From Riches to Ruin: 19 Major Mistakes People Made After Becoming Rich
Just because you have money doesn’t mean it won’t come without some pitfalls along the way. Whether you were born into money or you acquired it organically, there’s plenty of room for error, from bad investing decisions to spending too freely and frivolously. We headed to Reddit to uncover some of the biggest mistakes people made after they came into their wealth. Reading these 19 stupid mistakes might just make you feel better about your own financial decision-making.
1. Underestimating Lottery Taxes
“When I was 27, I hit the mega millions lottery for a million dollars, I know hard to believe. I bring my ticket to the lottery office; they immediately sit me down in this lucky room and bring a press crew. I told them no thanks, I’m good on that. Anyway, they tell me to come back for the check in 3 weeks. Came back, they give me a 670k check from the treasury, I’m ecstatic.
Brought my money to a few financial advisors to invest for me, I got very impatient with the slow growth and pulled it out. Decided to buy a mansion that was beyond repair on an acre of land in a mediocre town. I spent 450k on that and had 200k left to fix it. The goal was to rehab and sell the thing for 850. That 200k was gone before I could get the roof on lol. Had to borrow another 200k to finish the job. Sold it for only 750k, the market was horrible, and mistakes were made. On top of that, the million dollar lottery winnings 670k, which they already hijacked 33% for federal and state taxes, DID NOT INCLUDE THE INCOME TAX FOR THAT YEAR. So, I owed the IRS another 80k.” – u/DullFix2178
2. Impatient Investing
“So, in 2021 I invested in crypto, some real estate, single stocks, even some options trading, basically trying to diversify like the experts say you should. Now, I didn’t lose money per se because I didn’t sell anything yet for a loss (though I did lose on the options) but looking at the last 3-4 years, if I had just put all the money in a nice market index fund, I would be in waaaay better shape than I am today. And even though interest rates sucked in 2021 if I was patient, I could have just left things in cash short-term and been in a better spot.” – u/Icy_Occasion_3105
3. Gambling With Gusto
“I was 28 and blew 500k gambling one summer in AC. That one hurt lol.” – u/Smoke__Frog
4. Negligent Nuptials
“Got married without a prenup.”– u/PennStateMtnMan
5. Putting Too Much Stock in Stocks
“Got 5 million out of an IPO (I was employee number 5). Bought a modest $650k house at 3.25% with a small down payment, picked a high-end wealth management company to manage the money, and kept on top of the markets with frequent calls with my advisor. For tax reasons, we planned to diversify 1/3 of the stock each year. Year 1 was great, then the stock tanked 90%. It’s worth less than the tax I paid to exercise the options. I still have 1.5 million but my small business is failing and is about a million in debt with some personal guarantees, and I’m also about to go through a divorce that will clean out the rest. So I guess the mistake was to not just sell it all off in the first year?” – u/beachgal808
6. Avoiding the Startup
“Prioritizing a job in a large and more stable company for a green card vs being employee #7 in a start-up that ended up going public because ‘wHaTiFtHeCoMpAnYfAiLs?'” – u/Progresschmogress
7. Reckless Spending
“My brother’s friend hit a million dollar scratch ticket…he bought a used car and took a week vacation to an island..the remainder was spent 70% on scratch tickets 30% on drugs…it was gone in less than 18 months…he said the next million dollar ticket he hits he will invest it and buy a house…highly unlikely but the amount of good fortune this kid has run into over the years it wouldn’t surprise me.”– u/bostonstrangler01
8. Focusing on Cash Piles Instead of Cash Flows
“I made it big by sticking $50,000 into an oil company in 2020 averaging in at $2, and then sold it in 2022 at $37. My mistake was not immediately throwing it into something that was focused on cash flows over cash piles, and then risking the cash flows instead. I figured it out, but not after taking losses on my next large investment. But now I’m stacking cash, waiting on the next bad news where investors screw up.” – u/Alarming-Activity439
9. Not Setting Aside Money for Your Tax Bill
“Mine mainly involved not setting aside enough for tax bills or putting money into something that I should have known wouldn’t work out.” – u/chalky87
10. Getting Stuck in MLM Traps
“Had 970k from an inheritance and a small investment that actually worked out. Was never great with money tbh so I let my wife handle most finances. Within a year she got roped into 90 MLM schemes and I’m out almost 500k with multiple storage units full of crap.” – u/Sea-Competition5406
11. Spending Too Much on Family and Friends
“It was giving too many gifts to friends and family. Had I kept it to myself my investment would have been 7 figures…
Set boundaries but take care of a team player that has been there since day 1.” – u/RealMrPlastic
12. Oversharing
“Telling family members how well I was doing.” – u/MsDReid
13. Putting the Cart Before the Horse
“Thinking that I was rich was my biggest mistake.” – u/Dang_Life_9869
Rich is relative, folks.
14. Forgetting To Put Your Ego in Check
“Let ego take over.” – u/TheNotoriousNIL
Your ego will start writing checks you can’t cash if you aren’t careful.
15. Spending Like You Never Have To Worry About Money Again
“I’ve been lucky to have 3 startup exits in my life. Biggest mistake after the first was spending like I’d never need to worry about money again. Huge house, expensive car, first class flights and suites on vacation. Money goes really quick when you don’t think about it.” – u/chitown_jk
16. Living Like You’re Still Poor
“For me it was still living like I was poor. I was so used to being a starving student that when I started making six figures I just keep stashing money away, living in tiny studios, and eating as cheap as possible and continued that behavior when I was making high six figures.
There’s a balance with money. It’s important to be fiscally responsible and to save and invest. But at the end of the day, money is a made up concept and it only has real value when you spend it.” – u/Winstonisapuppy
17. Opening a Business Without Knowing Your Audience
“I opened a brick-and-mortar coding school for kids in a city that didn’t give a crap about their kids’ education. The school district told us we were their competition (WTF?). Anyway, that was right before COVID so that put the final nail in the coffin. Luckily, the landlord let us out of our lease since we dropped a couple hundred grand fixing the place up. Definitely the biggest mistake of my life, but learned a lot from the experience.” – u/Typical-Chocolate-82
18. Investing in Crypto
“My girl took almost all her cash and paid for a condo in full. Her $200k condo 2 years later is worth 400k. She begged me to do the same, and I refused, being greedy and thinking I can do better, I decided to invest in crypto and lost like 100k buying high and selling low, exactly the opposite what I taught myself. The cash I had left over became kinda useless due to inflation and the real estate market getting overheated. Lesson learned…hopefully.” – u/Healingtouch777
19. Not Paying Attention to Ticker Symbols
“I accidentally bought ~$800k in AMC $20 calls in early 2021. I meant to buy calls for another stock that started with AM. I decided to hold.” – u/nerdyfoe