Focus on what
My long-suffering editor, Wally, loves to joke that you can tell the financial pulse of the nation from a glimpse at my inbox. After all … thousands of people of all ages, from all across the country, write to me about what’s stressing them out.
So, after doing this for almost two decades, I can tell you exactly what worries Australians the most:
Whatever the media is banging on about at that moment.
It’s true. Right now the “threat” of rising interest rates is at fever pitch. It’s been spurred on by some experts predicting that interest rates will hit 3.5 per cent by next year.
To put that in context, that would be thirteen additional hikes in almost as many months.
Personally, I find that hard to believe.
The surging inflation that is happening around the world will require much higher interest rates going forward – yet I have no idea how high they will go, or when.
My main point is that higher interest rates were entirely predictable – heck, I’ve been talking about them for years!
In January 1990 the cash rate was 17.5 per cent, and they limboed it all the way down to 0.1 per cent.
Where did we think they’d go next?!
Now, I am not saying that interest rates will get back to 17.5 per cent.
Yet the one takeout from the last few years is the world is a risky and unpredictable place. Weird stuff happens when you least expect it. Bad stuff happens if you haven’t prepared for it.
So what can you do?
Well, if you’ve been following the Barefoot Steps, the answer is: you’re already doing it! You’re aggressively paying down debt, building up a cash buffer, and investing long-term into shares via your low-cost, tax-effective super fund.
In other words, focus on what you can control. More Date Nights, less TV news.
Tread Your Own Path! financially abusive relationship. Her husband is busy cashing in their assets and spending or hiding their money. She and the kids were left only in the clothes they were wearing, as he refuses to let her into the house to collect anything. He even took the Christmas gifts the kids had received from family and friends. We have offered her accommodation, but it means leaving the rural area she lives in and she does not want to take the kids away from their dad by moving away. We don’t know what else we can do to support her. We’re worried sick. Any suggestions you could offer would be gratefully received.
Cheryl
Hi Cheryl,
I’m so sorry your daughter is in this situation. It must be heartbreaking to watch her and your grandkids go through this.
Let’s call it out:
Your son-in-law is an abuser. There’s a name for this abuse: it’s called “coercive control”, and it’s a crime in other parts of the world (though not yet in Australia).
What would I suggest?
Well, as a first step I’d get your daughter to read the book See What You Made Me Do: Power, Control and Domestic Abuse by Jess Hill.
If she’s not much of a reader, it was made into a television show that she can stream on SBS.
It’s a confronting read.
All too often, abused women downplay what’s happening to them. Hopefully your daughter will see her own situation in the book, and it will convince her that she doesn’t need to take his crap.
Then she can get the support she needs by calling 1800 RESPECT (1800 737 732). They can help with counselling, accommodation and accessing financial support.
Your daughter is in a better situation than most: she has loving parents who care about her.
Good luck.
HELP! THE TAX MAN IS BEATING UP MY KID
Hi Scott,
I have a very hardworking 13-yearold who has amassed quite a bit of money: she has saved up $200,000! She would like to purchase a property but as a minor she will have to pay 66 per cent on any income earned from the property. (Clearly she’ll still live at home until she’s old enough!)
The goal is to own it outright in a few years and invest in more property, but I’m way out of my depth here. What is the best way for a minor like
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her to make their money work for them until they turn 18 – in their own name, not mine?
Helen
Hi Helen
Two hundred grand? That’s amazing! You must be very proud (and a fine role model).
You’re right about the penalty rate on kids under the age of 18.
However, this only applies to unearned income, like a bank account, rent or dividends from shares. It does not apply to income from the sweat of their own brow.
I wouldn’t limit your research just to property. It would be a good idea for her to learn about investing in the share market as well. To kick off her portfolio, all you’d need to do is set up an account as trustee for your daughter and purchase a hands-off portfolio of local and international shares. You’ll need to pay tax on the dividends – though franking credits mean it’s not much of an issue. To minimise this, open the account in the lower-earning spouse’s name. Then the shares can be transferred to her when she turns 18.
Finally, I’d give her my book (or audiobook) so she can learn all about investing and how to manage her money, as she seems to have the earning part all worked out!
YOU PRICK, BAREFOOT
Hi Scott,
So for the last 10 years all I have heard is “Barefoot this, Barefoot that”. (Not that I have minded, as we have just hit net zero debt thanks to Barefoot – having no debt is amazing!) But while cooking the barbecue the other night my wife and I had an argument on whether to prick the sausages or not. So I said, that’s it –
I’m asking Barefoot!
Clinton
Hi Clinton
I’ll refer you on to The Wiggles, who sing: “Ten fat sausages sizzling in the pan … one went pop, and the other went BANG.” It pays to prick.
AFTER MIDNIGHT WE’RE GOING TO LET IT ALL HANG OUT
Scott,
I have owned a small coffee shop for eight years, but since Covid started I just haven’t been able to catch up. I’ve been taking on credit cards to keep suppliers off my back, and also for wages. Now I’m desperate and so embarrassed and ashamed of my situation. Can you PLEASE answer my question as I can’t speak to anyone on the phone, as I don’t want my partner or my employees to hear what’s going on.
Helen
Hi Helen
I saw you sent your email at 1.08am. I get a lot of questions after midnight when people can’t sleep. I’d like to help you get some sleep again, so here’s what I want you to do.
The Small Business Debt Helpline (sbdh.org.au) has a webchat feature on its homepage where you can chat discreetly with a qualified financial counsellor – someone like me. They are experts in helping small business people in exactly your situation. They are government-funded and free from any conflicts and they do amazing, life-changing work.
Both the Small Business Debt Helpline and the National Debt Helpline (ndh.org.au) have this chat feature. It’s a great first step to help you get the support you need.
Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions