Welcome to the 17th edition of the Tech Financial Planning (TFP) Newsletter.

Today’s newsletter is something my dad wrote over 10 years ago.

It’s a topic I’ve thought a lot about recently, both in my life and in the families I work with - how as we earn more, we spend more.

In financial planning, we call this lifestyle creep.

While my dad is in commercial real estate, a lot of the same lessons apply to people in tech.

I’ll let my dad take it from here.

Best Year, Base YEar = BUst

“People tell me to save for a rainy day. But I tell them, ‘What happens if it doesn’t rain and I’m stuck with all of that money!” Leo Durocher

Here is a big piece of wisdom on what to do when you begin to earn a bigger income. It comes from the “Marshall School of Hard Knocks,” which means learn from my error!

My wife and I made the mistake, at least at two times of our married lives, of making our best year our base year. In other words, we used our best year of earnings as our standard of living.

It wasn’t like we consciously did this. It sort of snuck up on us. It started with a harmless cable upgrade. Next, I leased a new car. And then I thought, “Hey, we can finally take the kids on a nice vacation.” We began to expand our monthly obligations little by little. And then 2008 hit! Lost job, health issue, oldest started college. And savings….oops! What savings?

I got into sales (Commercial Real Estate) because of the possibility of making a lot of money. I have been blessed to have done very well. But not every year is a high. The fluctuation in income can sometimes be quite dramatic.

It is very easy to get a little crazy when a big deal closes.

I am probably the worst budget guy in America. To me, budgeting is like trying to lose weight. The diets I enjoy the most are the ones where I exercise a lot and don’t change my eating habits. But they don’t work very well, because as soon as I miss a few workouts, kaboom! The weight is back on. Diet along with exercise always produces the best results.

Likewise, in your personal financial matters, don’t depend on out-earning your challenges. Better to budget expenses. Live within a budget. Save both for short-term and long-term objectives. And practice delayed gratification. It works for raising kids and it works wonders for your financial well-being.

Leo Durocher spent his money as fast as he got it during his major league baseball career. But even in Southern California, despite what the song says, it does rain. It’s not bad to be stuck with a little money.

Don’t make your best year your base year!

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