7 Crucial Steps to Build Wealth ASAP, According to TikTok’s Humphrey Yang
If you’re in a rush to build wealth, you’ll need to watch out for common pitfalls, including staying in debt, spending too much and not having a plan. But the good news is that you can get started at any age, even if you don’t have significant savings already.
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In a YouTube video, Humphrey Yang talked about how the first $1,000 you save is crucial to the process. The financial expert offered these seven steps you can use to grow your money and reach your goals.
1. Determine Your Wealth Goal
Yang said, “So before we do anything else, we actually need to sit down and figure out what financial freedom means to us and what specific financial goals you would like to accomplish.” Part of this is determining your retirement age and necessary savings goal. Look to guidelines such as the 25x rule or try an online calculator to understand how much to save.
2. Consider Your Current Financial Situation
Like a business owner, you should think about what you own and what you owe to better understand your financial situation. Yang discussed how this helps you determine your next steps. For example, if you’re burdened with debt, you’ll know to focus on fixing that issue to increase your net worth.
3. Eliminate High-Interest Debt
While a pro for savings and investments, compound interest hurts you financially when it comes to credit. Yang emphasized that high-interest debts like personal loans and credit cards are dangerous, especially when making only minimum payments. He suggested the debt avalanche approach to eliminate these costly debts before turning to lower-rate ones.
4. Establish an Emergency Fund
A savings fund for emergencies helps protect your wealth when financial setbacks happen. Yang suggested accumulating three to six months’ worth of expenses, which you could do with monthly automated transfers. He said, “After doing this for a while, saving will hopefully feel more regular, and you’ll feel more confident about larger savings goals.”
5. Start Investing Money
While it can be risky, investing cash lets you potentially increase your wealth through returns. Yang focused on options such as exchange-traded and index funds for diversification over individual bonds and stocks. He also suggested planning for the long term and considering dollar cost averaging to better handle volatility and timing decisions.
6. Use a Roth IRA
Yang advised getting a Roth IRA at a brokerage to benefit from tax-free earnings and profits. This account requires having earned income that doesn’t exceed certain limits, and it allows up to $7,000 in after-tax contributions ($8,000 if you’re 50+) this year. However, Yang recommended handling high-interest debt and establishing an emergency fund first.
7. Invest in Yourself
Besides investing money, you should focus on learning and improving yourself, ideally when you’re still young. One example Yang gave was pursuing additional education to gain skills and improve your job prospects. If going back to school isn’t possible, check out books and many resources online.
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This article originally appeared on GOBankingRates.com: 7 Crucial Steps to Build Wealth ASAP, According to TikTok’s Humphrey Yang
