5 Ways My Millionaire Clients Have Wasted Money in 2024

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5 Ways My Millionaire Clients Have Wasted Money in 2024

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Poppin’ bottles in the VIP room? Some would call that wasteful spending. Others would call it being rich. After all, for some, having

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often means having less vigilance regarding where it’s allocated. And when one has disposable income, expect it to be disposed of.

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No one knows this better than the financial advisors who work with wealthy clients.

Here are five

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Earning passive income doesn’t need to be difficult.

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Michael Edesess, chief investment strategist for

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, identified one the biggest ways his multimillionaire clients waste money: paying very high fees to invest in hedge funds and private equity.

“Fees on these investments are about 100 times the fees on the lowest cost index funds, which yield investment returns at least as good,” said Edesess. So if a hedge fund required a 3% fee on a $2 million investment, that’s $60,000 down the drain. Edesess explained the reason many of his millionaire clients continue to invest in high-cost funds has to do with status and peer pressure.

In describing one individual who frequently plays golf with his equally affluent business associates, Edesess stated, “They may ask him what he invests in. If he says […] one or two low-cost total market index funds, they might laugh at him for what they mistakenly assume to be his lack of investment sophistication.”

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Millionaires needlessly wasted money buying luxury transportation like yachts or fleets of expensive cars that they barely used, stated Financial Advisor and Managing Director at

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, Mark Scribner. The reason? To impress others. These items are purely a status symbol. What’s more, yachts are extremely expensive because they require a full-time crew. “And the vast majority of [luxury] vehicles lose value as soon as you drive it off the lot,” Scribner told

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. Talk about poor investments.

Divorce is notoriously expensive. Especially when clients choose to litigate — a process that can drag on for years.

“Because they have millions in net worth and don’t trust their soon-to-be ex-spouses, some clients feel they need attorneys to represent them and forensic accountants to calculate ‘reimbursements’ for post-separation spending,” stated Laurie Itkin, financial advisor and certified divorce financial analyst at

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. But there are other, more cost-efficient and less combative ways to tackle divorce.

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“Savvy millionaires preserve their wealth by using a neutral mediator […] who can model the financial impacts of various settlements,” stated Itkin. The cost is shared by both parties who can each hire consulting attorneys to provide guidance. While mediation is not always an option if issues like domestic abuse or extreme power imbalances are in play, it’s smart when applicable. Alternatively, court gymnastics can run clients into the hundreds of thousands of dollars.

According to Chad Gammon, certified financial planner and owner at

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, one of the main ways millionaire clients waste money without even realizing it is by neglecting tax efficiency — particularly when it comes to charitable contributions or investments.

“I’ve seen people that give $15,000 per year to charities and it doesn’t allow them to itemize their deductions. If they always plan to give $15,000 per year, they could bundle that for 2024 and 2025 ($30,000) and be able to itemize,” said Gammon, which would ultimately save them money.

Gammon also cited clients who pay income tax as a result of frequently buying and selling securities as opposed to holding them longer and being taxed at a lower rate on their long-term capital gains.

While live-in housekeepers and personal chefs make life great, they come with a hefty price tag. And Scribner stated that this can be one of the largest financial drains.

A personal chef can run anywhere from $100,000 to $150,000 annually while the cost of preparing one’s own food is completely free. If short on time, prepared meal delivery boxes are a sensible option. Similarly, a live-in housekeeper makes $80,000 on average, with some earning as much as $200,000 annually.

Instead of a live-in professional, “you can save a significant amount of money by hiring a cleaning crew to clean up on a daily basis,” stated Scribner.

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