Great Advice From The Debt Man Walking:

Bruce Brammall (or debt man to his friends) has written the financial book Debt Man Walking published in 2008. We managed to ask Bruce some questions which will help people out with their home budget.

For more information on Bruce jump onto one of his two websites.

This website will give you all the information you need to know about Debt Man Walking the book.www.debtman.com.au

In 2009, Bruce opened Castellan, a financial planning business which helps people out with insurance, super, investments and has a monthly investment newsletter.www.castellanfin.com.au

Thanks Bruce Brammall for your time today. Maybe for our readers you can talk a little about your history and how you came to start the business and write the book?
My background is journalism, with over 15 year’s experience, mostly in the business section. From about 1999, I started developing a more general interest in property and finance.

I noticed a lot of people started coming to me for advice on finance. As I wasn’t licensed, I went and did the study and became licensed. Just as I completed that in 2006 and was about to go and look for a job as a financial adviser, I was approached with an offer to write a book. Which I did and it was called The Power of Property. Plus I also wrote Investing in Real Estate for Dummies.

Then I wrote Debt Man Walking. It’s slightly different from your book Adam; it’s about embracing certain types of debt for your advantage. But the book isn’t specifically about debt; it’s more about finance for Gen Xs. The sort of people who have control of their home budget and don’t have any trouble with their credit cards. They have their budget under control and want to work out what’s next.

My reason for writing the book is there are lots of books out there dealing with how to save money and basic budgeting. These are mainly for younger people who need to be shown the benefits of not buying that extra coffee a day and saving 3 or 4 dollars. Plus there are plenty of books at the other end of the spectrum as well which have geared property, high-end shares, trading and super. But there wasn’t really a book on the shelf in Australia for Generation X or wealth accumulators as they are known. This is the hole which I was trying to fill. I really felt I could help Generation Xs born in ‘60s and ‘70s.

The whole point of the book was to say, “OK you have learnt the basics and how to save so I’m not going to go through that. But you are nowhere near retiring, which is still 10, 20 or 30 years away for you. What do you do in between?

After getting the book out there, the response was pretty good. In fact in a week I got an email from someone saying, “I love your book, can we come and see you?” A few months after that I left where I was working and started my own business.

I assume you are quite good with money now? But in your younger years were you always good with money? Or was there a point where you changed?
I was always a very good saver as a kid. I would save a portion of my pocket money. I wouldn’t spend it on lollies or toys or whatever.

My philosophy has always been delayed gratification. Meaning the more you put away for later the more you will enjoy it. This works extremely well when it comes to money because you get interest on interest and it adds up quickly.

I always purchased shares from a young age. One day my mum said, “You need to save the $500 excess if you ever want to drive our car.” So she gave me a choice; I could put it in a bank account or I could buy some shares. So I bought some shares with it and it started an interest with me.

I was always a pretty good saver and have never had the living week-to-week thing. This terrifies me more than anything else.

You have helped a lot of people with their money issues but is there a special case you can tell us about?
There would be loads. But a good example would be a young guy I have been working with for two years now. He had $35,000 in what I call dumb debt; car loans, personal loans and credit card debt. All the stuff which gives people immediate gratification. He got himself into big trouble and was staring down the barrel of bankruptcy.

I’ve been talking to him, motivating him to get out of debt. Last week we chatted on the phone and he has managed to pay it down to around $10,000. Just by having regular chats over the last two years he has really made it a goal to pay the debt down to zero. Then we can start doing some positive things for him like getting shares and other positive moneymaking things for future years.

The three things which most financial advisers do is superannuation, investments and insurance. So we helped him with superannuation and insurance right away. But the investment side of things we can’t do yet until he is out of debt.

He had a hiccup about three months ago. He called and said he had a car crash. The car was a write off. He needed to buy a new car. So in this case I had to talk him out of going and spending 30 or 40 thousand dollars on a car. Telling him exactly how damaging it would be for his financial health. My advice was to just go out and buy a 3 or 4 thousand dollar car.

What is your opinion on credit cards?
There are two types of people who use credit cards. Transactors and Revolvers.

1. Transactors: These people put everything on their credit card and pay it off in full each month. They collect the frequent flyer points.
2. Revolvers: These people don’t pay much more than the minimum or just the minimum balance. They constantly have their credit card balance at a level where they are paying interest. This just does not make sense. The interest can be anywhere from 15 to 20 percent. The people who are paying interest are paying for transactors, who are not paying any interest. The people who are paying off their credit cards in full each month are getting the use of someone else’s money for free. But for revolvers they are paying a huge cost to just have their credit cards.

Essentially most of the stuff you are putting on the credit card is immediate gratification stuff. Stuff you really can live without. Revolvers tend to be people who can’t budget. Spending less than you earn is the 100% cornerstone of any home budget.

The Global Financial Crisis hit in 2008. Did you see a change in people’s behaviour in spending?
I did see people pull back a little bit. However, I really think it is happening more now, than it was say two years ago. Interest rates have been rising lately, where when the GFC hit they had been cut. Even though we have not had one since November last year, interest rates tend to take about six months to take effect.

I think people have been doing it tough in the last 3 to 6 months and are really trying to save more. There was a Melbourne Institute report which came out last month, which I have just written an article about. It suggests people’s ability to save has just fallen off a cliff. There are 25 percent of people now who say they are saving at the end of each week or month. However this has fallen by a quarter, from around 33%. The ability of people to save is really struggling now. But on top of this the people who are saving, are saving for the purpose of “saving for a rainy day”.

The retail sector has been suffering for the last year or more. Gerry Harvey (from Harvey Norman) has been moaning like crazy that people just have not been opening their wallets. Last year was just a shocker for retail and it seems to be getting worse. It could be that people are doing it harder or they are worried about their level of debt and they need to put some money away for a rainy day.

You have written many articles about money and budgeting in the newspaper. Which one has stood out in your mind, or was there one you really enjoyed writing?
I have three regular columns. But one article which people really remember me writing was one I did late last year on credit card debt. I write with three other writers and they had covered a lot of the issues. So I had to think outside the box a little. I came up with a new character “my grandmother” however it was a fictitious character. So the article was about a grandmother and her excessive credit card spending binges. Spending money on the RSL pokies and dinner with her Golden Girl friends. We got a really good reaction to this article. Older people are the opposite in most cases to the usual people who have them. It tends to be people in their 20s and 30s who have credit card problems. And here I was writing about a 70-year-old woman who was madly out of control with her credit card habits. To read this article click here.

What is the worst mistake you have made moneywise?
I haven’t made a big one really. I have always spent less than I earn. Once you get married, there are two people’s opinions about money in the household. So you have a few spanners thrown in the works, with kids and bigger mortgages. Then you take on a second mortgage and debt for an investment property. But it’s all gradual.

Have I made some financial mistakes in my life? Yes, of course. However, they have never been so bad as to decimate my finances. I have never made any huge financial mistakes.

If you could wave a magic wand and teach everybody in the entire world just one fact about budgeting, what would you teach them?
Probably delayed gratification; not spending money now or putting something away of what you have or earned. So you can create income streams and assets for later which will look after you later in life.

The concept of delayed gratification was developed by a psychologist called Walter Mischel. He did a study on 3 and 4 year old children in the USA, in the late ‘60s or early ‘70s. He put them in a room and he put one marshmallow on the table. He told the kids they could eat it. However he informed them if he came back in a period of time, they could have two marshmallows. Most of the kids would try their hardest not to eat it. They would try to sleep, play with toys or even lick it and put it back. But around 90% of the kids ended up eating the marshmallow. Only 10% got the second marshmallow. Those 10 percent of kids have followed this delayed gratification over their life. They have gone on to have better academic results, be more successful financially, have bigger groups of friends and were less likely to take drugs.

The concept of delayed gratification, of putting money away to spend later will really help your budget.

If you could go back in time to your 21^st birthday and give yourself some advice on money, what would you tell yourself?
Start investing earlier. I had some shares from age 17 and I was a good saver but I didn’t really get into it more until my late 20s. Plus I wish I had read some finance books earlier. The earlier you start, the longer you have for the power of compounding to make the most of it.