Barefoot Investor’s tips to get financially fit

Are you financially flabby or fit? Check out how much super the average Australian your age has and how you can follow the Barefoot Steps to get yourself and your future in better shape.

“You look different in real life than you do on the cover of your book,” said the waitress.

“You’ve lost a lot of weight.”

It’s true, over the past few months I’ve dropped roughly 13 kilos.

How did I do it?

Liposuction! Just kidding. I banished biscuits from the house and set up a gym in the shearing shed.

That’s the thing about being tubby: you can’t hide it (especially if your mug is printed on millions of books). Yet when it comes to wealth it’s the opposite. Plenty of people are hiding their financial flab in a leased Lexus.

So, for a moment, let’s you and I get naked and compare our financial bits. Here’s a table from the Association of Superannuation Funds of Australia (ASFA) that breaks down how much the men and women have in super on average by age.

So ask yourself: “Am I flabby or fit?”

Remember, it’s just an average.

It depends on how much you earn, and how long you take off to raise kids. That being said, if you’re following the Barefoot Steps long-term, you’ll almost certainly end up with more than the average.

As I say in Barefoot Step 5, once you’ve bought a home (though not yet paid it off), boosting your pre-tax super contributions from 10 per cent to 15 per cent will make a hell of a difference. As will switching to a growth investment option if you’re under the age of 45. And lowering your fees will give you a huge boost at any age (remember, you’ll pay the majority of your fees after you retire, because that’s when your balance is the biggest).

Don’t be flabby… be financially fit.

Tread Your Own Path!

Once you’ve bought a home, boosting pre-tax super contributions can make a big difference.

Tarzan feeds six people

Hi Scott,

My 58-year-old husband is the sole breadwinner, and we have six adults at home. We have a beautiful new house built on the site of our old home and a mortgage of about $350,000, which is currently interest only and consequently never seems to reduce. Given that everyone has started running around like headless chooks yelling “inflation!”, and my hubby’s super has plummeted again, should he stop putting the extra $750 a month into super and instead put an extra $500–$600 onto the mortgage? Obviously – God willing and no World War Three – the funds will pick up again, but we would really like to own our home fully while he’s still able to work. It seems like a reasonable strategy to us, but we’d really appreciate your advice.

Jane

Hi Jane,

There’s a lot to unpack here.

First, if you’ve elected to pay interest only on your home loan, you’re not actually paying off the principal, only the interest. If you want to pay down the debt, you’ll need to reconfigure your loan.

Now let’s talk about the monkey in the jungle:

Jane, you said there are six adults living in your house, and just one Tarzan providing for them all?

Talk about swinging from the branches! I’d suggest you hold a meeting around the campfire and get everyone to start pitching in to help pay down that debt.

Getting out of here

Hi Scott,

With borders now open and people enjoying the luxury of travel again, what do you think is the best option for money access overseas? Should I get a prepaid foreign currency card, and if so is there one you recommend? Or should I just use my Australian account and take the fees and exchange rate as they come?

Thanks, Sandiego

These days most decent transaction accounts offer free international transactions.

Hi Sandiego,

This is the first travel money question I’ve received in years!

Personally, I think travel money cards that the banks and currency operators offer are as dated as travellers’ cheques and thumbing through a four-inch-thick Lonely Planet guide to Bali.

These days most decent transaction accounts offer free international transactions, and they don’t mark up the wholesale interest rates offered by Visa or Mastercard. So that means you can use your own account without getting legged.

The only thing to watch out for is when you’re overseas and the machine gives you the option of paying in AUD. Always click “NO” and pay in the local currency, or you’ll be ripped off with a higher currency conversion than the rate your bank will charge you.

Thirty years of marriage ended in one minute

Scott,

My husband of 30 years left me in February this year with a one-minute phone call. Throughout our marriage I have been the main income-earner, supporting him through his small business and paying the mortgage and all living expenses. He would give me money here and there. The home is in my name but the mortgage is in both, though he has never paid a cent to it. The house is worth $200,000 with a $150,000 mortgage, and I have other debts that I took out to support him. His parents’ estate was settled in January and he was due to receive over $600,000 in inheritance. It was delayed for a month so that I couldn’t make a claim on it. I’m not being greedy, I just want the mortgage paid out. Do I have a claim?

Carol

Going to court can potentially be very expensive.

Hi Carol,

Your marriage may have ended in one minute, but it sounds like your ex spent many hours planning his departure.

Now you could go to the Family Court about this.

However, a word of warning if you do: the Family Court is a little like a mother at the end of her tether trying to sort out a fight between her kids … everyone gets a clip around the ear!

The Court could look at your husband’s trick of delaying probate on his parents’ estate and order him to give a chunk of it to you. Or, it could order you to pay off the mortgage and transfer the property to him. More likely it will be somewhere in the middle.

So, just like warring siblings, you should do everything you can to avoid being dragged into the fight: because it’s going to be rough … and potentially very, very expensive.

Yet if it does come to that, my advice is the same as rocker Tex Perkins:

“Better get a [family] lawyer son, you better get a real good one.”

Out of the cesspool

Hi Scott,

Two years ago, my wife and I had five credit cards topping $70,000 and seemingly no way out. After following the Barefoot Steps we have not only paid this cesspool completely off, we now have $100,000 in the bank. Right now we are on a Gold Coast holiday for five nights with the kids and are pinching ourselves that we got here!

So it’s time for the next step. I’m a builder and my wife and I want to buy land and then build in 12 months’ time. I pay my wife a wage for her work in the business, but not me. We are not sure how to approach a bank. Any suggestions?

Nick

Hi Nick,

You went from seventy grand in the hole to a hundred bones in the bank in just two years?

Congratulations, you two are on fire!

As far as getting a home loan is concerned, it’s worth chatting to your accountant to make sure your business and personal finances are sorted and clearly separated. Once that’s done, it’s time to go see a bank. The big thing a bank is looking for is that you have the ability to build your savings and pay down your debts – and you have been doing both.

You got this!

Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions

The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need

(HarperCollins) RRP $29.99

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