Snowflakes

I’m not a very sappy person, which is to say I don’t typically wear my emotions on my sleeve. But upon some recent reflection and experiences in meetings, it’s clear to me that the old adage is true, we are all snowflakes. Despite our many similarities, no two of us are exactly alike, especially when it comes to our finances. 

This fact is all too often forgotten when reaching important financial decisions. We take on a one size fits all mentality and wind up turning to the wrong sources for information. There are three areas in particular where we should first consider our unique financial profile before heeding advice received. 

Media Experts & Financial Gurus 

There is no shortage of personalities on television, radio and in newspapers and magazines that are willing to offer an opinion. We’ve all likely seen some of the more popular call-in shows where someone gives 15 seconds of background about their financial situation and the “expert” gives some sage advice.

I’m not here to spout off against the concept of these shows. To the extent that they get people to pause and think about their financial situation or to enhance their financial literacy, I’m all for it. The trouble with these recommendations is that they’re meant for a mass audience, meaning they’re boiled down to their simplest form. This is appropriate for the format in which they’re being communicated, but could be potentially the exact opposite of what you should be doing. 

Conventional Wisdom

Another dangerous road to walk down is that of rules of thumb, things “we all know”, and conventional wisdom in general. These messages get passed around, often over generations, without much thought to whether or not they’re valid at all, much less appropriate for our personal situation.

A popular example of late is that you can expect to withdraw 4% from your portfolio for a comfortable retirement. While this isn’t the worst starting point for discussion in the most general of terms, it is far from appropriate for a large majority. If your financial plan consists solely of benchmarking against various assumptions you consider to be common knowledge, it may be worth spending some time investigating those assumptions and whether they hold true for your situation.     

The Joneses

Often times, people will seek out friends and neighbors for advice as to what they might do in a given financial situation or if they have any experience. Our brains are wired to do this. Friends and neighbors are part of our “tribe”. They’re typically like-minded individuals and we want to behave and act as they would so that we can remain a part of the club. There’s nothing wrong with this behavior, it’s natural. 

That said, you should take particular caution to be aware of this inclination when it comes to your finances. While the Joneses may live on your block, drive a similar car or have kids at similar schools, you may share completely separate values when it comes to your finances. They may be leveraged to the hilt, have a large inheritance from a rich uncle, or a hundred other scenarios that would cause their response to be different from what would be appropriate for you. 

None of these scenarios are meant to be avoided completely. They are rational places for us to turn when first investigating our financial questions and curiosities. Ultimately, though, we must be sure to evaluate our own goals, risk tolerance, tax implications, state laws and other specifics about our given situation to ensure we are making the best decisions possible. Consult with a trusted professional that can take a holistic view of your unique situation before taking those important financial steps in your life.