It might be easy to think that wealthy people were born with a silver spoon in their mouths – but it’s often a long, hard slog for many to get to where they are now.
Even though everything worked out for the better, plenty of them made money mistakes along the way – and survived them.
On spending and saving:
When it comes to growing wealth, it seems that time is everything. Many millionaires seemed to share the same regret: not saving or investing when they were younger.
Other millionaires reflected on decisions made in younger years, such as living an expensive lifestyle or discretionary expenses such as eating out or purchasing luxury cars. Others realised in hindsight that they were not tracking their spending as closely as they should’ve been.
Nearly all the millionaires ESI Money interviewed earned US$100,000 (AU $142,000) a year or more – but they didn’t start on those salaries.
These are the career missteps they made:
- Quitting jobs without having secured another one;
- Not making the most out of education qualifications; and
- Not networking effectively.
On housing/real estate:
These were the wrong moves they made when it came to property investing:
- Buying too big and too expensive a home;
- Moving to a new house far from the city centre for cheaper housing without factoring in commuting and time costs; and
- Selling instead of renting out.
On debt and credit:
Some lessons you just have to learn the hard way, with a number of millionaires remarking that their 20s and 30s involved “revolving credit card bills”.
So millionaires get caught in the debt trap, too. Here are some of their hard-won lessons:
- Misunderstanding and mismanaging credit scores;
- Taking out more credit cards than they could handle;
- And living outside of their means.
Whether it’s your partner, your kids, your relatives or close friends, emotions inevitably come into financial decisions, and those dearest to you will play a part.
A number of millionaires had the following family dynamics in common:
- Making decisions without telling their partner;
- Loaning money to family or friends, and never seeing it again;
- Not being more aware of finances during a relationship.
Who you choose as a partner has a financial impact on you, for better or for worse, ESI Money said.
“If you stay together, a spender will sink a saver. If you separate, divorce is very expensive.”
Even though many millionaires had not yet retired, many were already considering the mistakes they made that could impact their retirement:
- Not saving earlier and more aggressively;
- Not doing the maths and figuring out how much would be needed for retirement;
- And retiring too late!
Investing is by far the primary challenge for millionaires, according to ESI Money. When it comes to investing, millionaires interviewed by ESI Money had the following regrets:
- Investing too late;
- Picking a company based on past performance or the biggest dividend without actually understanding the company’s trajectory;
- Cutting losses too late; and
- Taking others’ advice without doing their own research first.
Eventually, many to-be wealthy people came to a similar conclusion: simple index funds are the best option, ESI Money said.
On getting rich quick:
While ESI Money didn’t receive many responses in this category, this one is straightforward: most get-rich-quick schemes are too good to be true.