Surprisingly, even the wealthiest among us can fall into financial traps that lead to setbacks—and those financial mistakes of high-net-worth individuals can be especially costly given the scale of the assets involved.

The good news is that financial missteps can often be avoided with proactive planning and the guidance of an experienced financial advisor. Let’s examine some common financial mistakes high-net-worth individuals (HNWIs) make and explore strategies for avoiding them.

1. Overly Relying on Credit and Ignoring Credit Card Debt

Even the wealthy can let credit card debt creep up on them by ignoring credit card balances for too long. High credit card balances mean you’re not just spending but also paying massive amounts in interest payments.

The Fix:

Keep a close eye on your credit card balances and prioritize paying off your debt each month. Avoiding high interest rates can save money and prevent credit card payments from eating into your wealth. Consider automating credit card payments to avoid interest charges or racking up late fees.

2. Skipping the Emergency Fund

Even with significant assets, liquidity can still be a challenge. If you don’t have a readily available emergency fund, you may have to borrow money at high interest rates or be forced to liquidate investments when market conditions aren’t favorable.

The Fix:

Set aside cash in a high-yield savings account as your safety net. Even with substantial wealth, aim to save enough to cover several months of living expenses, providing you with a buffer against unexpected costs or financial setbacks.

3. Failing to Plan for Taxes

Taxes are often overlooked because many people (over 50%) are considerably bothered by their complexity, but ignoring the implications can mean huge tax bills. Whether it’s failing to utilize deductions or to plan for taxes on investments, this is one of the most common financial mistakes made by HNWIs.

The Fix:

Work with a financial advisor to create a tax strategy that aligns with your financial plan. This could include taking advantage of tax-advantaged accounts, leveraging deductions, or planning around your tax refund to maximize wealth preservation.

4. Overspending on Depreciating Assets

Luxury cars, yachts, and expensive toys are great, but they are all depreciating assets that lose value over time. Many HNWIs fall into the trap of buying too many depreciating assets without balancing them with appreciating investments.

The Fix:

Sure, enjoy life, but keep your eye on the bigger picture. Invest in appreciating assets like real estate, stocks, and bonds. Balance your spending on depreciating assets and focus on investments that grow your net worth over time.

5. Missing Out on Investment Diversification

Only 34% of Americans actively ensure their investment portfolios are properly diversified. Failing to diversify your investments is a classic mistake that can jeopardize your financial future. Whether it’s being over-concentrated in a single business or market, putting all your eggs in one basket is risky.

The Fix:

Build a diversified investment portfolio by spreading wealth across different sectors and asset classes. This can help you better handle economic downturns and ensure your portfolio is well-balanced.

6. Ignoring Credit Reports and Credit Scores

If you often assume that your financial success eliminates the need for good credit, then you’re likely among the nearly 30% of Americans who do not even bother to review their credit report annually. Maintaining a solid credit score is crucial for securing favorable loans, managing large transactions, or opening new bank accounts. A high net worth doesn’t necessarily shield you from the consequences of poor credit management or identity theft.

The Fix:

Regularly monitor your credit report and score. Keeping an eye on your credit helps you catch errors or fraudulent activity that might go unnoticed. Maintaining a strong credit history can ensure you access to the best loan and mortgage rates.

7. Not Having a Solid Budget

Yes, even HNWIs need a budget. Ignoring this key element of financial planning often leads to unchecked spending, as 84% of Americans overall admit to overspending. A lack of clear limits on your spending can deplete your finances over time, leading to financial hardship.

The Fix:

Create a clear and realistic budget. It doesn't have to be overly restrictive, but it should help you track your income, expenses, and investments. This can allow you to spot potential red flags in your finances early and ensure you can afford the lifestyle you want while still saving for the future.

8. Poor Estate Planning

With only about 32% of Americans having established estate plans, many wealthy individuals fail to plan their estates properly, resulting in heavy tax burdens for heirs and potential legal disputes.

The Fix:

Work with a financial advisor to create a clear and comprehensive estate plan. This should include setting up trusts, wills, and powers of attorney, ensuring that your assets go to the right people while avoiding unnecessary taxes.

The Aligned Perspective: Financial Mistakes to Avoid

A financial advisor is your first line of defense against these common financial mistakes for HNWIs. Advisors provide expert guidance on credit card debt, tax planning, estate management, and investment portfolios, ensuring your wealth grows and is protected from unnecessary risks. 

They’ll help you monitor your credit score, create a financial plan, and guide you in strategically paying off debts. With their support, you can build long-term wealth and enjoy life without worrying about interest rates, overspending, or future financial security.