Once You Get Rich You Will Make These 15 Mistakes
Getting rich is extremely hard. Staying rich? It's almost impossible. This is why most celebrities, athletes, or one-hit wonders reach the end of their lives poor or in massive debt. Money flees the hands of those who can't hold it, and you don't want to make the same mistakes as they do. So by the end of this video, you'll know exactly what to pay attention to, so please pay attention as we go through the list. Here are 15 mistakes you make once you get rich.
Welcome to Alux. You overestimate yourself. You're the king of the world. You've made a little bit of money, and now your ego has gone through the roof. There is some truth to that; most people want money, and you excelled at a game almost everyone else fails at. So you're feeling pretty good. The biggest mistake here is thinking that just because you were good at optimizing some numbers on a screen, you've got a relevant opinion on all sorts of issues.
Most people think they can catch lightning in a bottle over and over again, but reality is a harsh master. Friend of the channel, Justin Khan, sold Twitch to Amazon for one billion dollars. Riding on the high of previous success, he found out the hard way that statistically, you won't do it again. His second business lost 75 million dollars in the first 36 months before he shut down. The goal is to move beyond money and maintain an open mind.
Losing track of your spending? Here's a golden nugget: the more money you have, the less significant every spend is. So what that means is this: right now, you probably don't care if you buy gum at the supermarket or not. You just put it on the conveyor belt, and whatever the price is, you know it's covered. But the thing is, the more money you have, your brain automatically adjusts. Once you can afford to pay ten thousand dollars for a bag, a one thousand dollar bag seems kind of cheap.
Your brain is now wired based on the new benchmark you've set for it. If two years ago you would have gone on holiday and spent a couple of thousand dollars, now that you've got some money, 20, 30, or even 40K on a holiday isn't something that you still find outrageous. Your spending ceiling has shot up, so anything less than the ceiling is now fair game. The problem occurs when you don't realize just how much money you spend on the chewing gums of your new life.
Think ordering food, restaurants, events, car rentals, clothes, gadgets, expensive water, or wine; the list goes on. Spending money that's supposed to come in soon? This is the rich people's version of spending money you don't have. You can get away with it since it's predictable cash flow, but more often than not, delays might pop up, and you're left hanging, needing to take out short-term loans or, worse, needing to liquidate some of your assets to cover the bridge.
This puts you in a perpetual chase to get back to zero. Simply delay the purchase enough to see the money reach your account first. If it's too much of a stretch, let the deal flow by you. Deals and opportunities? They're like trains; there's always another one coming if you just wait for it.
Losing your hunger? Once you make some money, you no longer feel the need to hunt because your belly is full, and hey, so is your fridge. The problem with that is the fact that you're in a predatorial environment where, the moment you stop hunting, others will come after your food. You'll start missing opportunities; your costs will go up; you'll tolerate mediocrity, and some clients will leave you. You'll lie to yourself, saying it's all fine as the business keeps plateauing. It's not going to take long until you start to notice a steady decline, but it's not enough to make you do something about it.
But it is enough to keep you up at night. Losing your hunger puts everything you've built at risk. Being invested in only one asset class is true that the more you know, the less you diversify. But not diversifying is a fool's game. Think about it like this: if you're all in in a certain industry, a certain investment, or a bet that you're making, you need to be right 100% of the time. All it takes is one major financial event, and you get wiped out.
This is why smart investors keep a third of their portfolio in unrelated investments to their main one as hedges against whatever might happen. You think rich people buy Picassos for the art? Hilarious. Of course not. Everyone is pretending to understand art, but what they care about are the returns. The blue-chip art market has been outperforming gold, real estate, or the stock market for the past few decades. And the reality is, the ultra-rich kept the art thing for themselves and gatekept it with the high cost of entry.
However, one members-only platform is letting investors join them in the opportunity for the first time. Our friends at Masterworks have an expert team that buys and sells multi-million dollar art on behalf of a user base of over 700,000 investors. They pick the painting, split it up into shares; you buy however many shares you want, and when the painting eventually sells, the profit is split between the shareholders. Over the past two years, they've already delivered positive returns on 14 exits, and all ahead of the projected three to ten-year hold. These are multi-million dollar paintings by artists like Andy Warhol, Banksy, and Cecily Brown, typically selected for their performance as investments.
Masterworks is a private community with a long waitlist to get in, but since you're in Alux and they were kind enough to sponsor this video, if you go to alux.com/art right now, you can skip that waiting list altogether. That's alux.com/art or click on the link in the description to skip the waitlist. How cool would it be to have five to ten percent of your portfolio in blue-chip art? It would definitely make for a great conversation starter.
Not being paranoid enough? You might have heard the saying, "only the paranoid survive," and although tinfoil is out of fashion, it does pay off to pay attention to the way other people move toward you. It reveals more about their intentions than what they tell you. Once you have money, you have something to lose. People are drawn to your wealth and status, and because they want what you have, they're willing to risk more to get it.
You're guilty of this yourself. If you were sitting at a random table talking to some dude and he walks away, and you find out that he's a billionaire, all of a sudden you revisit that conversation to see if you can find some hidden gems because money multiplies offers. This means if you used to get two to three romantic interests, now that you've got money, that number is more likely to jump up to six to eight. Jets, multiple cars, multiple homes, and other comforts. Look, with money comes comfort; you buy it because you can afford it, and you know more money is coming in soon, so hey, no worries there.
But there is a comfort trap you're not aware of until it's too late. Let's say you fly to a faraway destination on a good airline but in economy. You've never flown internationally, so the quality of the food, the chair, and the blanket are an amazing experience for you; your happiness is at a level 10. Skip ahead a few years, and now you've got some money; you charter a private jet for the first time for thirty thousand dollars.
You realize you don't have to wait to board the plane; you can decide when to take off and hand-pick the people that you travel with. It's mind-blowing! The thing is, the private jet is now your level 10 in terms of happiness and comfort, while premium economy just fell to like a six. So you're emotionally and internally incentivized to fill the hole of comfort based on the data that you've discovered. Just because you can afford it doesn't mean that you should.
It's fun to buy as many cars as you want, the same with holiday homes, but there are diminishing returns to them, just like chocolate. The first few tastes are the best; then things get kind of boring. If you keep going, you might eventually get sick. It's like this with these kinds of purchases. You own 10 cars and five vacation homes, and all of them need maintenance. The cars all need parking spaces, and all of a sudden, you no longer drive the car to your destination because you'd rather not put miles on it, so you trailer it.
While you weren't paying attention, the things you owned ended up owning you. You get used to overpaying for everything. You only know this if you've lived it, but once you have money, you start overpaying for things all the time just because you want to get it over with. 10 to 20% over market price is pretty standard. Let me give you a real-life example. So the home that we live in right now, it wasn't for sale when we bought it; we just really liked it, contacted the owner, and asked what his number would be.
No negotiation; we paid it all in cash just so we could get busy renovating. Now, sure, we could have spent another year hoping a similar property would show up on the market, and once that happened, we could have surely spent three to six months negotiating with the owners and agents to get ourselves the absolute best possible deal. But in the process, we would have wasted a year and a half for a 20% premium. In our eyes, the spend was worth it. We no longer book plane tickets four to six months in advance; we're okay with paying whatever the going rate is a couple of days before we leave because it gives us more flexibility.
Flying to New York City or Monaco, we no longer take a cab; instead, we book a helicopter for 2x the price of a taxi. But hey, you get to your destination in five minutes. In this case, additional money buys you convenience. The mistake is when this behavior transitions to other parts of your life and other people take advantage of you.
Throwing money at every opportunity coming your way? With great money comes many opportunities, or whatever Uncle Ben was trying to teach Peter. When we began angel investing through our venture capital fund, we were surprised by just how many great investment opportunities are around us: super talented founders building incredible companies. Because these companies were in the earliest stage, our usual ticket was between twenty to fifty thousand dollars.
In the first years, we did 10 deals since it's almost a numbers game. But one of our older mentors shifted our perspective on this: twenty thousand dollars isn't enough to make or break us. So instead of doing these smaller deals, take the money and travel. With twenty thousand dollars, you could have a really memorable trip with your spouse, and those memories will be with you forever.
Even if we hit it big, which was statistically improbable, and the company 20xed in valuation, that 20K would have only turned into four hundred thousand dollars, which is a lot of money, don't get us wrong, but it's not reality-shifting for us. Not to mention that once you have money, all of your relatives and childhood friends will show up at your doorstep with great business ideas just waiting for you to part with that cash.
Not continuing to level up? With every new stage you enter in life, you'll encounter different kinds of problems and challenges. You think just because you became a millionaire, you'll have enough know-how and wisdom to navigate the rest of your life, but you're sadly mistaken, my friend. What got you from zero to one million is not enough to get you from one to one hundred million. The relationships you have now are different than the ones you had when you were broke, even if you wish it weren't true—it is. All of the elements in your life gravitate differently to you.
The same way you required specialized skills to be able to leap into wealth, you'll need a different set of skills to stay healthy in a high-stress environment, to be a great parent, to not neglect your partner and keep that spark alive, and to be able to build real teams who can help you grow the business. All of this can be learned, and rich people spend hundreds of thousands of dollars per year just to give themselves this unfair advantage of having access to the best road maps available.
We wanted to completely change the game and give everyone access to the same kind of high-level insights that previously only the rich could afford. We pay international experts a ton of money for their advice and expertise; we distill it and put it all into the Alux app—the only app specifically designed to hold your hand as you make real progress in life. We are closing in on the first million dollars spent on insights and content for the app alone, and you're getting access to it for only 99 a year, literally getting millions of dollars worth of advice for less than it costs you to eat out.
Go to alux.com/app right now and allow us to accelerate your progress in life. Failing to monitor and adjust course on your investments? They say the best investments in life are the ones that you set and forget about. If only there was such a thing as that! We've done plenty of videos on why passive income is a myth, and you know that even the most passive of investments still require you to pay taxes, keep up with the management company to make sure they aren't working the books or that your assets are being taken care of.
The difference lies in the frequency of inputs. With real estate, you only have to get involved when you buy, refurbish, and rent. Once the tenant leaves, you repeat the maintenance cycle. Let's say you have to do it once every few years. With hand-picked stocks, that frequency bumps up to almost daily monitoring. Getting out of an investment, taking profits, and moving it into another? Like all things in the universe, the tendency of matter is to decay, and your investments follow that rule too.
The moment you take your eyes off it, they start to tremble. It might not be immediately apparent, but by the time you realize what's happening, it might be too late. Our advice? Diversify selectively and make sure to rebalance your portfolios. More often than not, you'll find you'll be better off exiting the position while it's going up than wait to see what happens. Nobody went broke taking profits.
Not protecting your reputation? You might think that money buys reputation, but it's actually the other way around. People want to do business with people who have a pristine reputation. Professionally, do not associate with people who have dirty reputations, for that dirt is going to rub off onto you, and people will put all of you in the same bucket.
Playing catch-up with your even richer friends? The most common and valuable advice for poor people is to stop acting like you're rich because it's actually making you poor. But it turns out this advice applies to rich people too, who are pretending to be even richer than they are just to keep up with their own version of keeping up with the Joneses. Look, there is nothing to be ashamed of. If something is too rich for your blood, it's okay to say no to spending fifteen thousand dollars a night for a week at the Four Seasons Bali Resort when you and your entire family can live like kings for a month for the cost of two nights there.
It's always better to be friends with someone who has a yacht than to be the person who owns the yacht. Just because they have one doesn't mean that you should get one too. Making decisions based on other people's decisions without thinking for yourself? We've been guilty of this one too, and it led us to losing over one million dollars in a single year.
We actually made a video about it, which you can check out by clicking in the top right corner. When you make money, you find yourself surrounded by other rich people who you assume are all smarter than you are. Most of them have hundreds of millions of dollars in their hands, access to some of the best market analysts, so it makes sense for you to think that you can leverage their infrastructure and insights for profit.
FTX is a great example where we bought into the premise that this was a well-run company based on the fact that Paradigm and Sequoia collectively put 900 million dollars into the business. These are smart people, and even they got it wrong. Just because someone is doing something doesn't mean that you should do it too. Stick to what you know, or even better, stick to avenues where you can alter the outcome.
Inability to relate to people struggling with the basics? Look, it is really easy to lose your grip with reality when you haven't had to struggle for a while. From where you're sitting, the way to get out of the maze might seem obvious, but you're blinded to the fact that you're looking at it from above. The person stuck in the maze, running around like crazy? Well, their perspective is entirely different. This is going to make you seem out of touch or even be perceived as arrogant.
You're going to be oblivious to what other people are going through, which in turn will make you a poor manager of the human resources that you have under you. Once you lose grip on their reality, you'll lose that personal touch, and it's all downhill from there. Root yourself in reality. Visit your parents, talk to your grandparents if they're still alive, revisit your birthplace. It'll help you to live with gratitude and not take anything you have for granted. That's how you win.
You've lived a long life and have met many interesting individuals along the way. So which of these mistakes have you witnessed people make? Tell that story in the comments so we can all learn from it. And since we've been doing this for almost a decade, we have to keep the tradition alive with the bonus reserved for those who watch until the very end.
Big goals take time. The more you mature mentally, the more you realize just how time-consuming some goals are. We thought that going from 1 million to 10 million to 100 million to eventually a billion would be something exponential, but it's not. It takes building more and more infrastructure around you. It requires you to fire yourself from what you're doing in order to open up time to learn and build the stepping stones for the next level.
A few months ago, we had the privilege of talking to one of the top investment bankers in New York and asked what would be his advice to take Alex from our current mid-8 figure valuation to nine and eventually ten figures. This is what he told us: bring someone in to run the 50 million dollar business so you can build the billion dollar company without being distracted by this one.
So that shift in perspective was immediate, especially since it doubled down on something that Sam Altman, the founder of OpenAI, taught us when he was speaking at Y Combinator: all successful founders are able to transform from building a product to building a business. You build a business by building teams. If your team sucks, you've got a job, not a business. Time is going to pass either way, and your time is incredibly valuable, so shift from products to teams, and then allow your teams to build the product for you because this is what's going to open you up to take down those metaphorical mammoths moving forward.
And by the way, we think this is one of the most valuable bonuses we've ever put in a video, and to the right ears, this is going to be life-changing. If this was your "aha" moment, write the word "bonus" in the comments. Let's see how many of you have had the same spark that we did. [Music] Foreign.