Mistakes six-figure earners make, Earning a six-figure salary can make building wealth easier, but it’s not a magic solution for your financial woes. Earning a high income is only one part of the equation. If you want to be financially secure, you need to make your money work for you.

A high paycheck can make it easy to gloss over financial mistakes since you can still cover your bills. However, if you want to build wealth rather than an inflated lifestyle, you need to focus on reaching your full financial potential.

Most of the mistakes that six-figure earners make are easy to fix. Here’s how to use that high income to your advantage and build your net worth.

7 Six-Figure Money Mistakes

Mistake #1: Not using a budget

Just because you have a lot of money coming in every month doesn’t mean you shouldn’t keep track of where it’s going. This makes it easy to squander your paycheck without making any financial progress.

Creating a budget doesn’t have to be hard. Think of it as your spending plan. Make a list of all monthly expenses and use it to create your budget. Does your spending in each category align with your values? Can you cut back or cut out any expenses?

Certain expenses such as eating out or groceries can get out of hand if not kept in check. Cut back on these areas by cooking more at home and shopping smart. You can still have fun with no regrets when you know you’re sticking to your budget.

Review your accounts for subscriptions you are not using and cancel them. Look at your other expenses and think about ways you can cut back with little sacrifice. It may surprise you how spending can escalate when left unchecked.

Make sure to track your spending so you know where your money is going every month. Just because you can pay your bills every month doesn’t mean that it justifies your spending. Every dollar you invest instead of spending sets you up for a better financial future.

Mistake #2: No long-term financial plan

Having a long-term plan is an important part of setting yourself up for financial success. Making a six-figure income won’t mean much if you lose your job or if you don’t save enough for retirement.

If you want to continue to enjoy the lifestyle that your high income provides, you need to get your retirement plan on track. Having a financial blueprint will give you peace of mind since you know what financial moves you need to make to ensure your success. It will also help you align your finances with your long-term goals and values.

It also means you know how to invest your future dollars so you can maximize returns. Make sure to involve your spouse in all future financial plans so you can get on the same page. Figure out what is important to both of you, such as paying for your kids’ education, saving for retirement, buying another property, and aligning your spending with your goals.

Mistake #3: Failing to minimize taxes

As a high-income earner, you’re likely paying a fair amount of taxes. While you may think there’s no way to minimize how much of your earnings you hand over to Uncle Sam, that’s not the case.

There are ways you can minimize your tax burden by using tax-advantaged accounts and other financial products that can help you shield part of your income from taxes. These types of accounts have rules about income and how much you can contribute.

Talk with a financial advisor or a tax advisor on how you can pay fewer taxes this year. If you own your own business, it’s important to enlist the help of an accountant or tax advisor. They can help you find deductions and credits you may not know about from doing your own taxes.

Mistake #4: Spending too much

One mistake that many are guilty of from time to time – six figures or not – is spending too much. This is especially true of six-figure earners since they assume their good fortune will last for the indefinite future.

Anything can happen tomorrow – a job loss, an illness, an accident, and so on. Keeping your spending in check can help you to weather a potential storm in more ways than one. It’s okay to enjoy spending some of your money but make sure you build a safety net around your family.

Lifestyle inflation is a problem in more ways than one. Not only do you spend more of your paycheck, but you also get used to a certain lifestyle. It gets harder to be satisfied with less when you’re used to getting the best of everything.

It’s easy to finance a fancy set of wheels, a boat, or even a second house. These expenses take more and more of your income each month, leaving you with less to put toward building long-term wealth.

Instead of putting your money toward depreciating assets such as a car, try investing your cash in appreciating assets. This includes real estate, such as a rental property or investing in the stock market.

Once you retire, if you haven’t invested enough to cover your expenses, you will need to reduce your spending. This can be quite a shock if you’re used to fine dining and five-star accommodations.

Use some of your high income to enjoy a few luxuries in life but also recognize them for what they are – nice to have but not a must-have.

Mistake #5: Doing your own investing(without learning how)

Doing your own investing is a great idea if you’re willing to put in the time to research investments and learn about how to optimize your portfolio. However, most six-figure earners focus on earning more at their jobs rather than optimizing their investments.

Earning a high income is great but if you don’t invest your money correctly, it can cost you. High fees and improper risk allocation can eat away at your portfolio, limiting your long-term gains.

If you don’t have the time (or don’t want) to do the research on how to optimize your investments, speak with a professional or look at an online investment platform. They can help you optimize the investments in your portfolio to align with your goals for the future and ensure you’re diversified.

There are also certain retirement strategies that can help you maximize your Social Security payout. While you may think you will have enough to retire on without it, you may leave money on the table.

We at Dr Breathe Easy Finance believe in DIY investing as the ultimate goal. However, to do this, you have to educate yourself. In the mean time, we have no objection to using a fee only financial planner to get started. Robo advisor like wealthfron is also an alternative. This is how we started.

Mistake #6: Not saving enough

Even if you’re saving a lot for your golden years by maxing out your employer-sponsored retirement accounts, there’s more you can do to protect yourself financially. Most people spend at the pace their income increases while not making any changes to their savings habits.

Get in the habit of saving the same amount of your income no matter how much you make. A good number to shoot for is 20-25 percent (more if you’re able). This means you always have a safety net if you need cash to cover an unexpected expense.

Over time as your savings balance grows, you can invest part in stocks or index funds so you can continue to build wealth.

Mistake #7: Not updating estate plans

Most high-income earners already have estate planning in places such as a will and life insurance. However, many take a set-it-and-forget-it approach once they have these documents in place.

It’s important to update your estate plan every couple of years to reflect any changes in your life. For example, if you got a divorce, update your will and life insurance policies to reflect the change. The same goes if you add a new member to your family.

Many people forget to update their will once their children grow up and move out of the house. Make sure you update your estate plan to remove any mention of guardians once your kids are independent and supporting themselves.

If you have not created a digital estate plan, talk to an estate planning attorney today. Protecting your digital assets such as online accounts, retirement plans, and so on, is an important part of wealth preservation.

The Bottom Line

Making a high income can be a blessing if you make the right financial decisions along the way. If you end up spending all of your hard-earned money, you put yourself in a precarious financial position.

Make a plan to protect yourself and your family in case something happens such as a job loss. Create a financial freedom blueprint and make your money count by investing smartly and maxing out your tax-advantaged accounts.

This will set you up for success in the future and ensure you’re financially prepared.

This article originally appeared on The Money Mix, and has been republished with permission.

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Clint Haynes

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Clint Haynes is a Certified Financial Planner® and Founder of NextGen Wealth. His primary focus is working with Millennials and Generation X clients with an emphasis on truly comprehensive financial planning.