Save disgust for the politicians over issues such as negative gearing and capital gains tax
DON’T accuse me of political bias. Readers of my column know I give the Coalition just as much stick as I give Labor, writes Barefoot Investor.
Barefoot Investor
Don't miss out on the headlines from Barefoot Investor. Followed categories will be added to My News.
LAST week I got all excited with the column and didn’t answer any Q & As, so this week I’ve decided to go all out:
The super fund executive … who doesn’t want to invest in his own fund.
The woman who has a “secret debt” she’s so frightened about that she can’t tell her husband.
And one of the strangest questions I’ve ever been asked (it involves a dentist, gold, and one hell of a toothache).
DON’T BE SWEPT UP IN BANK JARGON
However, to kick things off, let’s hear from a lovely woman who is “absolutely disgusted” by me.
Tread Your Own Path!
BIM WRITES: I am shocked.
I will not be buying your new book. Why are you spooking your readers about policy reforms for negative gearing and changes to capital gains tax?
These entrench inequality in the system, so reforms are needed.
I thought you were impartial, but I was surprised by your interview with Kelly O’Dwyer in a previous post, and now this.
It all points to an agenda that is beyond helping Australians become financially literate. Disgusted!
BAREFOOT REPLIES: Let’s unpack this.
First, I interviewed Kelly O’Dwyer because at the time she was the minister for financial services, during the royal commission. Why would I not talk to her?
Second, for the past 13 years in this column I have been one of the few people in the mainstream media arguing for negative gearing reform. It makes total sense that young people should be put on a level playing field with investors when they’re competing to secure their first home.
That being said, I’m a realist.
There will be short-term ramifications if Labor’s proposed policies come to pass.
As I said last week, restricting negative gearing to new properties, and halving the capital gains tax discount, will almost certainly deliver a short-term blow to our already fragile housing market.
That’s not a political statement, it’s a fact. An independent, non-politically affiliated study from RiskWise Property Research and Wargent Advisory suggests the proposed policies would cause a 9 per cent fall in house prices in NSW and Victoria, 7 per cent in WA and the NT, and 6 per cent in South Australia and the ACT.
Does that mean the laws shouldn’t be changed?
Let’s leave that up to the voters at the next election.
Finally, if you’ve read my column for any amount of time, you’ll know I give the Coalition just as much stick as I give Labor. I can honestly tell you I do not have a political bone in my body.
The only people I care about are my readers, and their families. There’s no need to be disgusted — please save that for the politicians!
SUPER SAUSAGE FEST
TIM ASKS: I am 42 and on a $142,000 p.a. package working for a retail fund (MLC). Don’t hate me!
I’m looking into setting up an SMSF and investing it mainly in index funds (a la Warren Buffett).
I have $260,000 in super. What do you think of eSuper, who charge $899 a year?
BAREFOOT REPLIES: Note to the reader: This is actually quite common in the finance industry.
Tim gets paid big bucks to work for Australia’s largest retail super fund — MLC, which is owned by NAB (who have been recently “nabbed” by the banking royal commission).
However, Tim is far too smart to actually invest his own super with them.
After all, he knows how the sausage is made!
The fees on MLC super are too bloody high … and the returns on their MySuper product have underperformed the rest of the market.
And as a NAB employee, Tim no doubt intimately understands the bank’s hierarchy of needs, which are as follows:
1. NAB;
2. NAB Funds Management;
3. NAB Financial Planner;
4. NAB Banking (investment loan, mortgages, and credit cards referrals);
5. Client.
No one does independent research and actually selects a NAB super fund … rather, they’re like the financial equivalent of a Formula 1 Airport Motel room when your flight is delayed.
It’s either that or stretching out on the floor of the airport using your suitcase as a pillow. (Pro tip: keep your shoes on in the shower.)
Okay, now let’s get back to your question, Tim.
It’s a very smart idea to invest into a simple, ultra-low-cost, high-growth index fund, split across Australian and international shares. (There are none of these at NAB, of course.)
However, you don’t have to go through the hassle and expense of a self-managed super fund (SMSF) to do this, even with a low-cost offering like eSuper. (Being a trustee of your own fund is hard work … just ask your bosses.)
Instead, there are plenty of industry funds that offer the ultra-low-cost index funds you’re looking for.
Check out the investment options of Sunsuper, Media Super, First State Super and Hostplus.
WIFE’S DIRTY SECRETS
ALICE ASKS: I am afraid I will ruin my marriage … I have been married eight years.
Together with life, honeymoon, etc, my husband has $35,000 of credit card debt (to which I was a major contributor). What he does not know is that, after this, I took out two credit cards and a personal loan, which is currently at $12,000.
I have also kept hidden from him part of my salary (I earn $81,000 a year) which I use to pay my secret debt. I feel sick. How do I come clean and not lose him?
BAREFOOT REPLIES: You’re not a bad person.
You wouldn’t be feeling the way you do right now if you were.
You’re just financially out of control, and you don’t know what to do. I totally get that.
However, the only hope you have for rebuilding your life and your marriage is to take control of your situation.
If I were in your shoes, I’d do three things.
First, sit down and tell your husband the truth. Print out all your statements and put them all on the table in front of you. Don’t leave anything out.
Second, explain how you got into this situation.
Do you have a gambling problem?
What’s driving you to act like this?
Apologise for lying to him and accept total responsibility for your actions.
Third, commit to changing things from today. What’s done is in the past.
You could spend the next few years continually beating yourself up about it, but all that will do is ensure you don’t have the confidence and strength you’ll need to prove to your husband that you’re making amends.
A $35K TOOTHACHE
MELANIE ASKS: I am a 26-year-old at uni studying accounting.
To cut a long story short, I saved up $35,000 and lent it to my dentist (via a loan contract) a couple of years ago. He was meant to invest the money in gold, but turns out the whole thing was a scam.
I have been fighting to get it back since, including recently reporting him to APRA. After I did this, he got someone else to pay me back the $35,000. I would love your advice on what to do with it now that it’s back.
BAREFOOT REPLIES: Find a new dentist would be my first piece of advice.
I totally freak out when I visit my dentist, but your guy is filling you with laughing gas and drilling your wallet?!
You’re laying in the chair, with your mouth open, and he starts pitching you an investment in gold?
And you gargle, “I’ll give you my life savings.”
Frankly, I still can’t work out how you got back the money … do not tell me it was the Tooth Fairy!
(Readers, I get some strange letters, but this is a real rinse and spit.)
Anyway, for the $35,000 I’d suggest you fill up your Barefoot buckets, especially Mojo (never know when you’ll need some emergency dental work done), and save the rest in an online savings account towards a home deposit.
No more toothaches!
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 Save disgust for the politicians over issues such as negative gearing and capital gains tax
Why all that glitters is not gold
The price of gold may be on the rise but it’s not quite as shiny as it seems. When it comes to long-term gain, it pays to follow the golden rule — only invest in things that regularly put money back in your pocket, writes the Barefoot Investor.
Don’t get high on the short-term sugar hit
Despite the COVID crisis, money questions have been flooding in from readers about how to buy and trade stocks, or even gold. Maybe it’s down to raiding super, or the government stimulus, but the key to financial control is first to get out of debt, writes the Barefoot Investor.