Mistakes Mass-Affluent People Make All Too Often

Achieving a six-figure salary or a healthy brokerage balance often creates a false sense of security that can make it feel like "you've made it." For many mass-affluent individuals (those with roughly $100,000 to $1,000,000 in liquid or investable assets), that comfort can often create blind spots. You're earning and saving enough to build and keep wealth, but you're still exposed to factors that slowly chip at this wealth over time. 

The mass-affluent occupy a middle ground. They earn too much to be seen as struggling, but they also lack the tax advisors and management teams that high-net-worth individuals use to protect their capital. This gap allows inefficiencies to grow, and high earnings can be undermined by avoidable mistakes that often go unnoticed.

The mistakes outlined aren't dramatic or risky bets. They are repeatable behaviors that slowly affect purchasing power. Holding excess cash that loses its value to inflation, underestimating capital gains taxes, assuming high income is permanent, and over-insuring small losses while remaining underinsured for large ones — these are common mistakes that push the mass-affluent into fragility. Each mistake was assessed based on its long-term impact, ability to compound negatively, and its likelihood of disturbing the momentum any wealth-building may have. 

It feels good to see a lot of zeros in your savings account, but holding excessive cash is actually a losing investment. If too much of your net worth stays in cash for years, inflation slowly eats at what that money could buy. Holding lots of cash may feel like the safest thing to do, but if you leave that cash in a savings account, inflation will eat away at it over time.  

Essentially, if your after-tax savings aren't outpacing inflation, you're losing your purchasing power even if your balance goes up. This concept applies even to high-yield savings accounts that offer rates of around 4% to 5%. After inflation, adding capital gains taxes to the mix shows that the real return on excess cash can easily be negative. 

Compared to being cash rich, building assets through a diversified portfolio is a more effective strategy. J.P. Morgan's 2026 Long Term Capital Market Assumptions show that a diversified portfolio, which comprises a balanced mix of stocks, bonds, and alternatives, could earn you roughly 6.9% annually over the next 10 to 15 years. By contrast, cash and cash-equivalents continue to struggle to keep up with inflation in the long run. To put this into perspective, $200,000 in cash, growing at 3.5% for 15 years gives you approximately $335,000. Meanwhile, the same amount in equities, growing at 6.7%, yields about $530,000 — a difference of almost $200,000.

Most affluent individuals focus on reducing their income taxes but ignore managing the taxes on their investment. The Internal Revenue Service (IRS) taxes both, but your investment profits are taxed based on how long you've had the assets. If you sell off an investment within a year or less of buying it, the profits are considered short-term capital gains and get taxed at the same rate as your paycheck. For high earners, this means federal rates of 22% to 37%, and that's not including state taxes.

If you hold that same investment for over a year, you'll enjoy a tax break because long-term capital gains (on assets held more than a year) are subject to much lower tax rates that range from 0% to 20%. For example, in 2026, if you're a single filer earning up to $545,500, you'll pay just 15% on long-term gains. Meanwhile, you would have paid 35% on that same amount if it was a short-term gain taxed as ordinary income. So, waiting a bit longer saves you about 20 cents for every $1 of profits. On a $10,000 gain, that's about $2,000 less in federal tax.

Tax-loss harvesting is another smart way to reduce your tax bill. The concept involves selling investments that have lost their value to cancel out taxes you owe on profitable assets. So, if your losses are higher than your gains, you can even use up to $3,000 of those losses to lower the tax on your regular income. 

When business is booming, it's easy to think the checks will never stop, but income volatility is a real and growing threat. The Think Forward Initiative notes that 39% of individuals experience income volatility that can swing to the negative end, and in this age of AI-driven workforce changes, that number is climbing.

It's dangerous to assume high income will last forever. In reality, incomes peak in midlife — usually in your 40s or 50s — and then declines as you edge towards retirement. Even if you remain employed, bonuses, commissions, and salary growth may dip depending on the economic conditions. Recent economic markers pointing to a recession show how fragile these high incomes can be. In 2025, 127,000 workers were laid off from U.S. tech companies, including over 15,000 roles at Intel, Microsoft, and Amazon. 

The mistake becomes more obvious when high earners experience lifestyle creep. A household earning $400,000 that spends almost all of it on an expensive mortgage and high tuition could burn through months of savings if that income stops coming in. As CNBC recently reported, about 60% of NBA players go broke within five years of retiring, and close to 80% of NFL players face financial stress within two years of retirement. 

It's easy to make mistakes with the level of insurance coverage or the deductible amount. One common mistake is maintaining unnecessarily low deductibles. Many affluent individuals carry $250 or $500 deductibles on car and home insurance; these low deductibles are designed for people with no emergency fund. The math is shaky — lowering a deductible from $1,000 to $500 might cost an extra $200 to $400 per year in premiums. Over five years without a claim, you'll have paid $1,000 to $1,500 just to avoid covering a $500 difference you could have handled yourself. On the other hand, the Insurance Information Institute notes that by raising deductibles from $500 to $1,000, you can save up to 40% on your collision and comprehensive coverage. For homeowners, moving from a $500 to a $1,000 deductible can cut your total premiums by as much as 25%.

Another area of waste is concurrent insurance, where people hold two umbrella liability policies, thinking it doubles their protection. In reality, a single properly constructed policy with a higher limit does the job and is more cost-effective. Others accumulate multiple life insurance policies. From employer provided coverage, to individual policies, buyers end up with more coverage than they or their dependents could possibly need.

The bigger problem arises when individuals are over-insuring against minor losses but are underinsured for liability. Basic car and home policies cap liability at around $300,000 to $500,000. In 2026, a serious car accident can cost over $1 million in medical bills and lost wages. If you don't have an umbrella policy, the remaining balance comes from your assets or income. The solution? Getting a $1million umbrella policy at roughly $150 to $300 annually – a small price to pay for protection. 

With a comfortable income, it's easy to overlook a $9.99 streaming service or a 1% investment fee, but these small expenses add up fast. According to Minna Technologies consumer and business survey (via Savanta), the average digital consumer holds over 8.2 active subscriptions. Also, Americans estimate that they spend only $86 per month on subscriptions, but when the numbers are actually added up, the average is $219 per month, per data from C+R Research. Annually, CNET found that the average adult spends about $1,080 on subscription services, with close to $200 going into subscriptions they rarely or never use. As a mass-affluent person, you still have to deal with hidden subscriptions, including streaming, gym, and software, because those "small" charges become part of your routine unless you're intentional about reviewing them.

Investment fees present an even bigger issue. According to the U.S. Department of Labor, a seemingly small 1% annual advisory fee can shrink a retirement portfolio by 28% over 30 years. So, if you had $1 million at retirement, paying 1% in fees may leave you with only $720,000, nearly $280,000 lost. 

The fix here is to simply review all your recurring charges at least yearly and to cancel all unused services. For investments, try to adjust towards index funds and ETFs with a low cost of 0.10%, meaning most of the returns will stay in your pocket instead of wearing away through fees.