Scott pape financial advice: How to get your life back on track
HAVING an emergency fund and knowing your entitlements will go a long way towards helping you out of a crisis, writes Barefoot Investor.
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LINDA ASKS: I’m writing to ask for your advice on what to do when you lose everything you own.
I live in beautiful Lismore, in northern NSW, and my house was flooded last week.
We did get to grab a few precious things but we only had a short time to get out.
However, we have spent a week cleaning, chucking and carting away to get to the 5 per cent we hope is salvageable.
We have now got to deal with our insurer, and I just wanted any specific tips that you could give us. We have taken photos and rung the insurer and are waiting for the assessors.
I have never claimed on insurance and do not know how it works, though I have heard a lot of horror stories!
My husband and I both read your book late last year (sadly, my copy went to a watery, muddy fate!) and started the Barefoot Steps. But this has caught us by surprise.
Any advice would be greatly appreciated.
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BAREFOOT REPLIES: My heart goes out to you and your family.
Let me share with you the things I learned from standing in your shoes a few years ago:
First, this is most certainly a Mojo moment, so spend it.
Second, there’s no need to pussyfoot around your insurer — paying claims is the bread and butter of their business.
However, you need to be prepared to be a squeaky wheel and demand every single thing you’re entitled to in your policy.
Most policies have a “sum insured” figure and also include other benefits you can potentially claim, like temporary accommodation and clean-up costs.
So, read through your policy (known as the product disclosure statement) — then read it again, and read it again.
As you read, highlight all the relevant wording.
Then put in a claim for everything you can.
It’s a tough, emotional time, but you’ll get through it so long as you’re methodical, and put everything in writing.
PARKING THE MOJO
KELLY ASKS: We are absolutely loving your book — we are on Date Night Three and already feel more in control than we’ve ever been.
But the one thing we can’t get our head around is your advice on Mojo — you say that people shouldn’t put their Mojo money in an offset account. We make $170,000 combined and have $342,000 on the mortgage, which has an offset account. Wouldn’t it be the best of both worlds to use our offset account as our Mojo account?
BAREFOOT REPLIES: Great work on the Date Nights! As far as parking your Mojo money goes, I strongly favour keeping it in a totally separate account with another bank.
It just gives another layer of separation from your day-to-day banking (and spending).
I’ve met a lot of people who’ve “borrowed” from their Mojo money and never replaced it. Ultimately, though, I suppose it doesn’t matter where you keep it, so long as you have it!
JUST DON’T DO IT
NATALIE ASKS: Could this be divine intervention?
I have just read your recent article in which you saved a single mum from a property “guru”.
It hit home for me because my husband and I are considering signing up for one of these programs — a “step-by-step guide” to investing in commercial property.
It is not the $17,000 your article mentioned, but it is still $3000 that we do not have and which we are considering paying for on our credit card.
My husband is excited and wants to go ahead, but I am sceptical. We follow your blogs, have read your book, and religiously read your articles in the paper.
In the past you have advised that commercial property is a good investment, though you were referring to shares in commercial companies.
We know a little about investing in property (having bought a property through our SMSF which seems to be going well), but we are scared to take the plunge.
What would be your advice?
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BAREFOOT REPLIES: Tell your husband to pull his head in. You should both have an equal vote on where you spend your money.
Anyone who buys a $3000 course on credit card should not be investing in commercial property!
A LOVING BOND
DOUG ASKS: My granddaughter’s father (my son-in-law) died when she was 10 years old, and left her a legacy. She is now 19 and has a share portfolio worth $105,000 earning (around $7000 fully franked) and cash investments of $30,000.
She attends uni and has part-time work earning $20,000 a year. All good.
But for the past year she has been seeing a boy who only works part time and lives with his mother.
I think they may be planning to move in together.
How can she protect her assets if this relationship fails?
BAREFOOT REPLIES: You could encourage them both to sign a cohabitation agreement, which is a legal document between a couple who choose to live together.
Honestly, though, it’s not iron-clad and it doesn’t necessarily stop things from getting messy if he’s got dollar signs in his eyes.
You could choose to transfer the shares into a trust, or invest via an investment bond for another layer of asset protection, though you’d need to consider the capital gains tax implications of doing so.
For my money, the best way to protect your granddaughter is to explain, in as many ways as you can, what the money represents, namely her father’s dying wish that his daughter be financially secure.
It’s her job (with your loving guidance) to honour him, and the way to do that is by learning to become a good money manager.
She may need to hear it 30 times before it really sinks in: it’s not just shares and cash in a bank, it’s a bond she shares with her father.
No one else.
Read more Barefoot:
Knowledge is key to dodging a financial bullet
Scott Pape on why he rarely tells people to sell family homes
Bad taste lingers after GFC financial loss
Scott Morrison and the house that debt built
Originally published as Scott pape financial advice: How to get your life back on track
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