3 costly mistakes high-income earners make — and how to know if they’re impacting your financial wellness
A couple driving a classic convertible along a country road.
Many people presume that when they earn a high salary, they’re exempt from having any financial problems. But unfortunately many households continue to struggle even after they see a significant jump in income.
National credit data shows that payment delinquencies are climbing. According to Equifax, the first quarter of 2025 saw total consumer debt soar to $2.58 trillion, with non-mortgage debt climbing to $22,147 per consumer as costs continued to rise transportation, mortgage or rent, utilities and groceries (1).
Additionally, a 2024 bankruptcy study from insolvency trustee firm Hoyes, Michalos & Associates found that credit card balances among insolvent Canadians rose by approximately 26% over one year to an approximate average of $20,400 per person. The same study also noted a growing share of those who filed for bankruptcy are higher-income earners (2).
As the cost of essentials rises across Canada, you may also be feeling the strain of growing consumer debt. To avoid falling into a high-income, high-debt trap, avoid these three financial mistakes.
A sudden bump in income can oftentimes trigger a desire to upgrade your lifestyle due to extra cash on hand. But doing this can lead to “lifestyle inflation” — also known as lifestyle creep — and that’s exactly how many high earners get themselves stuck in a vicious financial cycle.
For example, splurging on a luxury vehicle, buying a lavish new home or sending the kids to private school can lock you into high monthly payments that can become unsustainable.
Bigger car loans, high mortgages and tuition payments can push many six-figure earners into living paycheque to paycheque. According to a 2024 survey by the National Payroll Institute, almost one in three Canadians earning more than $100,000 were in that exact situation (3).
If you adjust your spending habits to live below your means, you’ll avoid overstretching your budget and falling into a lifestyle creep scenario. This will give you greater financial freedom and allow your cash to be allocated elsewhere — such as investments or retirement savings — regardless of your income.
A higher income can give you access to premium products with better performance, so it’s tempting to believe you can also access exotic assets for better investment performance as well. But many Canadian family-run offices still prefer traditional assets.
A 2025 survey found that Canadian family offices primarily invest in developed-market equities (25%), real estate (19%) and direct private equity (13%) (4).
Many alternative investment products often fail to meet expectations, as they often come with opaque reporting, high fees, limited liquidity and difficult exit conditions. A 2025 analysis from Canadian Family Offices noted that alternative investments can carry higher risk and volatility during periods of economic uncertainty (5).
Simply put, as a wealthy investor, you won’t get a guaranteed investment advantage by chasing alternative products. A simple, low-cost index fund diversifies your portfolio with strong long-term value and without the high management fees that eat away at your returns.
Peak-income blindness is a behavioural finance concept that describes what happens when people assume their highest earning years will last forever and make financial decisions based on this belief rather than on realistic, long-term planning.
For example, if you have exceptional skills as an accomplished surgeon or as a high-profile corporate lawyer, it’s easy to assume that your skills will only improve with age and as you gain more experience.
However, recent research from the University of Western Australia suggests that most of our thinking and problem-solving skills peak between the ages of 55 and 60. When you add in normal health issues associated with aging, it becomes easier to see why even a strong career might not last as long as you expected (6).
The rise of artificial intelligence (AI) also threatens to reshape many white-collar professions in Canada, not only through automation, but also by transforming job responsibilities and increasing the pressure to constantly upgrade your skills. A recent Canadian analysis estimates roughly 60% of workers could see significant changes to their roles due to AI, with an almost even split between jobs that will be replaced by AI versus those that AI will support (7).
You may assume your higher salary will protect you from financial trouble — but rising costs, increased debt levels and growing bankruptcy rates among high-income earners paint a different picture. From lifestyle inflation to risky alternative investments and overconfidence in your long-term earning potential, top earners can fall into financial traps that threaten their security.
Staying wealthy takes the same work and discipline as becoming wealthy. Living below your means, sticking to low-cost, diversified investments and planning for potential career disruptions can help you protect your finances, regardless how much you earn. And even if you’re a millionaire, building a robust emergency fund can give you and your family some much-needed peace of mind in case the worst should happen.
