Yahoo Finance 21 Money Lessons That Will Make You Richer, According To Expert Humphrey Yang
If you’re looking to increase your net worth, Humphrey Yang has a few tips. The former financial advisor has a YouTube channel dedicated to sharing free financial advice(1).
Recently, he created the video “21 Money Lessons I Wish I Knew Earlier(2),” offering guidance to help you make better money choices. Here’s a quick look at what he had to say.
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1. Looks Aren’t Everything
Most wealthy people actually live well below their means. Therefore, just because someone who lives a flashy lifestyle might actually have less money than another person with a more modest existence.
2. Compounding Makes You Rich
Most people don’t get rich overnight. Instead, they build their wealth consistently over time, through the power of compounding.
3. Lump Sum Splurge
It’s great if you get a big paycheck one month — i.e., you work on commission, — but you can’t expect to earn this much every month.
For example, if you’re a realtor and you earn $60,000 in commissions in January, you can’t expect to get a paycheck of this size every month. Instead of living the kind of lifestyle that accompanies a $60,000 per month paycheck, assume that’s all you’ll earn the rest of the year and spend accordingly.
4. Affordability
You might be able to afford something on paper, but that doesn’t mean it won’t stretch your budget. Living below your means will give you more peace of mind.
5. Look for a CFP
When you need financial advice, seek out a certified financial professional. They have the right training and are required by law to act in your best interest.
6. Don’t Fly First Class
It might be more comfortable, but don’t fly first class until your net worth is $5 million — or maybe if you make more than $300 per hour. However, it’s okay if you’re using credit card points or airline status.
Learn More: 7 Things You Must Do To Start Making $1K a Month in Passive Income
7. Credit Utilization
Keep your credit utilization under 30% of your total credit limit. Carrying more can lower your credit score.
8. Never Carry A Balance
Try to keep your credit card balance under 10% or never carry a balance at all — i.e., pay it off every few days.
9. Buy Some Bitcoin
You never know what might happen in the future, so buy Bitcoin and never sell it. This will hedge your bets a little against our traditional types of currency.
10. Know How Much Money is Enough
Money isn’t a scoring system. Trying to “win” is often an unwinnable game, because someone will always have more than you.
11. Take Advantage of 401(k) Match
Always take advantage of an employer-sponsored 401(k) match. This is free money offered to you, which is one of the best ROI investments you can make.
12. Automate Your Savings
Every time you get paid, set up an automatic transfer from your checking account to your savings account. This will eliminate any temptation to spend money you should be saving.
13. Choose Low Expense Ratios
When you invest in an index funds, mutual fund, exchange-traded fund (ETF), you want low fees.
The average for an actively managed mutual fund is 0.5-0.75%, which is high. Instead, consider going with a passively managed fund with a 0.2% expense ratio or lower, such as Vanguard, Charles Schwab or Fidelity.
14. Making Money is a Muscle
As you learn and grow, you’ll be able to identify more (and better) opportunities to make money.
15. Surround Yourself with Driven People
When you spend time with career-driven people who care about money, you can learn from them. On the other hand, when you surround yourself with people who don’t care about money or have a negative money mindset, this could rub off on you.
16. Diversification is Protection Against Ignorance
A phrase spoken by Warren Buffett, this practice can protect you from market volatility. This is especially true if you’re not the type of person to pay attention to the stock market every day.
17. Leverage is Needed
You need a lot of leverage to make a lot of money. The more money you have to work with, the more it will earn for you.
18. Invest Early
Invest as early as possible to maximize your time in the market. Timing the market is mostly impossible, so try to be invested in the market as long as you can.
19. Filter Financial Advice
A great financial decision for you might not work for someone else. This means it’s always important to weigh whether money advice is right for you before taking it.
20. Capital Preservation
Once you get wealthy, focus on maintaining this status. Avoid risk of ruin by not chancing your money in an unhealthy way.
21. Transparency
Talk to your friends about finances. Eliminate the stigma about financial discussions by having these conversations with friends and family who are willing to listen.
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