This Ex-Advisor Reveals the REAL Path to Wealth | Humphrey Yang

0:00All right, Humphrey, how are you? I'm well. Thanks for having me. Yeah, thanks for being here. So for those that don't know you, who are you and why should people listen to you? Yeah, so my name is Humphrey Yang. I've been making content about personal finance for the past four and a half years. And previously, in my previous job, I was a financial advisor and I also worked in tech. And I also started my own business in e-commerce, selling posters for three years before I did content. So as part of like my entrepreneurship journey, I was like creating businesses and I was trying different things.

0:32And then three years into the poster business, I was just trying a bunch of different stuff and content seemed to stick. And I always wanted to be a YouTuber. So it kind of was like a nice marriage of everything that I had done previously, etc. Cool. I want to come to your main business in a bit as well. I just got so many questions. So why are young people now poorer than ever? Well, okay. Yes. So one of the reasons is that cost of living is so expensive now and owning a home is so expensive compared to, let's say, in 1950. So in 1950, the middle class, I believe the middle class median wage was$3 ,350 a year.

1:13$33 ,300. I actually have it on my phone somewhere else. Let me pull it up real quick. $3 ,350. That's thousands, right? No,$3 ,350. Okay, yeah, yeah. Okay, the median wage in 1950 was$3 ,300 a year, and the median house cost$7 ,350. So it took you about 2.2 years of your wages to buy a home. These days, the median wage is$70 ,000, household wage is$70 ,000 in the U.S., and the home is$430 ,000. So that's 6.14 years to buy a home. So when I say that younger people are now poorer than ever, relatively speaking, yes, they are. because everything is so much more expensive. And if you're making minimum wage, which by the way, minimum wage hasn't changed in like 15 years since 2009 or something like that.

2:01If you're making something like less than 15 bucks an hour, there's really not going to be a shot that you can buy a house. So what do they need to do? Do they need to reskill? How do they break out of that funk? Yeah, so I do think that we do live right now one of the best ages to actually make more money than possible because of the internet. And because of how much we can scale online. And so I think, yes, our minimum wage hasn't changed, but we have more opportunities presented to, let's say, the average 24-year-old these days than you did in 1950. In 1950, you showed up at the local company or the local industrial plant and you just worked there.

2:41And, like, that was it. But these days, you kind of have freedom of location. You can work remotely. You can take on a bunch of side jobs, which don't even require you to be there. there's a lot more opportunities for income. It's just like, it's a little bit more fragmented, if you will. Yeah. No, totally agree on that. I think it's the opportunity is all there. Go ahead, take a sip. The opportunity is there. And it's just at the end of the day, though, everyone wants to win. Nobody wants to prepare. And so nobody can make excuses anymore, but still people do. And go ahead. Yeah. I mean, it's tough because I think that, I don't know how to put this in a nice way.

3:24Just say it. Okay. Well, it's tough to say this, but some people are just lazy, right? And if you're lazy and you have some opportunities ahead of you and you don't take advantage of those, then that's kind of on you. However, if you're really diligent and hardworking, so don't take this out of context, but if you're diligent and hardworking and it's still not happening for you, perhaps you need to look for a different job, which we talked about a little bit before starting this podcast, but you need to figure out how can you get yourself, position yourself so that there are better opportunities for yourself.

3:57Right. So let's talk about that one. I mean, so we had Vivian too on this pod and she said that you should quit your job every two years. That's what the data says. So should you actually quit your job every two years? Okay, so I did see that clip. And Vivian says that if you quit your job every two years, you'll earn on average over your lifetime, at least double, right? She says if you don't quit your job, you'll earn 50 % less every lifetime. I actually think it's a lot more. So you actually make a lot more if you switch jobs every two years. Because that Forbes study, I did look it up after the fact, it was accounting for a 10 % raise every time you transitioned every two years.

4:31but you and I know if you've ever switched a job, like I switched jobs a few times in my 20s, my raise was much higher than 10%. I went one job, I went from 40 ,000 to$60 ,000 a year. That's a huge jump. That's not 10%. What is that? Like 40 %? Am I doing the math right? Well, I'm just saying, I'm just public math. I'm just going to assume you're right. 50%. You said 40 to 60? 40, 60 is 50%. That's 50%. And so if you think about that, if you can compound your salary that way, I mean, you're going to make a lot more money over the course of your career. And even the most successful people I know in Silicon Valley, I look up their LinkedIn's, they're literally job hopping every two years.

5:08And now they're the VP of, let's say, VP of HR at NVIDIA. And then boom, you know, so. So here's what I'll say to that. I think, so basically I'll share some data too. The more data we can share, I think the more helpful it will be for people. So when I was making, I was making$32 ,000 a year at my first job. So graduated out of UCSD, right? It was a dead end job. Anyway, the next job I got, I was making 45. And the next one after it was 55. And by the way, I changed six jobs in the first year. So like, yeah, a lot. And my mom was like giving her a heart attack, right? But then at the end of it, I went from 55 to 75.

5:43And then when I changed the next year, I went from 75 to 150. My God. And so like it's, and then I'm 25 years old. I was like a director, right? And I had no idea how to manage people. But point is not to brag. It's just to say that it's worth it to not necessarily chase the money, but to chase the opportunity. And that's how you're going to grow, right? And Vivian said this in that clip. She said, a lot of people take it out of context. They're all fighting each other in the comments, but she said, you got to go up or out. So that means you can either get promoted or you got to be out. And so she's not saying like, if you're really good, you get promoted.

6:14Yeah. there's program managers at Amazon they're making like$500,$600,$800k a year and some AI developers are making like$2-3 million a year so anyway that's my take on it. So to share some salary history for me I went from $40 ,000 a year in 2012 and then I went to financial advisory that was$50 ,000 a year starting and then you obviously got commissions on top. What did you get on the commission? Commission not too much actually probably less than 10 ,000 my first year because I don't know if you knew this about financial advisory, but financial advisory for a really big firm, for the first four years, you're in one of their like junior programs and you get your Series 7 and your Series 66 and then your whole job is to start prospecting.

6:58Your job is to find clients through your network. And a lot of these big firms will do that. They'll hire these young strapping lads or young strapping women and they basically want you to use your network so that you can get them clients. It's an MLM. Kind of, yeah. And so that's actually part of the reason I left. It's because a lot of financial advisory, they would just put you in standard products for investing. And the standard products aren't even beating the market half the time. So it's like, at that point, you're just paying a lot of fees for a financial advisor to hold your hand and invest in something that you can invest in yourself.

7:29Now, if you need estate planning, tax planning, retirement planning, planning for your kids, then yes, get a financial advisor. And many people have complicated situations. However, just for the investing piece, I don't think they're doing that much. so I went from like$40 ,000 and then$50 ,000 at the financial advisory firm plus commissions and then when I went back to video games so I was mostly working at a video game company before and after the financial advisory thing when I went back to video games I think I was making like$18 an hour so that comes out to$36 ,000 a year so I actually took a pay cut I was able to do this because I was living at home so we can talk all about that I was making$18 an hour but then soon a new position opened at that company.

8:13It was a startup. It was growing like crazy. And they needed someone to do monetization for live events. So basically, it was a live operations role. And what that meant was if you've ever played Candy Crush, you know that when you log in to Candy Crush or any mobile game, there's a sale that's shown to you. And that sale is typically chosen by somebody or a team of people. And that was my job within not Candy Crush, but a different game to basically come up with the in-game contents of the package that we would sell you. And that role paid $65 ,000 and then quickly$75 ,000 right after that. Got it.

8:45How old were you during these years? I was 26. Okay, got it. So you went from 40-ish down to 36 and then up to 75. Up to 65 and then three months after that, 75. And then about six months after that,$100 ,000. Wow. And then six more months after that, it was$140 ,000 after I left. Or right before I left,$140 ,000. But you got promoted like three times really quickly. So yeah, from the age of 26 to 28, I was promoted three or four times. And my salary went from 75K to 140K. And this was 2016 when I left. So that's an argument to stay at a gig sometimes. Well, that is an argument to stay at that particular gig.

9:25But they also worked us about 60 to 80 hours a week. Wow. Because it was a live operations role. We had real-time data of how much the company was making via these sales. Yeah. And it was almost like a trading floor. You had employees all looking at this data of how much revenue is coming in, and you can make a change to the sale any minute, any second. So if the hour wasn't tracking to your hourly goal, you could just change it like that. And they had 24-7 coverage. So oftentimes I would show up to the office 10, 30, 11 in the morning because it was Silicon Valley time. I wouldn't leave until 10, 30 or 11 at night every day.

10:01And that was for at least two years straight. So what does your hourly rate end up being? Not very good. Yeah. Not very good. It's almost cut in half, basically. But there is no complaints from the staff about, you know, work-life balance, mental health. Yeah, there were. But I think that the CEO is rather genius in the fact that he overpaid for the market rate. And so when you're getting overpaid for what the market is paying you, you don't want to leave. Because it's like anywhere else you go in the gaming industry, you're going to be taking a pay cut. And so like he viewed that as valuable because each person that was online and at least monitoring the revenue, he would see an ROI out of that, right?

10:40Like if you're able to make changes when everyone is sleeping, like if there's one person that's up and making changes, you could be saving the revenue for that company in the multitudes of hundreds of thousands or millions of dollars for that hour. So like there you go. You could just, you know, overpay someone by 20K a year and boom. I think it's important for people to know this. Like if you're going to go start working somewhere, understand that if you're getting paid 50K, the owner expects a multiple on that. They expect a return on their investment. And basically this guy knew psychologically that he could lock you guys in kind of.

11:10And he knew he was getting an ROI on you guys. Oh, 100%. He could have paid us all three times as much and still got an ROI. And I think like that was probably genius CEO, right? Like smart guy. You know who else does that? Who? Guess if you're to throw a random name. Zuck? I don't know. Close. You're close. You're in the realm. Elon. Yes. So have you read his book? No. I mean, the new book, I mean, it's super entertaining, right? But like the one thing that sticks out to me is like he overpays everyone, but he expects people to be hardcore, right? So you could be on the other side in Florida, right?

11:44And he might say, everybody, all SpaceX employees, you're coming to Texas tomorrow. You're all coming tomorrow. You guys will figure out your accommodations, whatever. And then if people aren't working at 9 p.m. on a Friday, he'll be like, where's everybody? Get everyone in, right? So he'll do that. It's pretty hardcore. I can never imagine myself doing that, but I'm saying that is an example of paying your engineers$500K plus and expecting them to be on call. Yeah, because psychologically it makes sense. It's like, if I quit, I'm going to take a$40 ,000 pay cut. And you know that most people aren't very good with their finances, so they're going to have lifestyle creep, and they're like, okay, I'm living a good lifestyle here.

12:21I'm not going to change this, so there's no way I'm going to get paid$100 ,000 after I just got paid$150 ,000 at this company, right? So lifestyle crew, that's a good one. I'm going to note this down over here too. By the way, Neil and I have an agency owners group called the Agency Owners Association. All you have to do, just go to marketingschool.io slash agency. Once again, it's marketingschool.io slash agency to learn more. And now back to the show. So how does the average person become rich, Humphrey? How does the average person become rich? which it's really just a combination of making an income, right?

12:55You got to make your income, and hopefully you're increasing that income over time, like we talk about, and then having good defense. So I always like to say defense is like knowing what you spend, knowing what the categories you spend money on are, and then figuring out if you're spending too much in those categories and making sure that the delta between your offense, your income, and your defense are big enough, right? And then with that delta, you're saving and investing, hopefully in the stock market or something that appreciates and scales over time. So typically index tracking funds, index funds that track the market, right?

13:28Right. And how much should you save to become rich? Because us growing up Asian American, right? It's like your parents want you to save everything actually. Yeah. I mean, my dad famously would tell me that he tried to save, out of every$10 he made, he would try to save nine of them, which is insane. You can't do that in this day and age. There's no way. But that was his intention. tension. But these days, I think if you want to become a millionaire as quickly as possible, I would try to strive for 20 % of your paycheck. But that's going to be really hard for most people too. So the recommendation is typically 10 % to 15 % is a really good gauge.

14:01And that includes something like a 401k match, right? So if you're saving 8 % and your match is 8 % as well, or 6 % and 6 % is usually the more typical breakdown, that would be 12%. So try to get in the 15 % to 20 % range and you're likely going to be more comfortable than most people. And when I say Asian save, it's actually, so Asian save is actually cash in the bank, not like investing. You're talking about actually being invested, right? Yes. So I think there is a distinction that we have to make. Yeah. Like in typical Asian culture, if you're saving, you're just literally taking cash, you're putting it under your mattress or you're putting it in a bank account, earning a little bit of interest, hopefully.

14:36But in the way that I'm saying saving, I'm also talking about investing that money. And so you should still have your emergency funds, you know any funds that you need just for short-term short-term needs but then the rest should be invested how big should your emergency fund be i like six to 12 months and i'm more risk averse and conservative when it comes to emergencies so i like six to 12 months of expenses saved up but the typical recommendation is three months three to six yeah and then if you follow like dave ramsey it'll be like let's get you to a thousand dollars as quickly as possible and his philosophy is like if you get to a thousand dollars like especially if you're struggling with money, if you get to$1 ,000, that's like a really big psychological barrier, right?

15:16Like you get to four digits, and then that kind of motivates you to start saving more and more. So his goal is like, you know, the first step is$1 ,000. So I also identify with that too. But I think that if you're doing slightly well in your career, strive for six to 12 months, you'll have a lot of peace of mind. Got it. And the rest of it, the safest thing to do, probably put it into index funds. I guess we can talk about asset allocation a little bit, But I mean, just in general population probably should drop it into index funds. Yeah, I would say the average investor is not good at picking stocks.

15:48They're not good at tracking the market. They might not even want to track the market, right? Like it's kind of a hassle for people. It's stressful for a lot of people. It's emotional. And oftentimes they will be panic selling or panic buying depending on how they're feeling that day. And an index fund is something that will just help you set it, forget it. And then you'll just slowly match the market over time, which will beat the average investor. who was trying to pick stocks. And he even beat professional hedge fund managers. Oh, for sure. Yeah, Warren Buffett did that bet, right? You can feel free to tell the story.

16:20Yeah, so Warren Buffett did a bet where he betted a hedge fund manager over a course of 10 years that his index fund strategy, just investing in index funds, would beat the professional hedge fund manager. And he beat him by a lot. I don't remember what it is, but his simple strategy of just sending it and forgetting it actually beat someone who professionally does it for his job 40 to 60 hours a week, right? And the S &P average, what is that? It's like 9 % over a long period of time? Typically, the S &P averages, we like to say conservatively, 8 % since the inception. But actually, over the past 10 to 20 years, it's been closer to 10 or 11%.

16:56Yeah. Okay, so Humphrey, how does, so why does net worth explode after 100K? Yeah, so that was the video that just came out today. And the principle is like, okay, it takes a long time to build up to$100 ,000. dollars, right? Let's say you save$10 ,000 a year and you're getting a 7 % return in the market. It takes you 7.84 years of saving$10 ,000 a year, getting 7 % return in the market to get to$100 ,000. But after that 100K, now your 100K is making you that 7 % as well every single year. So it's compounding. It's like a snowball rolling down the hill. It's getting easier and easier. And by the time you're at the 900K level, it only takes you 1.35 years to get your next 100K.

17:37So it's like 481 % faster from 900k to a million than it is from zero to 100k. So what does that tell you? All the friction is at the very beginning of wealth building, right? So that's why all these people online are saying, don't buy coffee. Don't buy avocado toast like Graham. The reason is they're trying to get you to your first 100k. And that first 100k, every single dollar on your way to that first 100k is so important because it's going to speed up that entire compounding process. Got it. How do you feel? So you agree with that? Don't buy avocado toast, don't buy coffee. I don't know if I agree wholeheartedly with that, but I think that if you're pre-100K net worth, you should be viewing your dollars as more weighted.

18:21They're worth way more than just a dollar. Your$1 technically is worth a lot more, like$33 over the course of 60 years, or I don't know what the math is. We'll have to fact check that, but you know what I'm saying. A dollar is so much more important on your way to 100K. Also, the time value of money right now is way higher than like in 20 years. So, yeah. So, how does someone get to 100K net worth ASAP? Oh, man. Okay. So, typically, there was a study done on fourpillarblog.com. It actually showed that most people with their first 100K, it's not from investment returns. It's mostly from savings.

19:01So even at like, I don't know what the exact numbers are, but typically it's comprised of 80 % savings and 20 % are actually from investment returns. And the typical time it takes is about six to seven years. And that's if you're saving like$8 ,000 to$10 ,000 a year. So if you want to get there as quickly as possible, increase your income. That's the easiest way to kind of propel things forward, get side jobs, you know, DoorDash, Uber, anything that you can get your hands on, flip stuff on Facebook Marketplace, and put all that money towards your investments to grow that initial nest egg. And then also just be frugal, right?

19:38Like, you might have to eat something you don't really want. You might have to eat like lean cuisines all day, or you just have to reduce your expenditures, especially if it's early on in your wealth building journey, and that's a goal of yours. You should be willing to sacrifice a year or two of your fun, you know, for that. If you've ever built a website, you know how tough it can be to keep a strong design while ensuring site performance is fast. That's where Framer comes in, and it totally changes the game. Framer is the design-first, no-code website builder that lets anyone ship a production-ready site in minutes.

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21:51Sign up for your$1 per month trial and start selling today at shopify.com slash marketing school. Go to shopify.com slash marketing school. Shopify.com slash marketing school. Yeah. Have you seen that graph? So, you know, us growing up Asian, the parents are like, yeah, you got a 401k house and all that. And then you realize that this one graph shows you the asset breakdown, really asset allocation of 100K, a million, 10 million, 100 million, a billion. Have you seen that before? I actually haven't seen that. Can you explain that? So, yeah. So, basically, it is exactly what our parents thought, right?

22:26It's like at 1 million net worth or so, most of your assets are tied into your house, your 401K, your car, and all that, right? But once you go up to 100 million, a billion plus, most of your assets are… What, like business equity? Exactly. And most of the vast majority of it is business equity. Your house is like a sliver, right? And you might have some in stocks here and there, you know, but it's just like most of it comes from business. And where I'm going from this for with this really is you talked about Naval Ravikant. Yeah. And he has said that you can't get wealthy with a job. What's your take on that?

22:59So I think Naval's point was like it's hard to get wealthy renting out your time. Right. And typically what a job is, it's you're renting out your time for a set salary. And so what he suggests is like you find some way to get equity, right? So something that scales disproportionate to your time. And I definitely agree. Like if you're trying to get to 5, 10, 15, 20 million net worth, you're going to have to find something besides a high paying job, unless you're some sort of high paying job that is, let's say you work at Nvidia, and you get paid a million bucks a year as the VP of whatever. And then you also have but you also have stock options, which probably gets you most of the way in terms of your net worth, right?

23:37And so even stock options are a form of equity. So you can still get rich with a job, but you want to make sure that job has some sort of equity play for you or some sort of ownership of something else besides just renting out your time. So yeah, I agree. And ultimately, I'm sure you've done a video on this. It's like you have to own assets. You can't own assets. They compound better over time also because of inflation and all the money printing and stuff. So what's your philosophy around asset allocation? Well, let's talk about assets first. Whenever I talk to, I have a friend of a friend's father who's quite wealthy.