Humphrey Yang Advises How To Avoid These 6 Money Traps
Written by
Ashley Donohoe
Edited by
Cory Dudak
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If you find yourself deep in debt or just struggle to save enough cash, you might have fallen for some of the many money traps. These can involve everything from how you shop and cover purchases to how you invest your cash and manage debt.
Humphrey Yang, a popular TikTok personal finance guru, has identified six money traps that harm your financial wellness. In a YouTube video, he explained how you can take better control of your finances and avoid them.
1. Staying in Credit Card Debt
Yang explained how many borrowers only pay the minimum credit card payment. As a result, they can end up with interest charges of up to 18% to 25% annually and pay more interest than the actual purchase price. Instead, wipe out your balance each month and never charge more than you can afford to quickly repay.
2. Being Lured by Sales
Yang told a story about how he fell for designer jeans sales when he could have found cheaper alternatives — or held off on buying jeans at all. To avoid this money trap, carefully think about whether you need the item and whether it’s actually a good deal. Avoid buying something just because a sale lures you.
3. Buying Liabilities Rather Than Assets
Some purchases, such as cars and fancy vacations, can be liabilities that only drain your money. Yang stressed the importance of instead buying assets that can generate a return and not just keep costing money. These could include rental properties, dividend-yielding investments and businesses.
4. Getting an Expensive Car
Yang explained how the depreciation on new cars made them a money trap. He also warned about how many car buyers just look at their minimum payments, which may not be affordable alongside other costs. Instead, consider buying a used or new vehicle according to the 1/10th rule, which limits your car’s total yearly cost to 10% of your gross yearly income.
5. Paying for Status
Some people waste money by buying things to look rich rather than make decisions to become rich. Yang mentioned designer clothes and accessories as common examples. While it’s fine to occasionally buy these things for special occasions, make sure you’re shopping within your budget and not just spending a ton of money to look wealthier.
6. Not Buying Items in Bulk
If you’re buying consumables individually and at normal prices, this is a money trap. While Yang discouraged simply buying things just because of a sale, he gave an exception for buying toothpaste and other necessary consumables in bulk. Just make sure you need these items and research deals at places such as Costco, Amazon and Sam’s Club.
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