The former financial advisor says his costliest mistake wasn’t a bad investment—it was waiting too long on the sidelines.
Humphrey Yang, who now shares money advice with millions of people online, recently learned that the seemingly safe habits he had in his 20s and early 30s were costing him a fortune.
He said: “For 10 years I thought I was smart… Some of these mistakes will end up costing me $750,000 or more over the course of my career (1).”
Here are five bad habits that ruined his and millions of other people’s money.
In his early 20s, Yang thought that the only way to build wealth was to join a hot company before it went public or start a business.
It was only later that he realized that this was a wrong assumption. “What I completely neglected from age 21 to 26 was investing in index funds,” he said. “I didn’t really understand that 8% was a lot and I thought it was boring.”
Yang’s estimates may be conservative. The S&P 500 has been returning about 10% annually (2).
Read More: 5 Important Investments You Can Make Once You’ve Saved $50,000
Yang’s upbringing also played a role in him avoiding the stock market. He says his father had a deep fear of losing money, fueled by growing up poor in war-torn China, and that this may have contributed to his “scarcity attitude toward money.”
He said: “What people don’t tell you on the Internet is that many of your beliefs and behaviors about money are inherited from your parents.
For Yang, this came at a high cost. He said: “Even if I just invested $500 a month… “If I just left it in a basic S&P 500 index fund, by the time I’m 65, it would be anywhere from $750,000 to a million.”
When Yang finally started investing, he kept most of his savings in cash. This, he notes, was not just out of fear. Another big issue is that he didn’t have a clear plan.
The right approach, says Yang, is to put every dollar to work, like cash for emergencies and to support long-term goals.
He says: “Ask yourself, what is every dollar for. But let’s say you want to save money to pay off the house in two or three years. That will be acceptable. Anything that does not have a purpose should be invested or at least sit in a high-income savings account.
Yang believed avoiding or reducing exposure to the market meant playing it safe. He later realized that the real “wealth killer” is inflation and losing years of potential growth.
“Inflation destroys your purchasing power about 2.5 to 3% every year (3). So, about 24 years means that you will lose about half of your purchasing power in dollars,” he said. And…
Yang also acknowledged that his community group contributed to his startup’s back-to-back investment. In his early 20s, he and his friends never discussed investing or building wealth. They just played video games and wanted to have fun.
“Try to look at the people around you. If none of them are talking about building wealth or investing, you might want to look at different communities online or in person where people are having these conversations that you really want to be a part of,” he said.
That doesn’t mean ditching your friends, adds Yang, but also surrounding yourself with people who are good at building wealth.
Yang’s experience shows how small, seemingly innocuous practices can cost you hundreds of thousands over time. Good news? They can be fixed.
Yes, Yang missed out on the wealth he could have had by not realizing early enough that his beliefs were wrong. However, the damage would have been worse if he had not admitted his mistakes and changed the way he lived.
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Humphrey Yang on YouTube (1); Loyalty (2); Business Economics (3)
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