Good intentions or otherwise, it could be costly advice
The network of people you have around you is one of the biggest contributors to your business, life and financial success. Intentionally or not, they shape your understanding of how the world works. And it’s in all sorts of ways from what makes for a good relationship and how you save money’, to ‘should you quit your job and open your own business?’
The people in and around your life are going to have an opinion, whether or not you ask for it. It’s not necessarily a bad thing and advice can be an important part of expediting your learning process and avoiding obvious mistakes.
But there is good advice and there is bad advice and you can’t always pick what’s going to come from whom or even which advice is correct. Some of the people who most want you to succeed can end up being the bearers of well-intentioned, terrible advice. And sometimes, you might not be able to see a carefully hidden agenda no matter how careful you are.
If your best friend knows you’ve been dreaming of running your own bakery all of your life, they aren’t likely to tell you to cut your losses, even if it turns out to be an obvious money pit. Or the inverse, you’ve got a top-tier, great idea to disrupt an industry sector, but your parents advise you not to pursue it, not because they don’t think it’s a good idea, they’re just worried you might fail and they want you to be safe.
Before you decide to take financial advice from someone, you need to ask yourself a couple of questions.
Do they run a successful business? Have they been at it for more than five years? Is it truly profitable? Are they across all their obligations, tax, super, industry rules – ie: are they at the top of their business game? Or if they’re giving financial advice and don’t run their own business, have they paid/or are close to paying off their mortgage? Are they set to retire comfortably? Do they have a six month fund set aside to see them through an emergency?
If the answer is no – or they tried something once and it didn’t work (for whatever reason), you’re probably best to take their advice with a grain of salt.
After all, you wouldn’t take marriage advice from someone who can’t sustain a relationship for more than a couple of months or has never been in a relationship. Nor would you take medical advice from your plumber. So why is it when it comes to money, so many people are prepared to listen to tax advice from their brother’s neighbour who swears they’ve got a tricky thing the ATO don’t know about or that they’ve got the next big too-good-to-be-true stock tip?
It’s fool hardy at best and downright dangerous at worst.
Even if the person dispensing the advice does have a solid track record and ticks all the boxes, you might want to consider a couple of other things. Let’s say you have a mate called Jo. Now Jo retired at 55 and ran a great company in the 80’s/90’s. Whilst he’s ever so generously offering you the hard-won advice that made him wealthy, there’s one problem – you’re not Jo.
Maybe he did all the right things and was actively responsible for his success, but he did all the right things for his circumstances at the time. He might’ve had equity in his home that you don’t. He might’ve had a network of business partners you don’t have access to. He might have had a wealthy father that gave him a ‘small loan of a million dollars’. And/or what made for business success in the 80’s and 90’s is very different to what works in 2018 (just ask Block Buster Video or Dick Smith).
So what should you do? By all means when it comes to business, find a mentor who’s done it all before. Preferably someone without vested interest, who will get you doing some good stuff in your business – filling your new business pipeline, keeping customers happy, challenging you on your thinking and your systems and processes.
However, when it comes to your financials (and legals) – especially around your obligations, always, always, always seek the advice of a qualified professional. The rules around your legislated obligations change frequently. Sometimes those changes are minor and might save you a bit if you’re across them and others are significant and can cost you thousands or worse, if your response is incorrect – even if you’re doing the best you can. When it comes to tax, the ATO and/or ASIC ignorance is never bliss or an excuse.
And that’s where we can help. If you’re interested in getting professional advice tailored to your business and/or personal circumstances, we’d love to help. You can give us a call on 02 6023 1700 or drop us a note via the form below.
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