Scott Pape’s advice for a reader tempted to pour money into silver

Scott Pape says accepting financial tips from Facebook and family members is dangerous for your future wealth. Heres’s why.

I’ve been debating all week whether I should tell you this story.

Generally – for reasons that will soon become obvious – I never write about these stories.

Yet this week is different. So let’s begin …

She was in a bad way when I first spoke to her.

“I’m frightened of everything”, she said, crying.

Linda and her husband, Harry, are in their eighties. Two years ago a violent storm sent a huge tree crashing through the roof of their home. Luckily they were unhurt, yet their home was unliveable.

Thankfully, for years they’d diligently paid their home insurance. Even better, it was ‘replacement cover’, which entitled them to a new roof. Or at least it should have.

Instead, the insurance company offered the elderly pensioners a cash settlement.

The first offer was for $80,000.

When they rejected it, the insurance company came back with $120,000. They still rejected it. You see, they didn’t want the money – they wanted the insurance company to fix their bloody roof! Yet when they rejected that offer, they were basically put on the bottom of the pile, and ignored.

A few months later Linda tragically lost Harry, the love of her life and her protector. And so for the past 18 months she’s been living alone in temporary accommodation.

“All I want is to move back into my home and feel like I’m around my husband”, she sobbed.

Dealing with insurance companies over storm damage can be difficult. Picture: David Crosling

Now generally I like to approach my financial counselling work with a collaborative mindset. Yet this time, the sage advice of my mate Darren (an old chestnut farmer) was ringing in my ears:

“Look, everyone throws around some fertiliser, so you should be gentle most of the time. Yet every now and again you just need to pull out your pruning shears and cut off some nuts.”

So, with pruning shears in hand, I called up the insurance company and started negotiating.

Hard.

When it went up the chain, they realised very quickly how badly they’d screwed this one up.

And then we waited.

And then they came back with an offer. But this time it wasn’t $120,000 …

It was $370,000 (it turns out it was indeed a total structural write-off).

Snip!

Plus an extra $50,000 for being total jerks.

Snip! Snip!

The truth is I do these deals quite often, though you never read about them (because the financial institution involved is generally highly motivated to not appear in this column).

Still, right now there are thousands of people who have been flooded and are dealing with their insurance companies. Now, most insurance companies want to do the right thing, and Linda’s case was (thankfully) an isolated one.

However, if you’re struggling – and especially if you’re a low income earner – I want you to know you don’t have to do this on your own. Call 1800 007 007 and get a financial counsellor in your corner.

Tread Your Own Path!

The reality of the budget

Help!

I really need advice. I’m a single mum of three (14, 12 and three years old). I bought a townhouse when rates were low, and locked in a fixed rate at 1.9 per cent. It was already tight with my budget. But now that rates are rising, I simply won’t be able to afford the mortgage when the fixed rate period ends. So do I sell now and cut my losses? Or do I hold until I am completely broke and wait for the market to recover? I reckon I have three months (six months tops). I feel like I’m gambling with all that I have.

Desperate single mum

Hi desperate single mum,

There are people reading your question thinking “why would a low income earner do this? Surely you knew that rates were going to rise?”

Well, you could ask the exact same thing of our politicians, who have created schemes that incentivise people to get into this sort of situation.

Case in point: in this week’s budget the Treasurer was crowing about their ‘Help to Buy’ program, which allows low-income earners and single parents like you to buy a home with just a 2 per cent deposit.

Now I’m not a gambler, and as a single mother you shouldn’t be either.

Keeping a roof over your kids’ heads is your first, second, and third priority. And it doesn’t matter if it’s rented or owned – just that you have one.

So it sounds like you’re going to have to make some tough decisions, which are best discussed with a financial counsellor (see the number above).

Did you see that post on Facebook?

Hi Scott

With all the rumblings in the news and socials about the world economy collapsing, we are a bit worried about our super and savings – we are getting a bit long in the tooth and are ready to retire in 18 months (we’re in our early 60s). My brother keeps saying we should put our money into silver (he buys silver coins). I just don’t know how I can go down to the shop to buy my bread and milk with silver. Is it a viable investment option? What happens to our super and our savings in the bank if it all tanks? (Apparently they can take it all and leave you with nothing, banks included.)

Mia

Hey Mia,

Let’s break down a couple of keywords in your question.

First up, “socials”.

For God’s sake do not get your news from Facebook … or any financial advice for that matter.

Second, “brother”.

Your bro may be a lovely dude, but if he is advising you to put your super into silver I would suggest he’s been reading too much Facebook himself.

Scott Pape says don’t put all your money into silver.

Third, “they” (as in “they can take it all and leave you with nothing”).

Who are “they”? The Government? Bill Gates? Jeffrey Epstein?

That sounds like yet another comment on Facebook.

Look, Facebook’s algorithms have one aim: to keep you staring at your screen (and their ads) for as long as possible. So they are programmed to find emotional, scary, and downright crazy posts and amplify them. The end result is that these posts are served up on you and your brother’s Facebook news feed so many times that it feels like everyone is thinking it.

But they’re not.

Oh, and by the way, do not put all your money into silver. No one is going to take all your money and leave you with nothing. The Australian Government guarantees deposits up to $250,000, and it will not go broke.

Instead, here are two things you can do that will make you happier and wealthier:

First, consider starting to build up a cash buffer within your super fund. You could make extra contributions and direct that into cash so you can ride out any pullbacks in the share market when you retire in 18 months’ time.

Second, delete Facebook. Seriously. Stop trading your precious time and attention just to make a billionaire even richer.

My deep black hole

Dear Barefoot,

Five years ago (at age 50), I walked away from an abusive marriage, with my two kids. As I was sinking into a black hole, a friend gave me your book. Through using your strategies, I’ve managed to rebuild my wealth, grow my superannuation to over $500,000, and buy a house for myself and my children to live. Better still, I paid that house off earlier this year – I own it lock, stock and barrel, and it’s MY name on the title.

I have close to $50K in the bank and a savings strategy to enable me to retire early at the end of 2024, which will let me be free to spend those precious years with my kids when they need me most. No amount of money can buy that time. Tread your own path? Right on! Here’s to you and your buckets, Barefoot. You’re a bloody legend. Thank you, thank you, thank you.

Claire

Hi Claire

Seriously, I have the best job in the world. Claire, thank you so much for sharing your story. You’re an inspiration to every single parent out there living in a dangerous situation.

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

Barefoot Kids: Your Epic Money Adventure! (HarperCollinsPublishers) RRP $32.99

If you have a money question, email [e-mail].

Originally published as Scott Pape’s advice for a reader tempted to pour money into silver