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This week is Bear Week.

My Sons Father introduced me to Bear Week. Those that know me know that I am always a bit bearish. A copy of The Bear Dance hangs in my office and I’m probably in the minority with a framed stock certificate of Lehman Brothers. I anticipated my bear week post to come to me quite naturally and quickly. However, always the contrarian, I decided to take the path less traveled rather than the easy path that was laid out in front of me.

Today, I would like to talk about bubbles. Now before you click away I’m not talking about stock bubbles, tech bubbles, tulip bubbles, or any of the other cliché bubbles that have frankly been beaten to death. Rather, I want to talk about the real bubble that can destroy your financial dreams and wreck your goals: the social/cultural bubble.

Birds of a Feather Flock Together – Proverbs

People tend to associate with others like themselves. The sociologists have coined the term “homophily” to describe the tendency for people to bond with individuals similar to themselves, rather than individuals that challenge their beliefs.

Sociologist Miller McPherson, in his 2001 paper on the aforementioned subject, stated “similarity breeds connection”. The study of homophily has been used to explain everything from why people vote for certain political candidates to why teenagers give in to peer pressure.  Research has shown that most social networks tend to be homogeneous. Now, if you have stuck with me this long, you are probably wondering what sociology has to do with bubbles and your financial health?

“The direction of one’s chosen paths automatically selects for the paths that may cross it. A warrior’s path will intersect with the paths of other warriors, allies and enemies alike. A worker’s path will intersect with the paths of other workers.” – Thrawn

Many producers of financial content such as bloggers have spent their lives crossing paths with people such as themselves.

A doctor that blogs about personal finance in their spare time will tend to hold other doctors and medical professionals in their professional networks. An IT professional that writes about finance making 100k salary a year will tend to hold other IT professionals and white-collar professionals in their network. That is their bubble.

A social network will tend to hold experiences, concerns, and insecurities in common, and individuals inside of the bubble will also be shielded from the experiences of individuals outside of the bubble.

This experience makes it challenging for someone in a specific niche to relate to every situation.

Take an IT professional, for example. No matter how well intended, he or she would likely not be familiar with the challenges of a truck driver.

Speaking of a truck driver, I recently met with a young truck driver that was helping his family move some furniture. A heavy object fell on his foot. His foot was shattered, rendering him unable to work. Since this accident happened off the clock and was not work-related, his employer-sponsored benefits wouldn’t cover the loss of wages. An IT professional with a broken foot would still be able to operate as an IT professional, as a broken foot would be, at worst, a minor (yet painful) nuisance. A truck driver’s tools include his feet, and therefore would not be able to fulfill his employment duties.

I have noticed that many younger bloggers tend to be glib about the markets and risk in general. They like to say things like it’s only a paper loss, or it’s only a loss if you sell, and that the markets always go up other time. The problem is, what if you need the money? What happens if the market is down when you break your foot and can’t work for several weeks, or even worse, what happens if you develop a more severe health issue?

It’s easy to be casual about the market when you’re a high-income professional and were planning for early retirement.

Let’s say you’re an IT professional (sorry to keep picking on you IT guys) planning on retiring at 45 and you are making 100k a year. If the market falls 30 percent when you are 44, you still have the luxury of pushing your retirement back a few years. Retiring at 48 or 49 is still deemed as very successful. You have the safety net of time. If you retire in your late 40’s and find that things don’t go as planned, hopefully you have your health and have the prospects of re-entering the workforce.  An individual in his or her 60’s doesn’t have the same safety net of time.

So, here’s the question: Do the producers of the financial advice you’re consuming hold the same values and concerns you do?

Do you even really know anything about their real identities and relevant experience? Do their values and experiences align with your own?

Financial advice affects everyone in a different way. There’s no “one size fits all” version of financial planning. It’s important to take financial advice from people who understand you and your financial situation. If you want to take advice from your favorite blogger, make sure they have a point of reference and can understand how their advice will impact your situation.

What makes sense for one individual may not make sense for another.

Here’s another example: A doctor saving 100k a year has a million dollars invested during a bull market to capitalize on the growth. For a few years, his portfolio was doing well and making great returns. Then, one day, the market decides to take a dip prior to retirement. In this situation, the market dropped 20 percent in one year. It may only take the doctor 2 years’ of additional savings to make back his loss and get his retirement back on track.

In contrast, if a pre-retiree built their retirement savings by contributing 10k to 15k a year over 30 plus years and the market dipped 20 percent, it could cost them 10 plus years of savings. The pre-retiree may not have the time inclination, or opportunity to attempt to recoup the loss.

As you can see, the market and financial advice given impacted both investors in extremely different ways. 

We aren’t seeing the entire picture. Financial gurus sometimes leave out the importance of having an adequate emergency fund, or insurance policy (home, auto, disability, life, and health) to protect you and your family in case of an incident or loss of a job.

So, if you want to continue to follow your favorite financial expert, do it. But do it carefully.

Take all advice with a grain of salt and understand that not all advice will work for your financial situation. Relying on advice from individuals whose experiences and values do not align with your own can prove to be financially costly, and ultimately, it could cost you time you cannot afford to lose.

“Piece of advice: you can lose your money, you can spend all of it. And if you work hard you can get it all back. But if you waste your time, you’re never gonna get it back.” – Del Knox (Without a Paddle)