Temporary Wealth – 6 Common Blunders of the Rich That Vaporize Their Wealth

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Sometimes rich people stop being rich. Things can go wrong. Sometimes those things that go wrong are outside the control of the wealthy (i.e. random bad luck) but more often than not they are things that are completely within their control.

As a CPA, I’ve been advising wealthy individuals in money matters for more than 30 years. Plus I spent five years studying the money habits of the rich and the poor (Rich Habits Study). In my CPA business and from my research, I’ve written books, articles and done many TV and radio interviews about the many blunders wealthy individuals make that cause their wealth to evaporate. You would think they’d know better but they don’t. The wealthy who make these mistakes all seem to be reading from the same script. So, I thought I’d share a few of the most common blunders of the rich that steal their wealth like a thief in the night:

  1. Penny Wise and Pound Foolish Many millionaires are frugal. By frugal, I mean they penny pinch dry cleaner costs, bank fees, credit card fees, landscaper costs, grooming expenses, such as haircuts and manicures, professional service fees, such as CPAs, attorneys, doctor and dentist charges. They will fight like a hell if they think they were overcharged for a grocery item or a restaurant charge. And then these same penny pinchers will go out and buy an expensive boat, Tesla, a diamond ring, Rolex, or take an absurdly expensive vacation. I have seen far too many wealthy business owners fight to keep wages down at their business only to spend their hard fought savings on yachts, big homes or expensive cars. It’s as if they have Jekyll and Hyde battling it out inside their very own minds. While it’s a Rich Habit to watch your pennies, it is a Poor Habit when you take those hard earned pennies and make an expensive emotional purchase.
  2. Sheep in Wolf’s Clothing – The vast majority of the rich in my study and in my CPA practice are long-term investors. They buy, hold and never panic. In fact, when the economy turns south they might even double down on their investments, buying more at a discounted price. But I’ve seen some wealthy individuals who invest aggressively and continue to do so until the economy turns south. Then they panic and begin unloading their investments. These so-called “aggressive investors” are actually conservative investors in disguise. They are sheep in wolf’s clothing. And their wolf disguise comes flying off the moment they start losing money.
  3. Ignore The Devil is in the Details – Most wealthy individuals become wealthy in one of four ways: #1 They Live Below Their Means (save more than they spend), #2 They Expand Their Means (grow their income), #3 They Do Both (save and grow income), or #4 They Inherit Their Money. Some of the individuals who fall into the Expand Their Means or Inherit Their Money categories have something in common – they often do not pay attention to the devil in the details. What I mean is that they don’t review their monthly bank statement, monthly bills or monthly credit card statements in order to make sure there are no unauthorized transactions or fees. They also don’t review certain transactions such as hotel bills, retail purchases or restaurant tabs to make sure they were not overcharged and paid the correct amount. They also don’t review their expenses at least once a year to see if they can reduce those expenses for the following year. For example, cable and cell phone costs keep going down due to increased competition. If you don’t spend any time trying to find the lowest price, it could result in you paying more than you should.
  4. Eggs Are All in One Basket – In my Rich Habits study I discovered that those with the greatest amount of wealth had three or more streams of income. This was strategic. When one stream dries up due to economic downturns, the other streams of income can come to the rescue like a knight riding on a white horse. But some rich people make the mistake of tying the bulk of their assets up in one place, such as their own business or in real estate, two very illiquid investments. For these wealthy individuals, when something goes wrong they are forced to sell some of their investments at a discount or increase their debt by securing a loan or tapping their credit line.
  5. Lack of Proper Planning – Another common money misstep is lack of proper planning. The three big missteps in this category include: #1 Lack of Adequate Retirement Planning, #2 Lack of Adequate Estate Planning and #3 Not Having an Updated Will. When Prince died he had no will and no estate planning. Settling an estate with an old will or no will at all increases the costs of probate. Also, without an estate plan in place, you will pay higher federal and state estate taxes and inheritance taxes. Millions of dollars of Prince’s estate will now go to paying the salaries of politicians.
  6. Generous to a Fault – Too much of anything is bad and this applies with giving away your money. Once you give away your money, it’s gone. Self-made millionaires are pretty responsible when it comes to distributing their wealth to others in need, but those who inherit their money or where the money comes with little effort, have a tendency to be irresponsible with their giving. Those who don’t have to work very hard for their wealth simply do not value their money as much as they otherwise would and they have a tendency to give too much of it away to their family, friends or charities.  Once people find out you’re rich they hit you up for money. It can come from every direction and overwhelm you. Those who anticipate this deluge establish a maximum amount of money they are willing to give away every year.

Staying wealthy is not as hard as getting wealthy, but it’s still hard. Any one of these six missteps can act like an anchor dragging you down off your mountain of wealth. Being aware of them is probably the best insurance you can have to preserve your wealth.



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Thomas C. Corley About Thomas C. Corley

Tom Corley is a bestselling author, speaker, and media contributor for Business Insider, CNBC and a few other national media outlets.

His Rich Habits research has been read, viewed or heard by over 50 million people in 25 countries around the world.

Besides being an author, Tom is also a CPA, CFP, holds a master’s degree in taxation and is President of Cerefice and Company, a CPA firm in New Jersey.
Phone Number: 732-382-3800 Ext. 103.
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  1. Great article Tom, I totally agree about the wealthy having the ability to look long term. The high wants it all here and now and are not willing to be patient and have the ability to look at the big picture.

  2. I think it’s interesting that you included “lack of proper planning” as a reason that some people stop being rich. I usually think that someone who has stayed rich until they died as someone who was successful in, well, staying rich. However, as you pointed out, not having proper estate planning or a recent will can mean that a lot of your wealth will end up going to the government instead of to your family, which means that you do “lose” that money. Thanks for the article.

  3. Matthew C. Kriner says:

    thanks for nice information.i/


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