Finance lessons are not taught in schools; they are lessons you pick up going through different financial stages. I am glad to announce that today, we were able to curate 10 personal finance lessons from Humphrey Yang, a personal finance YouTuber known for his practical and straightforward advice. He didn’t always have it all figured out, and that is one key finance lesson you should know.
His path to financial literacy was paved with mistakes, setbacks, and hard-won wisdom. From battling credit card debt to learning the power of long-term investing, Yang’s journey offers us valuable lessons to build a healthier financial future.
Here are ten key takeaways that transformed his approach to money — and can change yours too.
10 Personal Finance Lessons That Changed A Yang’s Life
Finance lessons – step 1: Delay gratification to maximize future rewards.
One of the most critical finance lessons that have shaped my financial journey is the power of delayed gratification. We live in a world of instant rewards — fast fashion, impulse buying, and quick spending. But here’s the thing: those who master the art of delaying gratification stand to gain the most financially. Think about it. Instead of splurging on the latest gadget or the newest car model, what if you invested that money instead?
Let’s say you have $1,000. You could spend it on a luxury item that brings you temporary satisfaction, or you could put it into an index fund and let it grow over time. Over the course of 10, 15, or 20 years, that initial $1,000 could potentially turn into $3,000, $5,000, or even more, depending on the market. The concept here is simple: the longer you wait, the greater your reward.
This isn’t about depriving yourself but rather about recognizing the value of future gains over present pleasures. It’s about understanding that every dollar you spend today is a dollar that could be working for you tomorrow. Mastering delayed gratification requires discipline, but the payoff is exponential. So, the next time you’re tempted to make a frivolous purchase, ask yourself: Do I want this now, or do I want more later?
Financially successful people aren’t necessarily the ones who earn the most but those who resist the urge to spend impulsively. By delaying gratification, you position yourself to build wealth over time — a fundamental step in mastering personal finance.
Finance Lessons – Step 2: Track Your Expenses, Savings Rate, and Net Worth Regularly
Tracking your expenses, savings rate, and net worth is one of the finance lessons that can significantly impact your financial health. Imagine trying to navigate a car without a speedometer, fuel gauge, or GPS. That’s what it’s like to manage your finances without tracking your money. You’re essentially driving blind.
The first step is to identify where your money is going. Are you spending too much on dining out? Is your grocery bill creeping up each month? Knowing these numbers gives you control. Next, calculate your savings rate. How much of your income are you actually saving? This percentage reveals how much progress you’re making toward your financial goals.
Finally, keep an eye on your net worth — the ultimate financial scorecard. Your net worth is the sum of your assets minus your liabilities. Tracking it regularly shows you whether you’re moving forward or backward financially. The key is consistency. Checking in monthly or quarterly keeps you accountable and helps you make adjustments before small leaks become financial floods. Monitoring your finances isn’t glamorous, but it’s one of the most powerful finance lessons that can transform your money habits for good.
Finance Lessons – Step 3: Keep Investments Simple by Focusing on 1-3 Diversified ETFs
One of the finance lessons that can simplify your investment strategy is keeping things simple by focusing on 1-3 diversified ETFs. The investment world is filled with noise — from hot stock tips to complex financial products. But simplicity is often the best strategy. Instead of chasing the next big stock or trying to outsmart the market, consider investing in a few well-chosen, diversified ETFs.
Why ETFs? Because they provide instant diversification across a broad range of assets. Instead of owning individual stocks, you own a basket of stocks, reducing the risk associated with any single company. But here’s the key: less is more. By focusing on just 1-3 ETFs, you avoid the temptation to overcomplicate your portfolio. This strategy not only reduces fees but also minimizes decision fatigue.
For example, you could choose a broad market index ETF, a bond ETF for stability, and an international ETF for global exposure. That’s it. Three simple funds that cover most bases. By sticking to a few diversified ETFs, you’re more likely to stay consistent and less likely to make impulsive changes. Remember, the goal isn’t to make investing exciting — it’s to build wealth over the long term. And sometimes, boring is better.
Finance Lessons – Step 4: Avoid Borrowing for Depreciating Assets Like Cars, Jewelry, and Electronics
One of the essential finance lessons is to avoid borrowing money for depreciating assets. Cars, jewelry, and electronics are prime examples of things that lose value the moment you buy them. Yet, many people still take on debt to acquire them. Why?
Imagine taking out a $20,000 loan to buy a car. As soon as you drive off the lot, that car’s value starts to drop. Within a few years, it might be worth only $12,000, but you’re still making payments on the original $20,000 loan. You’re paying interest on something that’s losing value every day.
The same goes for high-end electronics or luxury jewelry. You might feel good wearing that expensive watch or using the latest gadget, but financially, it’s a losing game. These items do not appreciate over time. Instead, they become outdated, lose their shine, or get replaced by newer models.
A smarter approach is to save and pay cash for depreciating assets. That way, you avoid paying interest on something that is dropping in value. If you can’t afford to pay cash, reconsider whether you really need it. The goal isn’t to deprive yourself but to make more financially sound decisions that align with your long-term goals.
Debt isn’t inherently bad, but it should be used strategically for assets that have the potential to appreciate or generate income — like property or investments. Borrowing for things that lose value only puts you on a financial treadmill, running harder but going nowhere.
Finance Lessons – Step 5: Stay Invested for 20+ Years to Reduce the Impact of Market Volatility
One of the most important principles of successful investing is time. The longer you stay invested, the less the impact of market volatility. Historically, the stock market has gone up over time despite short-term fluctuations and downturns.
The key to reducing the effects of volatility is patience. When you stay invested for 20 years or more, you give your investments time to recover from any market crashes and ride out periods of uncertainty. This long-term perspective is vital to achieving substantial returns in the market.
If you keep pulling your money out during times of market downturns, you’re more likely to miss out on the market’s eventual recovery. Staying invested for the long haul is one of the best ways to build wealth.
Finance Lessons – Step 6: Saving Money Is Crucial, Especially at the Beginning
Saving money is often overlooked in favor of trying to make money through investments or business ventures. But the reality is that in the beginning, saving aggressively is the most important step you can take. When you have very little to your name, every dollar you save has the potential to grow exponentially over time.
Imagine you’re starting with a zero balance. You decide to save $13,000 a year for six years and manage to earn a 7.5% return on your savings. After six years, you’ll have $101,000. But here’s the key takeaway — 77% of that total is comprised of your savings, not investment returns.
If you manage to save $10,000 a year and earn a 10% return, it will take you seven years to reach just over $100,000. In this scenario, your savings still make up 67% of your total balance. This highlights the importance of saving aggressively when you’re just starting out.
The first $100,000 is often the hardest to achieve because so much of it relies on disciplined saving rather than investment returns. But once you get over that hump, your money can begin to work for you, compounding over time and generating even more wealth.
Finance Lessons – Step 7: Investing Should Be Boring
Investing isn’t about chasing the hottest stocks or day trading. Instead, it’s about buying, holding, and forgetting. In a podcast interview with Morgan Housel, author of “The Psychology of Money,” he emphasized that the best investors often forget their investment account passwords. The idea is that successful investing is not about constantly checking the market or trying to beat it; it’s about letting your investments sit and grow over time.
If you’re invested in well-diversified index funds, like an S&P 500 ETF, for instance, your best strategy is to keep contributing regularly and leave it alone. The goal is to stay invested for the long term, ideally ten, twenty, or even thirty years. It may sound boring, but it’s a strategy that has historically outperformed 92% of active fund managers.
Trying to beat the market can be a losing game, but consistently earning average returns over a long period can put you in the top 5% of all investors. It’s not flashy or exciting, but it’s a proven path to wealth over time.
Finance Lessons – Step 8: The Best Opportunities Come From Chaos
Chaos and uncertainty can present some of the best opportunities to build wealth. When markets are down, assets are undervalued, and people are fearful, that’s when you can find great investments at a discount. The key is to have cash ready to deploy when these opportunities arise.
In the 2008 financial crisis, those who had cash available and the courage to invest in the stock market during the downturn saw massive returns as the market rebounded. The same can be said for the COVID-19 market crash in 2020. The lesson here is that chaos creates opportunities, but only for those who are prepared.
This is why maintaining a cash reserve is so important. It’s not just about having money set aside for emergencies, but also having the liquidity to seize opportunities when they arise. Staying calm and having a plan during uncertain times can set you up for substantial gains in the long run.
Finance Lessons – Step 9: Be Wary of Lifestyle Creep
As your income increases, there’s a temptation to upgrade your lifestyle — bigger house, nicer car, more expensive vacations. This phenomenon is known as lifestyle creep, and it can quickly erode any financial gains you make.
Imagine you get a $10,000 raise. Instead of investing that money or saving it, you decide to lease a new car with higher monthly payments. Suddenly, your extra income is gone, and you’re no better off financially than before the raise.
The key to avoiding lifestyle creep is to maintain the same standard of living even as your income grows. Rather than spending the extra money, allocate it toward savings, investments, or paying down debt. Living below your means might not be glamorous, but it’s a powerful strategy for building lasting wealth.
Finance Lessons – Step 10: The Power of Patience and Consistency
Wealth building is not a sprint; it’s a marathon. The most powerful factor in wealth accumulation is time, coupled with consistency. Too many people expect instant results and end up making poor financial decisions out of impatience.
If you start investing early and consistently, even with small amounts, compound interest can work wonders over decades. For instance, investing $200 a month for 30 years at an average annual return of 8% can grow to over $300,000. But this only happens if you remain patient and stick to your strategy.
Consistency in both saving and investing is key. Whether it’s setting up automatic contributions to your investment accounts or committing to a percentage of your income to save each month, the act of regularly investing is what will ultimately grow your wealth. The road to financial independence may not always be exciting, but it is steady, reliable, and achievable for those who stay the course.
The financial lessons shared here are not just strategies but fundamental principles that can transform how you approach money. They were curate from Yang’s teaching on personal finance and I hope you find them useful.
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