3 Money Mistakes New Millionaires Make — and How You Can Learn From Them
Written by
Cindy Lamothe
Edited by
Jenna Klaverweiden
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Hitting millionaire status sounds like the dream — until you realize having money doesn’t automatically mean knowing how to handle that kind of wealth. In fact, plenty of new millionaires trip over the same financial missteps that can shrink their fortune just as fast as it grew.
The good news? You don’t need a million in the bank to learn from their mistakes. Here’s what they often get wrong — and how you can avoid falling into the same traps.
Digging Into Your Retirement Fund
“I recently consulted a client that made it to retirement in their 60s and saved around $1.5MM to fund their retirement,” said Kyle Chapman, licensed fiduciary and investment advisor representative at Asset Preservation Wealth & Tax.
He said their first move in retirement was to purchase some land to build a vacation home costing around $400,000.
According to Chapman, the client’s old advisor didn’t explain to them the sequence of returns risk and how withdrawing this large portion of their retirement account in their early years could significantly limit how much they could withdraw for retirement activities in the long run.
It’s Not About How Much You Make, but How Much You Keep
Chapman noted that many clients tend to start spending more once they have more. “Their discretionary spending increases while their savings don’t change. It’s not about how much you make but how much you keep,” he said.
This goes back to the basic rule of paying yourself first a minimum of 20% of your gross income, which you can do by saving in various retirement and investment accounts.
It’s easy to get caught up in the excitement of higher earnings and start upgrading everything — from cars to vacations to gadgets. But without boundaries, that lifestyle creep can quickly eat away at long-term financial security.
By setting aside a portion of every paycheck before you touch the rest, you build a cushion that keeps working for you no matter how your spending habits evolve. Over time, those consistent contributions grow into real wealth, while the fleeting thrill of overspending often leaves people right back where they started.
Maintaining Accounts at Different Institutions
Many of Chapman’s millionaire clients tend to have many different accounts with different institutions. He said this makes it almost impossible to manage the portfolio in a comprehensive manner.
“Each account will have similar holdings leading to more stock intersection and more risk,” he said.
In other words, when accounts are scattered across multiple banks and brokerages, it becomes harder to see the big picture. Overlapping investments can sneak in, diversification gets muddled and fees may pile up unnoticed.
Consolidating accounts — or at least tracking them in one place — can give you a clearer view of your overall strategy and make it easier to rebalance when needed.
More From GOBankingRates
