Who can I trust with my money?

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

Businesswoman

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

Q Dear Scott,

I am in my late 40s and was recently very sadly and suddenly widowed.

I have four kids - two at uni and two doing VCE, who all live at home and are dependent on me.

My husband had life insurance, so I was able to pay out our mortgage.

I earn $68,000 gross and have only $40,000 in super. I have $360,000 left over from my husband's super/life insurance. It is a very expensive time for the family, so I will need to have access to a portion of the funds in the next few years. The family income has now dropped to one-third without my husband.

I am very frightened. I'm not money savvy and have already been contacted by the bank suggesting interest-earning term deposit set-ups that seem to have complicated terms. I'm not sure who to trust.

Nadia

A Nadia,

I'm sorry to hear about your situation. With the house paid off, you've done all the heavy financial lifting you need to do this year. Now it's time to mourn.

Lock $300,000 in a 12-month fixed-term deposit with your bank and keep the $60,000 in a high-interest online saver you can access at call.

You will be financially secure. In a few years all your kids will be independent, which will lighten your financial load considerably.

In 12 months, I want you to book in to see a financial adviser at a low-cost industry superannuation fund and start focusing on building up your super.

NO MORE DEBT FOR MUM

Q Hi Scott,

Several years ago, my mother, who is on an age pension, took some poor advice that left her with a mortgage at 8.8 per cent.

She lives in the family home where she singlehandedly raised four kids, and doesn't want to leave. The house is valued at $400,000, with an outstanding mortgage of about $150,000.

She previously cashed-in her small super to rid herself of a debt on an "investment" property that is linked to her current financial woes. Mum still does some part-time work and manages her current commitments without affecting her pension.

I have been trying, with the help of a mortgage broker, to find someone who will refinance her, with one or more of the kids as servicing guarantors.

We could save her $300 a fortnight at the current rates, according to the broker.

Are you able to shed any light on this situation?

Thanks, Neil

A Neil,

I doubt any bank will lend more money to an elderly pensioner working part-time. Your mum can't afford any more debt.

Under no circumstances should you go guarantor for your mum. I don't care what your broker advises you.

You don't want to be on the hook for your mother. If things go bad, it could ruin your relationship.

You mentioned your mother cashed out her superannuation to pay off an investment property.

She has a couple of options: sell the investment property and use the funds to pay off her current mortgage, or sell the home she's living in and move into her rental property.

Either way, Centrelink doesn't count your mum's principal place of residence in her pension calculation.

TELL DAD BAD NEWS

Q Hi Scott,

We're really stressed out. My wife and I live in our paid-off apartment. We also have a two-bedroom unit, with a mortgage of $298,000, in which my father lives and pays $200 a fortnight. Recently, we took out an equity loan for $15,000, and have a credit card with $2000 on it. Our total debt is $315,000.

I earn $52,000, my wife is on a disability pension and is currently getting $120 a fortnight. She has $20,000 in savings and $30,000 in shares. We are leveraged at 51 per cent. Should we sell some of the shares or put my wife's savings on the home loan?

Thanks, Chris

A Chris,

It's totally admirable that you're helping out your old man, but the truth is you can't afford it. It's sending you broke.

In the short-term, it makes sense to immediately pay off the credit card and and the line of credit from your savings.

But that's just Band-Aid stuff. You need to have an honest discussion with your father about your financial situation.