Written by David Rosbotham DipPFS | Financial Planner | Feb 25

When it comes to personal finance, one of the most common financial mistakes even the smartest people fall into is taking financial advice from their friends, family or colleagues without considering their own unique circumstances. While it might seem logical that a strategy working for someone with a similar job and salary would work for you too, the reality is much more complex.

The Financial Illusion: Meet Jim and Jon

Let’s consider two individuals: Jim and Jon. On the surface, their financial situations seem identical. They have similar jobs, incomes, cars, and even family structures. However, when we dig deeper, their financial realities are significantly different.

Key Differences That Impact Financial Planning

• Savings vs. Debt: The amount of money they have saved versus their liabilities (mortgage, loans, credit card debt).
• Liquidity Needs: Short-term financial obligations such as home renovations or education costs.
• Investment Preferences: Some prioritise long-term growth, while others prefer stable income-generating investments.
• Risk Tolerance: Comfort with market fluctuations and alternative investments varies from person to person.
• Inheritance & Windfalls: Some may have future financial boosts from inheritances, while others do not.
• Job Security & Career Aspirations: Stability and entrepreneurial ambitions impact financial risk-taking ability.
• Family & Relationship Factors: Spousal income, alimony, child support, and caring for dependents can dramatically alter financial plans.
• Retirement & Lifestyle Goals: Desired retirement age, lifestyle choices, and geographical preferences all shape financial decisions.

The Danger of Copying Financial Strategies

Even if two people appear similar in many ways, they likely have vastly different financial realities. Following a friend’s investment or savings strategy without considering your own risk tolerance, liabilities, or long-term goals could lead to significant financial missteps.

For example, if Jon invests aggressively in high-risk stocks because he has a financial cushion, but Jim follows suit despite having outstanding debts and short-term liquidity needs, Jim might end up in financial distress.

Why a Personalised Financial Plan Matters

Instead of relying on generic advice or copying a friend’s strategy, it’s crucial to create a financial plan tailored to your specific situation. A solid plan considers:

• Your current and future income
• Existing debts and financial obligations
• Risk tolerance and investment preferences
• Short-term and long-term goals
• Family and personal responsibilities

Trust Your Plan, Not Someone Else’s

Working with a financial adviser to develop a customised financial plan can help ensure your decisions align with your unique financial situation. While well-meaning friends may offer advice, their strategy might not be right for you.

Remember, your financial journey is as unique as you are. Making informed decisions based on your own goals and circumstances will lead to better long-term financial health.

If you need expert guidance on crafting a financial plan that works for you, consider consulting with a professional financial planner here at Rosbotham Finance, who will take time to understand your unique needs and goals. Find out more about Our Approach here.