This is the sixth in our series on the 7 Steps to health and wealth. 

It always amazes me how many people take investment advice from a friend around a dinner table.  I have!  Before I became a Certified Financial Planner (CFP), a friend was convinced palladium was the new in demand resource, so I bought some.  And it wouldn’t surprise you that over two years it lost 93% of its value.  I’m seriously glad I never bet the bank on it… because that investment was in fact was similar to gambling.  Putting money on something I knew nothing about in the hope to strike it rich.

The Millionaire Next Door, a book that really resonated with me, points out that you are 125 times more likely to get rich from working hard than a get rich quick scheme.  Yet we all try!

Here’s why you shouldn’t take financial advice from a friend

There are a few problems with taking a recommendation from a friend at the dining room table:

  1. They have no idea the detail of your financial situation. Even our best friends don’t know exactly where we are when it comes to money.
  2. Therefore, they have no idea what you should be prioritising in terms of your financial strategies.
  3. In addition, the role money plays in a marriage or relationship (and therefore the knock on effect of that recommendation on the marriage).
  4. Your investment risk profile may be WAY different to theirs. They may think that gambling is a sure way to make money, whereas you’d feel better with your cash neatly tucked under your pillow.
  5. The goals you’re trying to achieve are probably very different.
  6. The timeframes of their goals may also be very different to yours.

So what do you need in place for you to start investing?

Download the guide How to Invest Wisely for more information

  1. Start with a goal.  Understand how much you need – it will help you work out the timeframe and the amount you’ll need to save (working backwards).  If it’s saving for retirement, this PDF download will help you to know how much you should have saved by now.
  2. Make sure you have the basics in place.  As mentioned in the heartbreak of debt, pay off all your short term debt such as credit cards and clothing account.  For other basics you need in place, click here 
  3. Understand your risk tolerance.  The more risk you take, the more your investments grow.  But if you’re not comfortable with your investments dropping in the short term, then shares may not be for you.  Choose the type of investment that best matches your tolerance for risk.
  4. Increase your likelihood of wealth.
    1. Look out for fees – a 1% fee can reduce your value of savings over a lifetime by one third!
    2. Commit to increasing your understanding of wealth by reading one article a week.
    3. Get a great financial adviser who partners with you (not talks at you) to help you increase your wealth.
  5. Use these easy ways to save so that over time you build up more wealth.  And make it hassle free by setting up a direct debit.


Download our cheat sheet on How to invest in 6 steps