Humphrey Yang Reveals the Best Ways To Build a $10K Net Worth
Many Americans have a low or even negative net worth — when your liabilities and debts outweigh your assets. When you’re in this position, building up a net worth of $10,000 might seem impossible. But if you approach it strategically, you can slowly build your net worth up to $10,000 over time.
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In a recent YouTube video, money expert Humphrey Yang shared his best tips for building a net worth of $10,000. Here’s how he says to do it.
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Track Your Spending
“You should know where your money is going,” Yang said in the video.
One of the top reasons Americans live paycheck to paycheck is due to a lack of budgeting and financial planning, he said. That’s why the first step you should take is to write down all of the expenses you have on a daily basis, from your groceries to your utility bills to your Starbucks runs.
“I would probably do this for at least two weeks,” Yang said. “After two weeks, you have a general sense of where your money is going.”
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Figure Out Where You Want To Spend and Where You Can Save
“After you calculate all of your bills and discretionary spending, you’ll see where your money is going, and then you can figure out, OK, maybe this is where I can cut back and this is where I can afford to spend some more,” Yang said. “It’s all about prioritizing what you want to spend your money on.”
To do this, Yang said to consider whether or not a discretionary expense “brings you joy” — if it doesn’t, cut it out.
“For example, I like golf,” Yang said. “I love going to the range and hitting a bucket of balls, and it usually costs me 11 bucks every time I go. Now, if I go two times per week, that’s easily $22 a week, or around $88 a month. I’ve personally decided that I want to prioritize that, because it brings me a lot of fulfillment, and I enjoy getting better at the game of golf.”
While Yang is willing to spend money on golfing, he’s realized that he doesn’t get a lot out of watching TV, so he cut out his Netflix and cable subscriptions.
“Under the $10,000 net worth level, you want to be super careful about adding any expenses that you can’t easily cut back on,” Yang said.
Look For Ways To Cut Back on Everyday Purchases
“Every purchase needs to be looked at while you’re building your savings,” Yang said. “It’s usually the simple habits and everyday choices that will add up to more savings.”
For example, Yang said to opt for (free) water over soda, borrow books from your library instead of buying them and cook more instead of ordering takeout.
“All of these habits will add up, and you’ll slowly be able to accumulate your savings and [reach] your goal of saving 10% of your paycheck per month,” he said.
Invest In Yourself
In addition to saving more, you should also look for ways you can earn more. One way to do this is to invest in yourself.
“When I say invest in yourself, I’m talking about educating yourself or learning a specific skill that translates to more money in your career; for example, you could pursue a certification or credential that could instantly boost your salary,” Yang said. “Look around in your industry and see what credentials or certifications are out there to boost your salary.”
Take On a Side Hustle
Another way to earn more is to take on a side hustle. Yang views this as a short-term solution when you are building up your savings.
“If you’re able to do two to five hours of side hustles per week and earn yourself … an extra $200 per month, it’s going to go a really long way towards your $10,000 net worth goal,” Yang said.
One side hustle Yang has personally had success with is reselling furniture on Facebook Marketplace. He would try to find free or inexpensive items that were easily transportable and resell them for a higher price.
“A media console would be great because I could buy it for … 50 bucks and then flip it for $150,” Yang said. “Just doing this a few times per month while at my full-time job amounted to an extra $250 to $300 a month for me.”
Build an Emergency Fund
While you’re working on increasing your net worth, it’s important to prioritize building an emergency fund.
“We want to have at least three to six months of our living expenses saved up in a liquid emergency fund that we do not touch unless [it’s] for an emergency,” Yang said. “One big mental trick that I have … to stay disciplined is to put money in a place where you cannot get to it easily. So that means, if you have an emergency fund, don’t put it just your primary checking account, because it’s too easy to have access to it and it’s too easy to get confused with your everyday spending.”
Instead, Yang said to open up a high-yield savings account and set up automatic transfers from your checking account to your savings account.
“Humans are highly adaptable, and if all of a sudden there was a magic genie that took $100 out of your paycheck every time you got paid, it would kind of suck, yes, but after a while, you could find a way to make your life still work,” Yang said. “That’s what we want to strive for by setting up automatic transfers from your checking account to … a high-yield account.”
Eliminate High-Interest Debt
If you want to build your net worth, you need to prioritize paying down any consumer debt with an interest rate of 15% or higher, Yang said. He said to do this before you start investing any money.
“Now the reason I would actually advocate for paying off debt instead of investing [when you have an] under $10K net worth is that while investing is still useful from an ROI standpoint, it’s not as ROI positive as just simply paying off any high-interest-rate debt that you might have,” Yang said. “Since the stock market typically returns around 8% to 10% on average per year, if you have any debt with a higher interest rate than that, you should be tackling that first.”
Set Small Goals Along the Way
Getting your net worth from $0 to $10,000 can be daunting, so Yang said it’s best to set small goals that will help you reach your ultimate goal.
“This makes it a little bit more palatable,” he said. “So perhaps your first goal … is to save $500. Once you hit that $500, getting to $1,000 seems much more attainable. Once you hit $1,000 … $2,000 doesn’t seem too far-fetched. That’s a pretty good mental hack.”
Follow the ‘2% Rule’
Cut down on impulse spending with this rule of thumb.
“If a discretionary expense ever costs you more than 2% of your net worth, you really want to make sure you think about if you want that purchase or not,” Yang said. “You may want to wait a day, sleep on it, or maybe even wait seven days, or even 30 days before actually committing to buying that thing.”
Pay With Cash
Another way to be more mindful about your spending is to pay with cash.
“I know this sounds a little outdated these days with everybody paying by card, but if you’re able to withdraw some cash from the ATM and carry that around and actually spend that money, you will find that whenever you’re handing your money over to somebody else, there’s a physical pain that you actually get by handing that money over,” Yang said. “That should hopefully cause a behavioral change in your spending habits.”
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