By Dorian Traill April 24, 2026

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Five reasons why rich people go broke

Money & You
Five reasons why rich people go broke

Key takeaways

Wealth loss is usually behavioural, not market-driven – poor habits and mindset are the real culprits rather than external conditions.

Sudden money often leads to poor decisions – people who inherit or receive windfalls lack the experience to manage large sums and tend to spend on depreciating assets.

Personal growth must keep pace with financial growth – if your financial education and discipline don’t evolve, your money won’t last.

Being overly generous can be financially destructive – helping friends and family without boundaries often drains wealth quickly.

Many wealthy people fall victim to bad advice – either relying on conflicted “experts” or going it alone without proper guidance leads to poor investment decisions.

Lack of financial education is a major weakness – most people were never taught how money really works, which shows up later when larger sums are involved.

Wealth without structure disappears – without clear strategies, discipline, and systems, money tends to leak away over time.

High income doesn’t equal financial security – it’s how money is managed, not earned, that determines long-term wealth.

We have all heard the saying that a fool and his money are soon parted.

I know some smart reader will think – “ How did the fool get his money in the first place?

But putting that aside, you’re likely to have come across a few people who despite having the trappings of being rich, seem to keep throwing their money at bad investment schemes and always losing money.

In my many years helping successful and not-so-successful investors and businesspeople, I’ve seen many of what some would call “rich people” lose much of their money for no “apparent” good reason.

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And it's not the market conditions - that's not the problem - they just can’t seem to hang on to their money, let alone make it grow.

So why are some people, particularly those with a reasonable amount of money, destined to lose it?

Well…it has very little to do with fate and everything to do with their bad money habits and their “poor” mindset.

Here are some of the reasons I’ve seen some rich people go broke:

1. They have never had to manage a large sum of money before.

I’m sure you’ve heard how many lottery winners have lost most of their winnings after a few years.

I’ve seen much the same happen to those who inherit a large sum of money.

These people have earned an average salary for most of their lives and then come into a windfall.

The problem is they’re ill-equipped to handle their new bank balance, and it quickly dries up - usually after they have bought the expensive car, or a similar vanity purchase or depreciating asset.

If your personal development doesn’t catch up with your bank balance, its likely you’ll soon be parted from your money.

2. They are too generous

There is nothing wrong with helping friends and family pay for things here and there if you can afford to help out, but often people who have come into lots of money don’t know where to draw a line.

Friends from their past seem to show up wanting them to invest in their new business venture, and they may feel obliged to help.

Perhaps a cousin has a huge credit card debt that needs to be wiped. Bad idea.

Business is business, and you need to look after your money rather than focusing on giving it away otherwise, pretty soon, there will be nothing left to be generous with.

3. They get the wrong advice

Advice is a tricky area.

People either get the wrong advice by listening to so-called “professionals” who are really salespeople with vested interests, or they don’t get any advice at all.

The latter group consists of those who believe they can invest in a new area, such as property, without consulting independent experts.

They may have read one too many get-rich-quick success stories and think investing is a cinch. Wrong!

4. They were never taught financial literacy as children

When growing up, we are taught how to drive, read, write, and compose a standout resume.

But how many of us were actually taught how to manage money?

Did your parents ever sit you down and explain the importance of understanding terms such as diversified risk, compound interest, budgeting and managing cash flow?

Did teachers ever explain the ins and outs of raising capital for business ventures, trading in the stock market, or selecting the right superannuation fund?

If you answered ‘yes’, then you are among the lucky ones.

Most young people enter the adult world with a poor understanding of managing finances and it is little wonder so many of them struggle to build their wealth or hang on to it.

5. They are afraid of being rich

However, for many who come from poor backgrounds, being rich may seem like the preserve of an elite few.

It’s a club that you may wish to enter, but you don’t feel like you deserve to.

In these instances, people often subconsciously sabotage their finances because, deep down, they don’t believe they deserve to be wealthy.

On the surface, they may be talking about their desire to be financially free, but they act in ways that lead them to squander any money they earn.

If this sounds familiar, the only option is to examine your deeply held insecurities about money and change them so they no longer hold you back.

So there you have it – the rich can sometimes go broke too.

If this sounds familiar, the only option is to examine your deeply held insecurities about money and change them so they no longer hold you back.

What successful investors do differently

The investors who retain and grow their wealth over the long term tend to approach things differently.

They systemise their decision-making rather than relying on instinct.

They separate lifestyle spending from investment capital and avoid letting one erode the other.

They build buffers before they need them, not after things start to tighten.

And importantly, they surround themselves with independent, strategic advisors who look at the big picture rather than just one part of it.

They understand that building wealth and keeping it are two very different skill sets.

You see... wealth is rarely lost in a single dramatic event.

It’s usually the result of a series of small decisions that, in isolation, seem reasonable.

That’s why the real risk isn’t the market.

It’s the behaviours, habits, and assumptions that sit behind your financial decisions.

Get those right, and your wealth has a much better chance of lasting.

About Dorian Traill Dorian is a Senior Wealth Planner at Metropole and helps develop a tailored, individualised wealth plan specifically for the client’s circumstances. Dorian’s career in property and finance started in 1997 as a sales agent in Brisbane before he switched to mortgage broking. He has been advising clients on how to successfully grow their wealth through property for a number of decades.