Have you ever wondered if wealthy individuals are immune to financial pitfalls? In this blog, we'll explore five common mistakes we observe among high-income earners—those with individual incomes of $250K+ or households earning $500K+ annually.
The inspiration for this blog came during a discussion with my business coach. We were exploring ways to improve our lead generation to attract more of the right clients. While we receive excellent leads through referrals and maintain a strong Yelp presence, we're always striving for growth.
We know that the more you give, the more you get, which is why we continue to publish content we see as valuable. One of our favorite pieces of content we released is a free video course and workbook that breaks down core money principles and facilitates actionable steps to building wealth. You can explore our training here if you haven't already.
As I reviewed this training with my coach he asked a crucial question: Does what we offer align with what our ideal client needs? This seemingly simple question sparked a deeper inquiry into the financial journey of those we serve.
Our ideal clients typically earn between $10K and $100K+ per month from their active income, are at early to mid-career stages, value one-on-one support, and understand the power of delegation to focus on their highest-impact activities.
When my coach asked this I thought, “maybe this doesn’t align with what they are looking for.” And the more I thought about it, the more I realized, it may not be what they are searching for, but it is what they need. I have had the privilege of peeking behind the curtains of a lot of "rich people’s" finances and I can tell you, they are not immune to financial problems and frequently make costly money mistakes.
Here are five of the most common ones we encounter:
1. Wealth Concentration
High-income individuals often have a substantial portion of their assets tied up in their businesses or company stock options. While this can be financially rewarding, it can also be risky. If the business or company faces challenges, it can significantly impact their financial security.
2. Not Tracking Spending
Ironically, the more money people make, the less concerned they tend to be about tracking their spending. Budgeting often falls by the wayside, especially when income appears stable. This can lead to cash flow mismanagement, overspending, and unnecessary credit card debt.
3. Underfunded Retirement Accounts
Despite high incomes, many affluent individuals haven't saved enough over a sufficient time frame to support their desired lifestyle in retirement. They may contribute to their retirement accounts, but it often falls short of their goals.
4. Making Emotional Money Decisions
Surprisingly, many wealthy individuals excel at creating wealth but struggle with managing it. Lifestyle inflation, emotional investments, and impulsive financial choices can erode their financial stability.
5. Money IQ Doesn't Keep Up With Income
One of the significant challenges we've noticed is that high-income earners often haven't invested enough time in financial education and money management. Focusing on wealth creation (making money– active income) often overshadows the importance of wealth preservation and growth.
While our free training and worksheets may not directly target high-income individuals, they hold immense potential to save them both money and time. Ironically, the practical advice shared in our free training applies to anyone at any stage of their financial journey because money principles remain constant, regardless
of income levels or net worth.
As we continue to develop more free educational content, we value your input on what lessons or topics you find most valuable. Your feedback helps us tailor our resources to better serve you and others like you. What do you think? What type of content do you think is the most valuable?
Ethan Ho- Your Financial Advocate