Barefoot Investor: Generosity has benefits for the giver as well as those receiving

The “science of spending” tells us that we get a bigger kick out of spending money on other people than we do on ourselves. There’s a genuine psychological benefit to being generous, writes the Barefoot Investor.

This wasn’t going well.

“You want to do what?” asked the waitress.

“I’d like to pay for that guy’s lunch,” I said, pointing to a 50-something dude sitting in the corner.

“Do you know him?” she asked.

“No, I’ve never met him.”

She crossed her arms, cocked her head and eyeballed me: “So, why are you paying for his lunch?”

“Because it’s a nice thing to do,” I mumbled.

“That is … so … weird,” said the waitress, holding out the EFTPOS machine.

Okay, so that wasn’t the reaction I was expecting.

Buying a stranger lunch is an interesting ideas. Picture: Chris Walls

Still, the moment I walked out of the restaurant I had a spring in my step as I thought about the chain reaction I’d just set off. The dude would go up to pay and be given the good news. Then he might choose to pay it forward. And on, and on, like a Mexican wave.

Hokey?

Abso-freakin-lutely.

Then again, I spent $5000 on a 10-day family cruise that gave me the runs (and the kids head lice).

Buying a stranger a meal cost me $40 and it put a smile on my dial that lasted the rest of the day.

Here’s the deal: collectively we donated $500 million to the bushfire efforts last month.

It felt good to give, right?

That’s because the “science of spending” tells us that we get a bigger kick out of spending money on other people than we do on ourselves. In other words, there’s a genuine psychological benefit to being generous.

So now you’ve got a taste for it, why not take a few more swigs from the kindness cup?

Now, you could be a weirdo like me and buy lunch for some random, or coffee for the guy behind you in the line.

Or you could just buy a few extra tins of baked beans at the supermarket and donate them to Foodbank (I’ve recently seen how valuable these can be for fire-affected communities).

The generosity was the best thing to come out of the horrific bushfires, so let’s make it stretch!

Tread Your Own Path!

Q&As

CASHING IN ON THE CORONAVIRUS

NICK WRITES: I’ve been watching (from afar!) the spread of the coronavirus and I am worried that people are underestimating the long-term financial repercussions if it is not contained soon (and I don’t trust the Chinese government’s figures).

Despite this, the Australian share market is up this year, but I am growing increasingly worried.

In fact, I am thinking that, with the market now at record highs, it might be time to take some money off the table and wait for a correction before getting back in. What are your thoughts?

BAREFOOT REPLIES: First, let me lay my cards on the table:

I don’t know much about the coronavirus.

I don’t know whether it will become the next global pandemic that Bill Gates sagely once predicted “could come from China and infect up to 30 million people within six months”.

I don’t know if it will trigger a share market correction.

Traders have already factored into their decisions that the “factory of the world” is effectively shut, that our biggest source of tourists is not delivering at the moment, and that the bushfires have devastated major parts of Australia. Yet that’s all old news.

The spread of the coronavirus may have long-term financial repercussions.

It’s what happens next that matters to the share market, and, just in case you’re slow on the uptake, I don’t know anything.

So, what do I know?

I know that over the past couple of hundred years we’ve endured a lot of bad things — wars, recessions, depressions, pandemics — and through it all the stock market has never failed to hit new highs.

Case in point: $1 invested in the share market in 1888 would have grown to $226,560 today.

I know that it’s impossible to profitably trade in and out of the markets.

That’s because if you decide to sell you have to be right twice: first when you sell and second when you eventually buy back in.

I know that the bulk of your long-term returns will come from dividends, not share-price movements. That’s why I focus on the income I receive four times a year and not the value of my portfolio.

Oh, and I also know that I can’t catch the virus from drinking beer. Other people aren’t as sure: since January, Google searches for the phrase “Corona beer virus” rocketed 2300% globally.

Don’t drink and trade, Nick!

BEWARE OF 60-YEAR-OLD HUSSIES

DAN WRITES: My mum passed away two years ago and it seems like my 80-year-old dad is being swooped on by several single women 20 years his junior.

He lives alone several hours away from us (my two brothers and me).

We are concerned that he will be swindled out of his house and savings, so we have suggested he get his will and power of attorney (POA) sorted.

We honestly cannot see what these women see in him, but his ego might tarnish his ability to protect his assets from clever predators. Do you have any family asset protection strategies that we should be aware of?

BAREFOOT REPLIES: If you were my son, I’d give you a clip around the ears: “We honestly can’t see what these women see in him.”

Way to cut down your old man! Then again, if you are dealing with the power of 60-year-old “predators” (your words, not mine!), you’ll have your work cut out for you.

That being the case, I don’t feel qualified to answer this question, so I’ve called up my lawyer, Brett Davies. Here’s what he had to say:

“If your father is of ‘sound mind’, he is free to deal with his assets as he sees fit.

“If it is clear he is of ‘unsound mind’, then you are free to use a POA. In fact, in most states you are duty-bound to do so, to protect the person who gave it to you. But the POA is only to help your father — you cannot use it solely to protect your inheritance.

If someone is of “sound mind” they are free to deal with their assets as they see fit.

“If he is of unsound mind, you can act against his direction, as he would lack mental capacity. For example, you could have bank accounts moved out of his control. But be careful — if you are wrong (i.e., your father is of sound mind) then you have broken the law.

“When in doubt, it may be prudent to go down the path of an administration order, which is when a court decides mental capacity, not you.”

Barefoot translation: by all means let your old man enjoy himself, just make sure he protects his nuts.

 

MY HOUSE BURNT DOWN, NOW I REALLY AM BAREFOOT

EMILY WRITES: I know you probably won’t read this, but you were “on my list”.

You see, since my house in Mallacoota burnt down, I have been shown the most amazing acts of generosity and human kindness, and I have a list of the people I want to thank.

So while I go through the emotional process of figuring out my new life, thanks to your book I am not immediately worried about money. That’s huge!

My partner and I are even contemplating taking a six-month hiatus and travelling around Australia.

Seems like good timing while we don’t have any “stuff”.

BAREFOOT REPLIES: Welcome to the “no stuff” club!

The truth is that, as for all of us, almost everything you buy will end up in a rubbish tip, but in your case you’ll receive a cheque for it!

MORE BAREFOOT INVESTOR

When it happened to my wife and me, we felt an overwhelming sense of freedom, like a weight had been lifted off our shoulders. Which it had — we literally didn’t have any clothes.

Seriously, though, over the following 12 months we didn’t really buy anything, and it changed the way we thought about “stuff” forever — for the better.

Go travelling, and make some memories!

If you have a money question, go to barefootinvestor.com and #askbarefoot

 

The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need (HarperCollins) RRP $29.99

The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice.

Originally published as Barefoot Investor: Generosity has benefits for the giver as well as those receiving