6 Money Mistakes That High Earners Make, According to Rachel Cruze
Written by
Ashley Donohoe
Edited by
Rebekah Evans
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The 2025 Goldman Sachs Retirement Survey and Insights Report found that around 40% of Americans making more than $300,000 per year were living from paycheck to paycheck. While this might sound surprising, making a high salary doesn’t guarantee that you’ll use it wisely to build wealth or afford the lifestyle you want without debt.
In a YouTube video, money expert and author Rachel Cruze discussed six financial mistakes that high earners often make. Plus, find out which smart alternatives she recommended.
Allowing Lifestyle Creep
You might assume a higher income equals more cash for key goals, but some high earners become comfortable overspending to upgrade their lives. A 2025 Harris Poll survey even found that around one in three Americans with six-figure incomes experienced financial distress.
Cruze explained that upgrading your lifestyle a little as your income grows isn’t always bad, but encouraged having a monthly budget based on your old income. That way, you can cover the essentials and designate some of your extra money for both luxuries and financial goals, like investing and becoming debt-free.
Taking Too Many Risks Too Quickly
Having extra margin can tempt you to make risky decisions, such as investing in crypto, taking out a loan to buy a rental property or investing in a novel startup. While the potential returns sound great, you can also end up broke quickly.
“When you go and you take on, especially debt, but you take on things that are not proven with that extra margin that you’re making and then what happens is that snowball effect can happen,” Cruze explained.
She encouraged sticking to more boring, lower-risk options, such as mutual funds in a Roth IRA or a 401(k). Once you’re more established and can afford to lose money without it being detrimental to your finances, you might revisit the riskier investments.
Spending Cash They Don’t Have Yet
People of all income levels might make plans for money they haven’t received yet, whether that’s a big bonus check or an expected raise. You might prematurely make a large purchase, such as a new car, not thinking that something could go wrong. Maybe you get laid off or the company skips bonuses this year.
Cruze recommended spending the money wisely once it does arrive and avoiding debt in the process. For example, you might use your big check for an affordable used car instead of trapping yourself with expensive monthly payments on a new one.
Believing Income Equals Wealth
“So remember, your annual salary does not equal your net worth,” Cruze said. “And in fact, a good portion of it probably doesn’t factor into your net worth at all because it’s liquid cash that you’re having to spend to live on.”
Rather than using your income as an indicator of financial status, calculate your net worth by subtracting all your debts from the value of your assets, such as your house, car, cash and investments. Plus, if you have a lot of debt, aim to pay it off quickly so you can increase your net worth and stop losing income to debt payments and interest.
Not Prioritizing Saving
While they were in better shape than lower earners, 25% of U.S. adults earning at least $100,000 per year didn’t even have enough saved for a three-month emergency fund, based on 2024 Federal Reserve data.
Cruze encouraged having sinking funds in your budget to ensure you’re saving for future needs, such as emergency medical bills or a car replacement. She also advised having three to six months of your usual monthly expenses in an emergency fund once you’re debt-free. To earn a decent return on your savings, use a high-yield savings account.
Forgetting That Cash Is King
Whether you have your eye on a new phone, car or yacht, you might base your decision on the affordability of the monthly payment for that item. But Cruze explained this is a big mistake.
“If you depend on debt for all these things that we’re talking about, then you are putting yourself at risk because if that income for some reason goes down or goes away, you’re still stuck with the payment,” she said.
It’s wiser to look at the full picture and only buy things that you already have the cash to fully cover. You should also ensure these purchases fit in with other items in your budget and your long-term goals.
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