You may already be thinking, “Seriously? Downsides to making a lot of money?” Those with a low net worth might dream of being in this same “predicament.” However, just because you make a lot of money doesn’t make you immune to problems — they’re just different problems.
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Many Americans fall into the millionaire category. In fact, 12.1 million Americans can claim millionaire status, which means they have between a $1 million and $5 million net worth, according to Spectrem Group.
Let’s take a look at some of the money challenges these 12 million people might have because they make a lot of money. Are you one of them?
Downside 1: Family and friends may treat you differently.
Family and friends may treat you like a money fountain, expecting you to spew great holiday or birthday gifts. They may ask you for a loan or ask you to pick up the tab.
A total of 53% of Americans either borrowed money or loaned money to a friend or family member in 2019, according to a survey by Lending Tree. This way, they could avoid the major interest charges from a bank. The majority of family member lenders didn’t charge interest on the loan.
Downside 2: Wealth can be detrimental to kids.
Teens in wealthy families often have more mental health issues than those who don’t come from a wealthy family, according Suniya Luthar at Columbia University. In fact, she documented more depression, anxiety and substance abuse among those teens compared to other socioeconomic groups.
In addition, your children might not learn the value of money. Growing up with access to plenty of money might cause them to not develop the qualities they need to succeed.
Downside 3: The things you can buy may become less appealing.
Consider the car you’d hankered after during college. When you finally scraped up enough money to buy it, you might have savored the moment when you wrote the check to the dealership.
Now that you have money at your disposal, writing a check for a car or another item you want isn’t a big deal and might not mean as much to you. You may not feel the same sense of satisfaction of saving — you won’t have quite the same feeling as to how much that object means to you.
Downside 4: You can fall into negative patterns.
Money often causes people to fall into negative patterns. You might:
- Find that your money owns you, instead of the other way around.
- Crave status symbols.
- Worry about losing your wealth.
- Become conscious of others richer than you.
- Spend all your time working.
- End up being bored after years of working, then quitting work because you become independently wealthy.
What other negative patterns might you fall into when you have a lot of money or will work hard to keep your wealth intact?
Downside 5: You might flounder in the wake of success.
Imagine working hard at, say, building a company. What happens if you sell that company? You might go from working 90-hour weeks to nothing at all — and then what will you do with yourself, short of starting all over again with a new company?
When you use money as your motivation when you have specific goals in mind. But what happens once you reach your goal of building your company? It might mean you lose all motivation and not know where to go next with your life — it’s the perfect setup for a midlife crisis.
Downside 6: Taxes. And more taxes.
You don’t typically have the benefit of tax deductions and credits like middle- and lower-income individuals and you must pay the alternative minimum tax.
Internal Revenue Service (IRS) data indicates that the wealthy in America bear the heaviest share of the income tax burden, and the top 1% paid $616 billion in income taxes, according to the Tax Foundation.
Downside 7: Estate and retirement planning gets trickier.
You can’t do estate and retirement planning like the average Joe. First of all, you automatically become eliminated from contributing to a Roth IRA as soon as your modified adjusted gross income (MAGI) hits $140,000 for the 2021 tax year (as a single filer) or $208,000 (if you’re married filing jointly).
In addition, if you’re a “highly compensated employee,” you also cannot contribute to a 401(k) at the same rate as your counterparts who don’t make as much money.
Estate planning may also look more complicated, especially if you have a lot of bits and pieces to your estate or if you want to make sure your kids don’t get “too much money.”
Downside 8: You may have given up a lot to become wealthy.
Family time. Vacations. Friends. Dinners with extended family members. When you were in a boardroom making your next big move, what was everyone else doing without you? Everyone around you might have suffered as a result of you being gone. Debilitating relationships with family and friends can have lifelong effects, and not ones that you can take lightly.
Downside 9: Nobody wants to hear about it.
Nobody wants to hear about your million-dollar deal, and chances are, you don’t want to brag about it, either. You may end up keeping your wealth a secret instead of talking about it, even with close friends and family. You may not want any of your coworkers or neighbors to know, which can lead to a lonely existence.
Downside 10: You might find it hard to trust people.
You might be brimming with great ideas, but if you get into a business setting, you might suddenly realize that people are more interested in your money than, well, you. In addition, you might find it hard in social settings as well — you might find it hard to find a spouse or even friends who set your wealth aside.
Can You Think of More Downsides?
Okay, let’s not forget the positives — you can buy what you want, have more flexibility in your lifestyle, feel comfortable spending money on your family and send your kids to college. It all comes with tremendous upsides and rewards as well. Just don’t forget that wealth can have its challenges as well.