Humphrey Yang: 8 Best Purchases To Make in Your 20s To Earn More Money
Written by
Quinlan Grim
Edited by
Jenna Klaverweiden
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Money expert Humphrey Yang posted a video describing the eight best purchases someone in their 20s can make.
Yang began the video by explaining that he wasn’t responsible with his finances in his early 20s and he wanted to share what he had learned. “Ultimately, by making smart financial decisions early on in life, you’re setting yourself up for greater financial freedom and wealth as you experience life and get older,” he said.
Here are the eight best things to buy in your early 20s, according to Yang — plus a few tips to set you up for financial success on a limited budget.
Education
The first important purchase Yang listed is education. The upfront cost of gaining knowledge, he explained, will almost always pay itself off in the long run.
Keep in mind that he isn’t just referring to formal education. You don’t have to take out a student loan to gain knowledge. Community college classes, online classes, podcast subscriptions and audiobooks can all deliver a high return on investment as you turn your knowledge into a successful endeavor.
In other words, knowledge becomes value, and value becomes income — so it’s smart to invest in any form of education while you’re young.
A Plane Ticket
The next item on Yang’s list is a plane ticket for solo travel. He explained that traveling on your own is a great way to learn about yourself and build your self-esteem.
Research shows that travel has several benefits for your mental and physical health, including reduced stress, enhanced creativity and a lower risk of depression. Investing in travel while you’re young is a great way to set yourself up for a healthier future.
On top of that, travel doesn’t have to be expensive. Look for affordable hostels, cheap transportation and free sightseeing opportunities while you’re abroad.
Index Funds
The earlier you start investing, the more time your investments have to compound. That means a much higher return in the long run. According to Yang, index funds are a simple first investment for beginners in their 20s.
An index fund is a low-risk investment that mirrors the performance of an established index, such as the S&P 500. It’s essentially like buying a small percentage of multiple stocks across multiple industries. Yang recommended buying index funds in a Roth IRA for the best long-term return.
Coffee
This one might seem silly. After all, aren’t financial experts always telling young people to stop spending so much money on lattes?
By “coffee,” Yang didn’t just mean caffeinated beverages. He meant meeting a like-minded friend or colleague for coffee (or lunch, dinner or after-work drinks). In other words, investing in your network.
Experts believe that meeting face-to-face helps build stronger, more meaningful business relationships. But you don’t have to sit down for a formal meeting every time you take a friend out to coffee. Just establishing connections with like-minded people in your 20s can help you get inspired, connected and involved in new opportunities.
Reliable Transportation
You need a way to get around at any age. While that could be a bike or metro pass if you live in a city, for the majority of Americans, that means a reliable car.
Yang recommended investing in a quality used vehicle instead of a flashy new car. That’s because cars are depreciating assets, and they depreciate most rapidly right after they’re purchased. In fact, some models can lose up to 40% of their value in the first year.
To get the most value out of your car, Yang recommended looking for one that’s between three and four years old, with a relatively low number of miles on it. Choose dependability and good gas mileage over aesthetics.
A Good Mattress
Quality sleep is more valuable than you might think. A lack of sleep can impact your job performance and productivity, while good sleep has been linked to better learning and memory retention.
Investing in a nice mattress in your 20s — while you’re also investing in your foundational knowledge and skills — is a simple way to feel better and set yourself up for future success.
Real Estate
Unlike cars, real estate is an appreciating asset. While not everyone in their 20s can afford real estate, Yang recommended that those who have the time and budget for it invest in a rental property.
One way to make your real estate investment more affordable is what Yang called “house hacking” — renting out a room or unit in your primary residence. That way, you can make a lower down payment on your home and still easily afford your mortgage with the help of your rental income.
A Gym Membership
The final thing Yang recommended buying in your 20s is a gym membership. He explained that his gym membership has helped him establish an exercise routine and get out of the house.
Exercise has proven benefits for your work performance as well as your mental and physical health. If gyms aren’t your thing, consider investing in other things to get regular exercise, such as a yoga class, high-quality running shoes or a road bike — whatever it takes for you to get moving every day.
Making Big Investments on a Tight Budget
As Yang explained, your 20s are a great time to make smart investments that support your well-being and future success. However, if you’re currently in your 20s and struggling to make ends meet, you might be wondering how you can afford these things.
The answer is that big investments don’t necessarily have to be expensive. Even a small index fund purchase, for example, will compound over time. Prioritize quality over appearances when it comes to choosing a mattress, car or health investment, and remember that paying a little more upfront can save you from the cost of replacements and repairs in the long run.
Put simply, you don’t need to be wealthy to make smart investments. These eight suggestions are all examples of purchases that can deliver a high return in the future without breaking the bank today.
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