IN DEBT AFTER WIFE’S TEXT JILT
James says: So I get this message from my wife at 2am while she is in Morocco (finding herself ) — “I think I’m going to move to Morocco, I’m so sorry.”
This really was not expected, nor in my plan for the future. Now I am having to deal with all the financial responsibilities on my own, without a second income. I have a half-renovated house, our combined debts, and now legal fees to deal with the separation. I am 34 and earning good money ($140,000), but it feels like I have caught an STI from an overseas holiday I didn’t take. Barefoot responds: It sounds like your ex-wife took the ‘Eat, Pray, Dump’ tour!
Seriously, I can’t imagine what it was like to get that text — you must be going through hell. And while it probably feels like you’re the one here in Australia cleaning up the financial mess, you are both responsible for seeing this out. So, a couple of practical things. If you haven’t already shut down any joint bank accounts, credit cards or redraw facilities, do so immediately. Also, keep good notes on your finances, and engage a family solicitor.
You don’t mention kids and, given your age, it sounds like it may have been a short marriage. This will be taken into account, and should make things much simpler in coming to a final property settlement. Obviously you are facing a financial setback, but at your age and with your income it’s something you will overcome. So, think hard about whether you want to keep the house or sell and make a clean break . . . your ex-wife certainly has.
Lisa asks: I am 27 and earn $95,000 a year, so my super is adding up. But I received my annual superannuation statement and found I am being charged three separate fees — administration fees (0.37 per cent), investment fees (0.25 per cent) and something called indirect costs (0.64 per cent). In your book you recommend paying no more than 0.85 per cent in fees on super. Does that refer to any type of fee charged, or only administration and investment fees? And do you have any idea what indirect costs are?
Barefoot responds: Good on you for being one of the few people who bothers to look at this stuff.
ASIC defines indirect costs as costs “paid by your super fund to external providers that affects the value of your investment. Typically these are costs paid to investment managers.” Bottom line? It’s another fee. All up, you are being slugged 1.26 per cent of your balance each year.
If you’ve got $40,000 in super, that’s about $500 a year. That doesn’t sound like much. yet as a back-ofthe-envelope calculation (6 per cent real return, not factoring in tax), your super will grow to about $720,000 over the next four decades.
However, the negative effect of the compounding fees will be roughly $220,000.
You’ve done the hard work by wading through the complicated, boring guff.
Now comes the most profitable call you’ll ever make.
Talk to your fund and ask if it has a high-growth, low-cost index super offering — preferably one that charges less than 0.85 per cent in fees, total.
Is AMP heading south?
Cliff asks: On advice from our financial adviser, my wife and I moved our super from Australian Super to AMP MyNorth Super a year ago.
We have generally been happy with the advice we have received and, like all funds, in the past year MyNorth has had its ups and down. However, with the findings of the banking royal commission and recent stock market volatilities affecting AMP, we think we should maybe go back to the industry fund.
Is it likely AMP could go under in future, meaning we could lose all our super? Barefoot responds: I’ve had a number of people ask me the same question — whether their money is safe with AMP. Let me be clear: your money is safe. That’s because the money you have in super is held via a legal trust for you. Super is strictly regulated and the trustees have a legal duty to manage the fund for the benefit of members.
But the same can’t be said for the suffering AMP shareholders. The fact so many of its customers are questioning whether this 170-year-old blue-blooded company will survive is an indication of just how much the brand has been battered.
As Dr Phil says, it’s hard to win back trust. Speaking of which, I’d ask your adviser to do a financial comparison between your old industry fund and your MyNorth fund since you switched.
The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need HarperCollins RRP $29.95