If you’re thinking about taking control of your financial future, it can be easy to get caught up talking about your plans with friends or family over a beer and a BBQ.
While friends and family might have the best intentions, sometimes the advice they offer might actually do you more harm than good. Here are some common finance traps you could fall into at your next backyard BBQ:
Backyard Tax Advice
Some Australians are notorious for knowing everything about tax rules, and they’re willing to share their knowledge with you, no matter how inappropriate it might be for your personal circumstances.
For example, your well-meaning friend might have heard from a mate’s brother’s next-door-neighbour that the best way to minimise tax is the same way he did it.
While your friend might only have good intentions of helping you, it’s important to remember that YOUR personal financial situation is never the same as anyone else’s.
Your income, your expenses, your home loan balance, and your investing goals are not the same as anyone else’s, so why would you follow tax advice from someone with a completely different set of financial circumstances?
Your friend might have recently bought an investment property and chose to buy it jointly with his wife, going in at 50% ownership each. Your friend might also explain that he’s minimised his tax really well this way, so it can be tempting to follow his example.
Once again, your friends and family don’t have the same financial circumstances you do, so why would their strategy also work for you?
Mum and Dad Did It
Your parents only ever want the best for you, so it’s normal for most parents to make suggestions about what worked for them already. While their strategy might have suited their goals and their strategy, they aren’t taking into account what might work for you too.
Now, if mum and dad have retired early with a multi-million dollar property portfoilo behind them it makes complete sense to follow their advice. However, if they’re still working hard to achieve their goals and dreams, it makes more sense to discuss your personal situation with a professional to ensure you’re on the right path to your own success.
Everyone has a friend who is full of negative advice and barbecue conversations are always the best place to bring it up.
After all, negative friends will be happy to tell you horror stories about tenants from hell. They’ll tell you all about how someone they know got caught in a scam and lost everything. They’ll also find ways to tell you that investing is risky, or the real estate market is shaky, or it’s the wrong time to buy right now.
Friends who bring up negative comments about your investing goals aren’t trying to hurt you. Instead, they’re trying to protect you against getting hurt.
However, ask yourself if your well-meaning, negative friend actually did any of those things for themselves. If they didn’t, then why are you following their advice at all?
If they did, find out why they had such a bad experience, and then work on learning how to avoid making the same mistake on your own investing journey. Tenants from hell can be avoided with a professional property manager. Scams can be avoided with a little homework and research to be sure you’re on the right track.
Turn their experience into a positive lesson you can use on your way to success.