4 Money Mistakes Wealthy People Don’t Make

It should come as no surprise that wealthy people (or people aspiring to be) are constantly paying close attention to the economy, legislation and various markets. They’re also always analyzing how these factors can and will affect their finances.

Trending Now: Multi-Millionaire Says Timing the Market is Impossible – Here’s What You Should Do Instead

For You: 6 Subtly Genius Moves All Wealthy People Make With Their Money

Building and maintaining wealth isn’t just about earning a high income. As per usual, the devil is in the details, and it’s more about making smart financial decisions consistently. High-net-worth individuals often follow disciplined strategies to protect and grow their assets, and just as importantly, they avoid common pitfalls that can derail long-term success.

Here are four money mistakes the wealthy rarely make, and how you can apply these lessons to your own journey toward a richer you.

Not Speaking With a Financial Advisor

The wealthy understand the importance of careful financial planning and money management. That’s why they almost always consult with a financial advisor during political or economic shifts or potential downfalls.

An experienced professional can help you navigate the ins and outs of complicated tax laws, hone your investment strategies and make the smartest financial decisions overall to boost your net worth.

Be Aware: Avoid These 4 Common Mistakes When You Get Rich Overnight

Not Diversifying Their Portfolios

Diversification is key when it comes to a well-balanced portfolio. This is especially true during turbulent economic times. Ensuring a healthy and strategic investment mix is crucial to hedge against financial loss.

Putting all your money into one asset class — whether it’s stocks, real estate or a business — is risky. Wealthy individuals diversify across multiple types to reduce risk and increase long-term stability. Here are some top pieces of advice:

Invest in a mix of equities, bonds, real estate and private equity. Use international diversification to hedge against domestic volatility. Rebalance portfolios regularly to maintain target allocations.

Not Taking Advantage of Tax-Advantaged Accounts

Wealthy individuals understand that taxes can significantly impact their net worth and you simply can’t afford to ignore them. They work with financial advisors and tax professionals to structure their income, investments and estate plans in ways that minimize tax liability.

The wealthy always search for ways to reduce their taxes. One smart way to do so is to put your money in a tax-advantaged savings account. Here are some common strategies:

Story Continues

Build tax-advantaged accounts like IRAs, 401(k)s and HSAs. Invest in municipal bonds or tax-efficient funds. Strategically time asset sales to reduce capital gains taxes. Leverage charitable giving for deductions.

By putting your money in accounts like these, you’ll effectively reduce your taxable income now and defer taxes until later in life.

Ignoring Estate Planning

Without a proper estate plan, your intended generational wealth can be eroded by taxes, legal fees or the dreaded family dispute. The wealthy prioritize estate planning to ensure their assets are transferred smoothly and according to their wishes.

If you are trying to imitate the wealthy when creating your will or trust, be sure to designate proper beneficiaries and power of attorney, map out a generational wealth transfer and use life insurance and gifting strategies to reduce estate taxes.

Adam Palasciano contributed to the reporting for this article.

More From GOBankingRates

5 Items With Greater Value at Dollar Tree Than Costco Why You Should Start Investing Now (Even If You Only Have $10) How Middle-Class Earners Are Quietly Becoming Millionaires -- and How You Can, Too 5 Things You Must Do When Your Savings Reach $50,000

This article originally appeared on GOBankingRates.com: 4 Money Mistakes Wealthy People Don’t Make

View Comments