-FUNDED DILEMMA

Q Hi Barefoot,

I am a 67-year-old retiree. My wife and I own our own home and on my retirement started a SMSF with a $900,000 balance.

My question relates to the amount of fees I pay to our local accounting firm for "assistance" in operating this fund.

This year we have paid two accounts to the firm. One of $4136 for the "operation" of the fund and one of $3575 for "professional services" and an annual audit of the fund.

Are these fees reasonable for a fund that has shares we never trade and term deposits?

Cheers, Ken

A G'day Ken,

You're paying less than 1 per cent of your assets - which isn't high according to the financial industry. But it sounds like you feel they're charging you too much, and that's what counts.

Australian Super (and other providers), will allow you to invest part of your superannuation directly in shares that you choose, together with competitive term deposits for a yearly admin charge of $180 a year (and cut price share trades starting at $15 a pop). For ease of calculations, let's say it costs you $771 a year.

I'd ask your accountant to run the numbers on the following: would that $7000 be better off going to his bottom line, or compounding in your fund, knowing that over 20 years you could have an extra $448,000? I know which option I'd choose.

BASIC NO-FRILLS OPTION

Q Hi Scott,

What do you think about Mark Bouris's new superannuation fund RetireRight, offered through his company Yellow Brick Road?

Thanks, Eric

A It's a low cost, no frills account that has a couple of basic investment options.

It's not a bad choice, but it's about as groundbreaking as his television show.