Humphrey Yang: 8 Worst Purchases To Make in Your 20s
Written by
Jake Safane
Edited by
Susan Kim
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Your 20s are a time that can be full of newfound freedom and opportunity. Perhaps a few years ago you were a student with minimal income from a part-time job, and now you’re living away from your family, supporting yourself with a salary from a full-time job. But while you might have more money than ever before, you also have a lot more responsibility, and it can be easy to fall into bad financial habits that threaten your future.
Ideally, you can use your 20s to your advantage by saving and investing for the future, as time is on your side when it comes to compounding returns. And you can also use this time in your life to live a fun yet modest life. By avoiding certain types of purchases, you can set yourself up for the future without really missing out on much.
Humphrey Yang, a former financial advisor and current entrepreneur, explained in a YouTube video how the following eight types of purchases are the worst ones to make in your 20s.
No. 1: Luxury Travel
Social media makes it easy to compare yourself to others and want the luxury vacations that others post about, said Yang. However, you don’t really know the backstory there. Maybe a friend went into credit card debt to book a luxury hotel. “I’d personally rather be rich than look rich,” said Yang.
And as Yang pointed out, when you’re in your 20s, your body can handle less cushy accommodations. So, if you do want to travel, which is understandable in your 20s, consider lower-cost options like staying in a hostel.
No. 2: Buy a New Car
Buying a new car is another common mistake young people make, especially by purchasing one that they can’t really afford. As Yang noted, cars are depreciating assets that can quickly lose a lot of their value within a few years. So, save your money and buy a used car that still looks good and runs well.
No. 3: Invest in Things You Don’t Understand
While it’s good to invest when you’re young, you don’t want to buy assets that you don’t understand, as that can be a path toward throwing your money away. If you follow your friend’s hot stock tip or invest in assets like cryptocurrencies or NFTs that you don’t understand, then you might be putting your money at risk. If the asset crashes, that one bad financial decision can wipe you out, said Yang.
No. 4: Sports Betting or Gambling
Similar to the problem with investing in things you don’t understand, putting money into sports betting or gambling is too risky for many people in their 20s. While you might want a quick way to win money, said Yang, many people overlook the risk of loss.
And if you’re not earning much money, what you spend on sports betting or gambling could be better utilized elsewhere. If you earn a lot of money like $200,000 or $300,000 and want to set aside a little gambling money for entertainment, that’s different, Yang indicated.
No. 5: Luxury, Brand Name Furniture
Spending too much on furniture can also be a mistake, as most pieces are depreciating assets, and you’re probably not going to get your money’s worth unless you use that furniture for the next 10-20 years, per Yang. In your 20s, do you really want to make such a big commitment to furniture — especially as your housing needs will probably change over time?
Conversely, cheap furniture can get expensive, too, if you have to keep replacing it, said Yang. Instead, look for mid-range furniture or used furniture from nice neighborhoods, he suggested.
No. 6: An Apartment You Can’t Afford
While affordability is somewhat subjective, many people spend too much on housing. As Yang pointed out, many experts recommend spending no more than 30% of your gross income on housing. However, that might be tough for people in some areas like New York or San Francisco, especially if you’re in your 20s and of modest means.
Still, Yang noted that you want to make sure you leave enough room in your budget based on your spending habits, so that you can still save and invest.
No. 7: Buying Designer Goods
Buying designer goods like luxury clothing brands might look nice, but a lot of times you’re paying for the brand marketing, said Yang. In many cases, spending so much on these designer items is about trying to look rich and impress others, said Yang. But you could actually become rich by not making purchases like these, and instead investing for the future.
No. 8: Frequently Eat Out at Fancy Restaurants
Lastly, eating out frequently at fancy restaurants is similar to buying designer goods. In many cases, it’s a waste of money, considering you don’t have the discretionary income to spend as you please, and oftentimes you can get a meal that tastes just as good — if not better — for less.
Occasionally, you may want to go to a fancy restaurant for the experience — like for an anniversary, said Yang. But more regularly, you’d likely be better off going somewhere more affordable and saving your money.
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