4 COMMON MISTAKES AFFLUENT AMERICANS MAKE WITH THEIR MONEY — AND HOW TO AVOID THEM

Affluence, like beauty, is often in the eye of the beholder. What looks like wealth to one person might not seem that way to others — especially if that “wealth” is offset by high debt and reckless spending. Just because someone earns a high salary doesn’t make them immune to the same financial mistakes as everyone else.

Even defining “affluence” isn’t easy. As Forbes reported, many factors go into determining someone’s wealth — including net worth, household income and location. A net worth of $500,000 might make you affluent in some parts of the country, while in other parts even $1 million falls short of the mark.

A recent survey from financial services provider Equitable defined the “mass affluent” as Americans who have an income level at or above $90,000 per year. According to that survey, 80% of all Americans are “concerned” about the affordability of everyday living costs, regardless of income. Nearly half aim to change their financial habits in 2025 to ease financial stress. Almost 70% of the mass affluent said they plan to increase their savings by $500 or more per month.

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Increasing savings is one way to bolster your finances. Another way is to avoid making the same mistakes over and over. Here are four common mistakes affluent Americans make and how to avoid them, according to Nasha Knowles, CFP, a financial advisor with Equitable Advisors who counsels high net worth individuals.

Also see how the super-rich will be spending and investing their money in 2025.

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Underestimating Income Taxes

Many affluent people don’t realize the tax impact when they start earning more money, Knowles told GOBankingRates in an email.

“They will now pay more in taxes because they make more, and they will also be in a higher tax bracket,” she said. “It always surprises them how much they are now paying in taxes.”

To avoid this mistake, hire a tax professional or financial advisor to help with tax planning.

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Making Big Ticket Purchases Without Considering Related Costs

“Some [affluent] people now want to buy bigger ticket items such as a more expensive car, or a home,” Knowles said.

The problem, according to Knowles, is that these items also come with bigger costs, such as more taxes and higher insurance payments. Whenever Knowles’ clients make a major purchase, she advises them to discuss it with her first to calculate the overall cost. 

Not Increasing Savings and Investments When Income Rises

One of the great things about a pay raise is that you get more income but your expenses stay the same. This amounts to extra money that you didn’t have before — and one of the best things you can do with it is put it toward savings or investments.

Unfortunately, a common mistake many affluent people make is not increasing their savings and investments when their income rises.

“This is the perfect opportunity to save and invest a portion of that new income for the future and build wealth,” Knowles said.

Lending Money Too Often

Here’s another common problem affluent people face: feeling obligated to lend money to others. It’s admirable to be generous, but only if it doesn’t cause financial strain on your end.

“Some people who make six figures may fall prey to lending money to others to the detriment of their own budget,” Knowles said.

The obvious solution to this problem is to lend only money you can afford. You should also set boundaries about who you will lend money to, how much and for what reasons.

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This article originally appeared on GOBankingRates.com: 4 Common Mistakes Affluent Americans Make With Their Money — and How To Avoid Them

2025-03-18T15:10:51Z