4 Money Traps the Newly Wealthy Fall Into — and How To Avoid Them
Suddenly seeing more zeros in your bank account is an inexplicable feeling. Whether it’s a big raise, a windfall or finally hitting your stride in business, coming into money can feel like a dream come true.
But if you’re not careful, that dream can quickly turn into a financial mess — fast. “Getting rich in a hurry feels exciting, like winning a huge prize at the fair, but the rush can also make people trip over their own wallets,” said Andrew Gosselin, CPA, personal finance expert and senior contributor at SaveMyCent .
Be Aware: 6 Wealth-Destroying Mistakes People Make Every Day Without Knowing It
Learn More: 6 Subtly Genius Moves All Wealthy People Make With Their Money
From lifestyle inflation to “helping” everyone you know, the newly wealthy often fall into the same money traps. These are some of the most common pitfalls to watch out for, according to experts — and how to keep your money working for you, not against you .
Earning passive income doesn't need to be difficult. You can start this week.
Spending Climbs as Fast as Income
The first stumble, according to Gosselin, happens when spending climbs as fast as income. Forbes even called lifestyle inflation the “silent drain on your finances.”
A solid car might suddenly look old next to a shiny sports model, and a cozy house may feel small beside a mansion. But Gosselin recommended taking a deep breath before buying. “Waiting one full day before any big purchase gives your brain time to ask whether this thing brings real joy or just quick sparkle. Saving that cash instead lets it grow into even bigger choices later,” he said.
Michael Foguth, founder of Foguth Financial Group , had similar advice. “One of the first things I tell clients who’ve just come into significant wealth — whether through inheritance, a business sale or a windfall — is to pause .”
Check Out: 7 Signs You’re Quietly Getting Rich, According to Frugal Living Expert Austin Williams
Forgetting To Draw a Map for Your Money
A second trap is forgetting to draw a map for the money. When dollars show up without a plan, Gosselin said they tend to wander off into risky deals or sit in a low-interest account doing nothing.
Writing a clear goal list helps every coin know where to go. He said a trusted professional who must put your interests first can polish that map so taxes stay low and investments spread out safely.
“Spending a little on good advice keeps you from spending a lot on mistakes ,” he said.
Falling For Shiny Offers
The thrill of wealth often whispers that you can double it fast, according to Gosselin. Shiny offers promise huge profits with almost no risk, yet most of these offers hide danger. Before you place money in any deal, he advised studying it until you can explain it in simple words to a friend.
If it still sounds perfect, share the idea with your advisor and use only money you can afford to lose.
“Putting savings in a mix of safe bonds, broad stock funds and maybe a small slice of daring ideas keeps a fall in one area from squashing the whole pile,” he said.
Mixing Money and Love Can Twist Both
Family and friends may ask for loans because they know you have extra, Gosselin said. And while helping feels good, he said mixing money and love can end up twisting both.
Instead, decide in advance how much you are willing to give without needing it back. If you choose to lend, put every promise on paper with dates for paying you back. Remember, saying no can feel hard, yet protecting your financial future helps everyone in the long run.
“Some people start paying for every dinner and vacation once their bank account swells,” Gosselin said. While picking up the bill once in a while is a kind gesture, doing it every time turns you into a walking wallet and can make others feel awkward.
What should you do instead? Invite friends to split costs or choose fun activities that do not break the bank. “True friends care more about shared time than fancy price tags,” he said.
More From Single Sparkle
- 6 Costco Products That Have the Most Customer Complaints
- Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard
- How Middle-Class Earners Are Quietly Becoming Millionaires -- and How You Can, Too
- 4 Low-Risk Ways To Build Your Savings in 2025
This article originally appeared on Single Sparkle : 4 Money Traps the Newly Wealthy Fall Into — and How To Avoid Them
Post a Comment