4 surprising mistakes these millionaires made (and you could be making too)

Ruth Davies 08 April 2015

"It's fine to celebrate success but it is more important to heed the lessons of failure." ~ Bill Gates.

It's easy to assume that millionaires belong to an exclusive club of people who must be experts at managing their money. But it turns out they can be as flawed as the rest of us when it comes to making smart financial decisions.

Here are four mistakes made by the rich and famous – and how to avoid them.

#1 Sticking with it

The mistake:

He may be worth over £4.9 billion, and Richard Branson has built close to 100 businesses under the Virgin brand, but he hasn't always been successful and many of his businesses have failed. Remember Virgin Megastores? If not, it's probably because the last one closed down in 2009, and Branson himself admits that he didn't review the situation soon enough.

What caused it:

In his book, Like a Virgin: Secrets They Won't Teach You at Business School, Branson wrote:

" ...the business was losing a lot of money. We did not make a speedy exit in part because I resisted closing the business. I was worried about losing the flagship stores' presence in Times Square and on Oxford Street since they were so important to brand recognition and our link with the past. But the scale of the losses meant that we had to sell the business to its management and focus our attention on markets where we could be the disruptor, not the disrupted."

Branson firmly believes that trying, failing and learning from your mistakes is an important part of success in business. Fortunately he has the vision, the drive, and the capital to keep going; not everyone is so lucky.

How you can avoid it:

Once you've committed to a new venture of your own, whether it's an investment, a mortgage or setting up your own business, regular review of your circumstances is key. Are you still getting the best deal? Does the product that suited you six months still fit with your financial goals?

#2 Failing to prepare for disaster

The mistake:

Entrepreneur and Dragon's Den investor Peter Jones learned his lesson the hard way. In his twenties Jones grew a substantial fortune, only to lose it all before he turned thirty.

What caused it:

Having built a successful and expanding computer business, Jones had the opportunity to take out credit insurance at a cost of £12,000 a year. He decided not to bother.

After making this decision, Jones won a large contract with a reputable company. Having fulfilled the order and supplied the equipment, the entrepreneur decided to visit the company's offices to check everything had gone smoothly – only to discover that his new client's company had folded without paying him. Without insurance, his business couldn't recover and he lost everything.

How you can avoid it:

Having a safety net is important precisely because you don't know when you're going to need it. The reason many people fail to set one up is simple: they have only the vaguest idea how much protection they'll need if things go wrong. Discover how big your safety net should be by viewing all income, accounts, debts and assets in one place with MoneyHub.

#3 Cutting corners

The mistake:

U.S. fashion mogul Ralph Lauren was asked to design and deliver the USA's 2012 Olympic team uniforms. In an effort to cut costs, Lauren had the uniforms manufactured by low-paid workers in China – this turned out to be a mistake. The lack of a "Made in the USA" label on the athletes' uniforms caused an outcry in the States, leading many to boycott the brand. The reputational damage to the Ralph Lauren brand may well have outweighed the cash saved in the short-term.

What caused it:

Missing the bigger picture can have a huge financial impact. While Lauren was concentrating on cutting the cost of production he didn't take into account the other things that could impact profit.

How you can avoid it:

Many financial decisions require a broad view in combination with the finer detail. Cutting corners in the wrong place can lead to disaster whether you're about to make an investment, buying a new house or retire. On the other hand saving smartly can will help you get the most out of what you have and achieve your goals.

#4 Basing goals on passion and vision alone

The mistake:

Henry Ford was the hugely successful billionaire behind the Ford Motor Company, but did you know that he also attempted to build a town? As his car manufacturing company began to take off and the demand for rubber increased, Ford decided to build a rubber manufacturing plant closer to the source: the middle of Brazil. Not only did he want to build a plant, he also wanted to recreate an American suburban town for his workers, complete with American homes, shops and a mess hall serving American food. He called it "Fordlandia" and built it at breathtaking speed.

Unfortunately, the Brazilian workforce didn't appreciate the insistence on American values; many complained that the food gave them indigestion, there were protests over the company-enforced square dances and the American style homes weren't designed to keep insects and animals out. The venture was doomed. Fordlandia has since been abandoned, and is now an eerie ghost town in the Amazonian rainforest.

What caused it:

Ford went ahead with striving towards his goals without taking into account practical aspects of the location or the attitude of the local population. Passion, vision and setting goals are all important, but decisions made without considering a practical strategy for achieving those goals can often lead to disaster.

How you can avoid it:

MoneyHub can help you set a financial goal for yourself, make a practical plan to achieve it and check it to see that you're on course along the way.

Become a better money manager...

Branson, Jones, Lauren and Ford are millionaires that prove it's possible to learn from your mistakes and still be successful. Planning ahead from the very beginning can help you to avoid the big mistakes in the first place, react quickly to the small ones, and stay on course to meet your goals.