💸Oversaving Might Be Your Biggest Expense

☕ Good morning SenseMakers!

The traditional advice to "save for tomorrow" while depriving yourself today seems responsible but as income increases, the game changes. 

Truth is, for high earners, financial planning isn’t a story of deprivation as much as it’s a game of optimization. 

The question isn’t “Can I afford this trip, this car, this house?” 

It’s “How do I build a financial life that funds both indulgence and endurance without compromise?”

In other words, how do you find the high-income balancing between spending like you’ll live forever, but planning like you won’t? 

It comes down to systematic frameworks that enable intentional enjoyment without undermining long-term accumulation. 

Today, we’re talking about how to build a financial plan, a system that lets you spend freely without eroding your future liquidity, legacy, or leverage. 

📊 The ROI of Luxury 

Not all spending is created equal. For high-income earners, spending decisions shouldn’t hinge on guilt but on return, and not always financial.

Enter the idea of Lifestyle ROI: a deceptively simple but powerful mental model that evaluates luxury spending by mapping its subjective value (memory creation, relationship building, creative recharge) against its opportunity cost.

Imagine categorizing discretionary spending into four buckets:

1. High financial cost, high existential return (e.g., bucket-list travel with aging parents)

2. High cost, low return (third vacation home in a tax-hostile state)

3. Low cost, high return (curated experiences, health optimization tools)

4. Low cost, low return (default luxury consumption without intent)

This matrix (inspired by the Eisenhower matrix for task planning; he won a war, he can help with spending.) removes so much of the cognitive load and impulsivity from luxury spending. It also helps reinforce intentionality into any experience. 

Suddenly, the fuzzy becomes focused. Impulse becomes intention. And “worth it” gets a real framework.

Also, experiences that deepen relationships and create family touchpoints don’t just “feel good.” They can actually reduce family conflict and clarifying values, often leading to smoother estate transitions and stronger wealth preservation across generations.

🚥 Dynamic Drawdown: Spend Smarter With Market Rhythm  

Most traditional financial plans treat lifestyle spending like rent: fixed, predictable, untouchable. If your portfolio’s dynamic, your spending strategy should be too.

Smart money treats financial planning as a variable allocation responding to market conditions and wealth accumulation targets.

Top advisors now use dynamic drawdown planning: spending thresholds tethered to real-time market or personal financial signals. 

Instead of relying on fixed percentages, withdrawals flex based on things like rolling portfolio returns over trailing 12–24 months, capital preservation thresholds (e.g., drawdown caps triggered at a 10% equity loss), or non-portfolio income variance (performance bonuses, K-1s, founder exits).

Take Darren, a 48-year-old tech founder with $15M in liquid assets and a $1M annual lifestyle. His team doesn’t just “pull 4%.” Instead, they’ve built a glidepath that adjusts for market rhythm:

If his portfolio is up 10%+ YTD, they greenlight discretionary splurges, upgrading the vacation house, art acquisition, and funding a family foundation. They then focus on selling assets that only trigger short-term capital gains to provide the capital for that spending, if they need it.

If returns are flat or slightly down (say, 0–5%), spending continues at baseline but they defer new capital commitments.

If the market drops 10%+, they tap a pre-planned liquidity sleeve of muni bonds, reduce new luxury outflows, and lean more on non-portfolio cash flow (like recent secondary liquidity from his startup).

Done right, dynamic drawdown planning keeps you investing through the cycle, preserves capital, and reduces sequence-of-returns risk, without turning every market wobble into a lifestyle crisis.

Check out our recent YouTube short on how this concept could apply to your situation:

📈 Perception-Adjusted Lifestyle Creep: Cap the Ego  

As your net worth grows, so does the ambient wealth around you. What was once a quarterly splurge becomes routine. The Camry turns into a Tesla, the Tesla into a Bentley, and suddenly you’re debating which private jet terminal has the better espresso.: NetJets or Wheels Up.

Lifestyle creep isn’t just a money problem. It’s a neuroscience and social engineering problem. Dopamine recalibrates. Status becomes relative. And spending shifts from intentional to automatic.

The danger? It all feels normal.

That’s where perception-adjusted guardrails come in. Think of things like a lifestyle lockbox, or a separate post-tax earning sleeves grown for future indulgence only. For example, a lifestyle trust that auto-disburses a fixed $50k/year for indulgences.

 This is about fighting hedonic escalation with pre-set friction systems. As your perception of “enough” evolves, your capital doesn't need to follow obediently.

Making Sense of Balancing the Finances of Today and Tomorrow

There’s plenty to think about and plan around the modern tension of maximizing life now or maximizing longevity later.

Traditional advice assumes you’ll overspend. But for capital-rich individuals, the greater risk might be oversaving and living with phantom regret.

This isn’t about penny-pinching. You’re not reusing Ziploc bags. You’re architecting a life where five+ income streams fund ski weeks in Zermatt, and not a dime more than necessary goes to the IRS.

Enter the philosophy behind Bill Perkins’ Die With Zero and the momentum of the FIRE (Financial Independence, Retire Early) community: Spend intentionally while you can still enjoy it. Design life backward. Avoid the phantom regret of hoarding too long.

Yet most planning models miss the emotional nuance of moving from accumulation to freedom. They flatten you into a “savings rate” or “4% rule.”

When it comes to the lifestyle you want to live, the challenge isn’t so much whether you can afford it, but how you can keep the machine running without torching the long game.

This is wealth architecture.

As always, I hope this helps you to Prioritize Your Version of a Rich Life.

Until next week!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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