We often associate wealth with financial expertise, but this could not be absolutely right. High net worth people are not immune to making mistakes. In fact, they make just as many mistakes, if not more than everyone else. And the worst part about it is that these mistakes they make can be even more costly due to higher amounts being spent behind the mistakes.
Few of the common mistakes I see when meeting people:
Making Their Investments / Savings Too Complex
This is something I see way too often, people start making good money and their wealth builds. And because of this, they think they need to start investing in anything and everything.
Whenever they listen to someone close to them or some fin-influencers they follow they blindly go with their advise and invest and most of these investments lack liquidity.
Be careful doing this! You do not need to invest in anything and everything. In Investments, the best strategy is to keep things simple.
Inflating Their Lifestyle Too Fast
Inflating your lifestyle too quickly is a huge risk. What often happens is that people start making a higher income quickly and they inflate their lifestyle right away with it. Then, all of the sudden, that income drops by 25-50% and they are stuck. They have a huge home loan, large car emi payments, private school, etc. and they are stuck.
As your income grows, make sure you keep a high savings rate and not high EMIs.
Investments in products with less Liquidity
This is one I see way too often. And it goes hand in hand with complexity.
What happens is people with a lot of income start investing in complex products and all investments that can be really illiquid. This can work fine when things are going well, but if you find yourself in a spot where you need liquidity, this can also be really bad.
You need to invest well while also maintaining some liquidity for tougher times in life. You never know what will happen.
Thinking They Can Do It All
Most high-income millennials try to do it all themselves when in reality it would be better to outsource it. We cannot concentrate in all things we come across in life, You have to focus your time on where it is best spent.
And If you are a business owner, and if you spend your time in doing something else, you are impacting the amount of money you can bring in. Use your time where it is best spent and outsource the rest.
Assuming Their Income Will Always Be There
This is the most important mistake I come across with almost everyone and this aptly applies to people with high incomes more than people with high net worths. But regardless, this group of people are taking on a huge risk assuming that their income will always be there. There are 3 main ways income can be lost:
- Loss of job – Plenty of high-income folks get cut when businesses are not doing well. This is why diversifying, building up assets, having an emergency fund, etc. is crucial.
- A disability putting you out of work – Millennials though they are young and health might have a disability that stops them from working. So, we cannot take things for granted.
- Business Failing – Many high-net-worth investors are business owners. This means most of their wealth is in the business and their income is tied to it. That concentration brings on a lot of risk. Managing this business well and diversifying as you earn is crucial to keep you on a good path. Do not just use your business as a single source of income.
Last but not the least – “Not Choosing Fund Wallet as their Mutual Fund Distributor”
These are some of the common mistakes / life style assumptions people make during their early part of their carrier, and this is what I generally come across when I meet clients / prospects. If you have anything else in mind, please feel free to comment.
Best Regards,
RVi
I am an AMFI-registered Mutual Fund Distributor (ARN-111231)
This communication is for informational purposes only and should not be construed as investment advice. Mutual Fund investments are subject to market risks.
Featured Image created using AI tools.
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