I Work With Millionaires: What Wealth Doesn’t Automatically Solve
Millionaire status used to mean something exclusive. Now it just means you're one of roughly 24 million Americans — a club that's more than tripled in size since 2000, according to data from Ramsey Solutions and Statista.
Getting there is genuinely harder than it sounds, but staying there, and actually building on it, is where most people quietly struggle. Having a lot of money doesn't make you immune to bad financial habits. It just makes those habits more expensive.
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Chad Cummings, an attorney and certified public accountant (CPA) at Cummings & Cummings Law who previously worked in finance and tax, has seen this up close. Here are four wealth traps he said millionaires fall into more often than you'd think.
Lifestyle Inflation
“Lifestyle inflation” refers to the habit of hiking spending in proportion to increases in income, rather than putting extra money into savings or investments. It’s a particular problem with upwardly mobile people and the newly wealthy, according to Cummings.
“A client who finances a $15,000 monthly mortgage and a $2,200 boat slip lease cannot reverse those obligations in a bad month,” he said. “Those are long-term contracts that lock up the money. One revenue dip (especially for business owners) creates a liquidity crisis."
Cummings offers a simple rule of thumb: expense growth should never exceed one quarter of income growth in any given period. If your income goes up $100,000, your lifestyle costs shouldn't increase by more than $25,000.
Depending Too Heavily on Financial Advisors
According to Cummings, delegating too much responsibly to financial advisors “breeds expensive ignorance” and increases the risk of losing money.
“I have reviewed portfolios where clients paid 1.5% advisory fees on top of hidden fund expense ratios,” Cummings told MoneyLion. “Total trust in an advisor means clients stop reading statements, and that delay gives fraud or mismanagement (or simply missed opportunities) months or years to compound.”
To put that in concrete terms: on a $2 million portfolio, a 1.5% advisory fee alone equals $30,000 per year, before any additional fund costs.
Overly Aggressive Tax Strategies
Aggressive tax strategies can look brilliant on paper and become a trap in practice. As Cummings put it, most tax reduction techniques are “actually tax deferral techniques." Deferring taxes means you still owe them — just later, and possibly at higher rates.
“Many of these strategies lock up funds for extended periods, which some tax advisors and financial planners do not adequately explain,” Cummings said.
A common example is the 1031 exchange, a real estate strategy that lets investors roll profits from a property sale into a new property without immediately paying capital gains taxes. Used strategically, it's a legitimate wealth-building tool. Used repeatedly across a chain of properties, it can leave investors with large amounts of equity they can't access without paying a massive tax bill.
"Clients who placed appreciated real estate into 1031 exchange chains years ago now sit on equity they cannot access without triggering six-figure capital gains," said Cummings. "The wealth exists on paper but costs 30% or more to unlock… and possibly more when tax rates change in the future.”
Ignoring Operating Agreements
Forming multiple LLCs is a common move among high-net-worth individuals looking to protect their assets. Done right, it works. Done sloppily — with outdated operating agreements or conflicting buy-sell provisions across entities — it can create serious legal and financial exposure.
“Often this doesn’t come up until one of the entities is in litigation,” Cummings said. At that point, gaps or conflicts in the legal structure become very expensive problems very quickly.
The underlying issue, according to Cummings, is that wealthy clients often spread their legal and financial work across multiple professionals without anyone having a complete picture. The result is a patchwork structure where nobody is fully accountable.
“Entity creation and trust execution need to be centralized to effectuate meaningful asset protection — not bifurcated across a financial planner, a ‘tax guy’ and a couple of attorneys," said Cummings.
The Bottom Line
Wealth creates options. It doesn't create discipline, attention or good legal infrastructure on its own. The millionaires who stay millionaires tend to stay engaged — they know what their money is doing, they keep their fixed costs flexible, they ask hard questions before committing to tax strategies and they make sure their legal structures actually do what they're supposed to do.
The goal isn't just to reach a number. It's to build something that holds.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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