No su­per loop­hole for debts

Sunday Herald Sun - - Opinion -

ME­LANIE ASKS: TWO-and-a-half years ago, I was di­ag­nosed with breast cancer.

Af­ter chemo­ther­apy, ra­dio­ther­apy and seven op­er­a­tions, we (my hus­band and I) find our­selves with our sav­ings zapped and our credit cards burst­ing.

We are both 42 and earn a com­bined $110,000. I would love to take some money from my su­per to pay off some debt, but un­less I am considered ter­mi­nal I can­not do this.

A friend of mine, how­ever, took money from her su­per just to have a gas­tric by­pass — I don’t get it. What op­tions do I have?

BARE­FOOT REPLIES: Zero. You have zero op­tions to raid your su­per.

Yes, there are a few com­pa­nies out there that will “help” you to raid your su­per for du­bi­ous med­i­cal rea­sons (droopy boobs, tubby guts, or a big honker), but these com­pa­nies have as much cred­i­bil­ity as a late-night shop­ping in­fomer­cial.

Be­sides, you don’t sound like some­one who takes the easy op­tion. You’re a fighter — you beat cancer.

So af­ter a cou­ple of years fo­cus­ing on the very short term, you can now thank­fully think about the long term.

In the long term, you need to own your own home debt free and have a good amount in su­per.

My ad­vice would be to domino your debts — write them down from small­est to largest and at­tack the small­est first — and get debt free. Don’t un­der­es­ti­mate the self con­fi­dence you’ll build from do­ing this.

This is the start of the rest of your long, pros­per­ous life.

FUND NEEDS CLAR­ITY

CALLUM ASKS: MY part­ner and I are lov­ing your book, but we have hit a road­block in try­ing to set up our su­per.

Your bench­mark of less than 0.85 per cent for to­tal fees is su­per clear.

But now we are con­fused be­cause you rec­om­mend Host­plus and its web­site says its fees are over 1 per cent.

Ei­ther they are tak­ing ad­van­tage of your pub­lic­ity and up­ping the rates, or I am not cal­cu­lat­ing the fees right.

What say you?

BARE­FOOT REPLIES: In my book, I dis­cussed my de­ci­sion to shut down my self-man­aged su­per fund and move over to what my re­search shows is the low­est­cost su­per fund in the world, the Host­plus In­dexed Bal­anced Fund. The Host­plus In­dexed Bal­ance Fund charges just 0.02 per cent per an­num, plus a mem­ber fee of $78 per year. In other words, on a bal­ance of $50,000 I get charged just $88.

Host­plus also of­fers the op­tion of choos­ing my own shares, which is some­thing I’m at­tracted to, be­ing the Bare­foot In­vestor.

You did not look at this fund.

What you looked at is Host­plus’s flag­ship fund — the sim­i­lar sound­ing but to­tally dif­fer­ent Host­plus Bal­anced Fund, which charges 1.2 per cent per an­num, or $678 per an­num on a $50,000 bal­ance.

Here’s the thing: the more ex­pen­sive Host­plus Bal­anced Fund was just named the top­per­form­ing su­per funds over the past 12 months. Good on them! How­ever, the truth is that most fund man­agers don’t out­per­form the mar­ket year in, year out.

As in­vestors, the only thing we can con­trol are the fees we pay and stud­ies show that, over time, hav­ing the low­est­cost fund can save you tens of thou­sands of dol­lars.

BUYER’S CONUNDRUM

SU­SAN ASKS: I AM 33 and des­per­ately want to buy my first home — I am cur­rently look­ing at a home and land pack­age for about $400,000.

I earn $97,000 and have $5000 in sav­ings, but I also have a car loan of $26,000 and a per­sonal loan of $7000.

I am con­sid­er­ing con­sol­i­dat­ing these two loans to de­crease my in­ter­est and ser­vice fees.

Do you think this would be the right way for me to han­dle my sit­u­a­tion?

BARE­FOOT REPLIES: I think con­sol­i­dat­ing loans is a good way to save in­ter­est.

I also think the amount of in­ter­est you pay isn’t going to make that much of a dif­fer­ence. What mat­ters is you get as fo­cused as an an­gry al­paca on pay­ing the bloody debt off quick smart.

Now, to the se­cond part of your ques­tion: in my opin­ion, you can’t af­ford a home — yet.

Even though it’s highly likely you’ll get ap­proved to buy a house and land pack­age, I’m telling you can’t af­ford to buy a home.

Pay off your debts this year, then save up for a de­posit. Then, you’ll be in a much stronger position to make the big­gest pur­chase of your life.

HOPE DEFEATS STRESS

BRUCE WRITES: I AM 30 years old and — be­fore I read your book — was not feel­ing well.

I was in debt, had no idea how to get out of it, and, in my mind, had no future.

In fact, over the past three years I have fallen into de­pres­sion and was even sui­ci­dal due to the hope­less­ness I felt at not be­ing able to get my act to­gether fi­nan­cially.

Well, your book has pro­vided me and my fam­ily with di­rec­tion for our

fi­nances. It has picked me up off the ground and given me a to­tal new out­look on my life.

I can­not thank you enough for your help.

BARE­FOOT REPLIES:

You’ve hit the nail on the head — fi­nan­cial stress can be suf­fo­cat­ing and po­ten­tially dev­as­tat­ing.

I’m glad my book gave you hope. How­ever, the truth is it’s 80 per cent your be­hav­iour that’s made the dif­fer­ence and 20 per cent the com­mon sense strate­gies that I write about.

Peace.

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

The Bare­foot In­vestor: the only money guide you’ll ever need (Wi­ley $29.95). her­ald­sun.com.au/shop

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