11 Money Mistakes That Keep You Below $100K Net Worth

The first 100k is famously very hard to achieve and why is that? Because if you're starting out, there's going to be tons of pitfalls and traps that you could be susceptible to without even realizing it. In fact, you could be doing everything right, yet your net worth isn't growing. So in today's video, I'm going over the most common 11 mistakes that keep you below $100,000 in net worth. And if you're able to fix or at least be aware of these, the first 100k is going to be a lot easier to get to. I'm also going to show you the real cost and impact that these mistakes have on you, especially over a period of 10 to 15 years. And I'm going to use a hypothetical friend of mine named Kevin. Kevin is 28 years old. He's an employee at a software company earning $65,000 a year. And the first money mistake that could cost him over $120,000 by the time he is 40 is overspending on housing. Housing is usually the biggest line item in almost every single budget for people that have moved out of their parents' home or their family homes. Now, the old rule used to be that you would take 30% of your gross income, and that would be the amount that you could spend on your rent or housing payments to comfortably afford it. However, I do think that that's a little bit outdated now because you are always paying for rent or your housing payments with after-tax dollars. So I think the better rule here is using a 35% after-tax rule, where your rent or housing payments should be no more than 35% of your take-home pay. Let's pretend Kevin wants to rent an apartment that's $3,000 a month. Well, according to this table, he should be making around $134,754 per year in gross salary. And then if you take the after-tax component of that, then that actually would fit the 35% post-tax rule. Right now, roughly half of Americans are spending above this number on rent. So that is kind of a sobering statistic. And also, admittedly, for this money mistake number one, that number is actually very hard to change, especially if you're already locked into a housing situation. I just wanted to show you and illustrate the cost of having too expensive of a housing payment for your salary. Let's pretend Kevin spent 45% of his take-home $65,000 pay on housing. That means he's taking home about $4,250 per month and spending $1,900 per month on his rent. If he were able to spend 30% to 35% of his take-home pay on rent in an alternate universe, he would be looking at minimum a savings of $500 a month on rent on a monthly basis. If you add that up over 12 years invested in the stock market, that's about $122,000 of a difference. Now, of course, this does come with some sacrifices. You might have to live with roommates longer than you want, or maybe you live at home in order to save more money, or you might have to have a really bad commute that is a little bit longer than you would like it to be. But let's say you're watching this and you're close to the end of your lease, or you're actually looking at new places to live. This is probably going to be the highest return on your money if you can take the time to find a place that is actually fitting the affordability rules. And if you're looking at buying a house, the mistake might not be buying a house. It might be buying too much of a house, and then not being aware of hidden costs that balloon your housing payment, like maintenance, insurance, and closing costs. All right, so I already know what you're probably thinking, which is like, dude, I'm already locked into my lease for another eight to nine months. I'm not going to be able to even think about reducing my housing costs just yet, which is totally fair. It's also what Kevin, our friend today, thinks as well. So he decides, all right, well, let me make some more money by doing a side hustle in order to give myself more of a cushion. But this could actually also be a mistake for him, even though it sounds like it's the right thing for him to do. And that mistake is grinding a ton of hours on a side hustle instead of just going for a raise at his main primary job. So Kevin decides to do 10 hours a week for a ride-sharing app. And while the money is really quick and it's immediate, it does come with some costs. Kevin can make an extra $750 a month from driving for ride shares, but after gas, depreciation on the car, and self-employment taxes, his after-tax and costs actually will net him closer to $300 to $400 for the month. And so if you take that over the course of a year, that's 480 hours per year for roughly $4,500 net. Now, if Kevin took the same amount of time and instead invested in actually trying to get a raise at work, that could be worth way more. He could update his resume, reach out to people and have coffee chats in his network. He could take calls, go through interview preps. And if he's able to secure a better offer or get a raise at work, that could be worth way more than the $5,000 or $6,000 or $4,000 that he might be making from ride shares. The cost of this mistake is really hard to put a number on over 12 years, but let's assume he does ride share for 12 years earning $4,500 net per year. And in the alternate timeline, he switches to a new job earning him $75,000. But he only gets that raise after two years from now. So from his ages of 28 to 30, he still kept earning $65,000. By the time he's 40, if he stuck only with ride shares and didn't try at all at his job and just kept the same salary, he would have $46,000 less than if he had got the raise two years later and never did ride share at all. In other words, the side hustle is just a band-aid. And if upward mobility at his company isn't impossible, he should probably focus his time on that instead. Of course, there will be times when the job market isn't great or if you need money right away, then yes, a side hustle is very rational. However, if you have better alternatives and you're doing a side hustle just because it's at your fingertips, I would prompt you or try to challenge you to think twice about that. Mistake number three today is unmanaged discretionary spending. So what I mean by unmanaged is that you aren't planning for your purchases or your week ahead. It doesn't mean that you have to stop buying coffee or whatever small indulgence you might have. What I'm talking about is not being intentional about your spending. For example, if you're not planning what you eat on a weekly basis and you know you have a DoorDash or Uber Eats problem, you might get home from a long workday, you're going to be really lazy and you're going to pop open those apps and you're going to order some food. After delivery fees, tip, et cetera, you might get a pad thai and you will pay $35 for that pad thai dish. When in reality, if you had planned it ahead of time, that meal could have cost about $10 or less in meal prep ingredients. Another example is if you have a trip at the end of next month, but you delay booking that flight until just the week before, that will end up costing you an extra $200 for that fare instead of just booking it right away. And this is a habit that ends up costing people a lot of money. I would ballpark upwards of $15 to $25k over the 12-year period, which is a good time to bring in the sponsor of today's video, Chime. Most everyday cashback sits somewhere around 1-2% and with the Chime card, you can get 5% back in one category every month and you're the one picking the category. Here's what that actually looks like. Say you're spending $500 a month at the grocery store because you meal prep. At 5% back, that's $25 a month, so about $300 over the year on food that you were going to buy regardless. And you're not locked into any one category, so groceries, gas, dining, travel, and more. For me personally, it would be eating out since I don't cook and I have most of my meals out at fast casual restaurants. But then if I've got a trip coming up the month after, I might move that cashback category over and get cashback on flights. Speaking of travel, the Chime card also comes with travel perks like the 24-7 travel concierge and airport lounge access. So if you're stuck on a layover, that's somewhere to sit that isn't the floor by the outlet. No monthly fees, no minimum balance either, and with direct deposit, you can get your paycheck up to two days early. Right now, new Chime checking accounts open through my link will get up to $350, so head to Chime.com slash Humphrey. It'll be pinned at the top of the description, or you can scan the code on screen. It takes a few minutes and going through my link helps the channel out and gets you the exclusive bonus. Once more, that's Chime.com slash Humphrey, and thank you to Chime for sponsoring this portion of the video. Mistake number four today is getting a new car and having a crazy car payment before you hit $100,000 in net worth. The average new car payment these days in the United States is $770 per month, and this could even happen on a modest-looking car. Let's use this Toyota Camry with $32,000 as a retail sticker price. Now, this is far below the average new car price in America. Looking at the 36-month loan where you put 20% down, your down payment is $7,000. You're getting a loan on $25,000, and with an interest rate of 6.5%, you will have a monthly payment of $767 a month and a total interest paid of $2612 over the course of this loan. Here's what your monthly payment might look like after factoring in gas, maintenance, and insurance costs. You would be looking at $1,217 a month. You would think that with a $1,200 a month payment, you could afford a Mercedes, a BMW, or something like that. That's a huge misconception and is the exact reason why so many people you see are driving fancy cars and lifted trucks, but they're in debt for it. If you ran the payment alone invested over 12 years, you would be at over $189,000. Of course, this assumes that the alternative is that you have no car at all, and I know that's not very realistic. You will have to pay for transportation of some kind, but I just want to illustrate that this number just really blows me away because you regularly will see people blowing $770 a month, $870 a month, or even up to $1,000 a month on a car payment that they can't afford. What I will actually say is that you should aim to buy a car two to three years or maybe four years used. Keep the payment under 10% to 15% of your take-home pay per month and focus on the overall price of the car rather than the monthly payment. All right, moving on to mistake number five today, which is having your money sitting in cash. This actually has a high cost, believe it or not, so if you watch enough of this channel, you should know that if your money isn't working for you, it's costing you because it's losing value to inflation. Even though Kevin might save and is disciplined and he might have $30,000 in a checking account, that will actually cost him over $15,000 to $20,000 in potential gains over 12 years. At a big bank paying 0.01%, that balance might get him an extra $2 per year. Yes, a lot of money. In a high-yield savings, that's a joke. In a high-yield savings, $30,000 over 12 years is an extra $18,000. The framework I use is three buckets. You should have a bucket for the money that you're spending this month. That should go into your checking account. Then you want to have another bucket where you aim for three to six months of expenses in a high-yield savings account that doesn't move at all. Everything after that can go into the third bucket, which is low-cost, broadly diversified index funds, tracking the U.S. stock market, or maybe a mix of U.S. stocks and international stocks for investing. So I hope you got that. Let's move on to the next mistake, which honestly is a sleeper and not in a good way. And that mistake is being sold expensive products. So when you were on your way to $100K, there's going to be a lot of people trying to sell you things. On the low end, you could put yourself in a target date fund, for example, with a high expense ratio of 0.75%, instead of 0.05%. On a $20,000 balance over 12 years, that difference will cost you about $4,000. It's not a ton, but it is still something. On the high end, someone might sell you whole life insurance. And the average cost of a premium for whole life insurance for a 30-year-old is around $421 per month. And it's going to be framed to you as an insurance plus an investing portion. But your premiums and a whole life insurance policy go to funding three things. So number one is your own death benefit coverage. So for example, it could be $500,000 of coverage. Number two is your salesperson's commissions. And number three is your cash value. That's the investing component about whole life insurance that the salesman will try to convince you of. But the thing is, is that your monthly premiums that you pay for the first five to 10 years barely even go towards the cash investment value. They, in fact, go to paying none other than your salesperson in the form of commissions, as well as administrative fees. And you have to fund your own death benefit insurance coverage. So the fees are really front loaded in whole life insurance. And really, there's a ton of opportunity costs there. So take that example. The difference between whole life insurance and term life insurance for a healthy 30-year-old could be around $4,400 a year because term life insurance is really cheap. And if you compound that at 8% in the market over 12 years, the ending balance on that difference is over $90,000. So the takeaway here is that if you are earning and saving your way to 100K, you want to be very skeptical of anyone trying to sell you a financial product, especially if they're trying to sell you aero time industries. You do not need anything besides a high savings rate and maybe investing in the market in order to get there and don't let anyone else commit to otherwise. Mistake number seven today is leaving your 401k match on the table. So if your employer offers a 401k match, you should definitely take them up on this. And the reason is, is that if you don't take this, it can actually cost you $45,000 over 12 years. Let's take Kevin, for example. He has a 50% match on 5% contribution. So if he's earning 65K a year, that's $1,600 a year of pure employment match money that he would be getting for free if he were to also contribute to his 401k and get the match. Invested over 12 years, that's going to be somewhere around $45,000. And I think there's no other place in the financial world where you can get an instant 50, or even sometimes a 100% return on your decision that merely takes a few minutes. If you want some homework, make sure to log into your 401k provider today. Check out if they offer an employer match and also double check on how much of a percentage that you're contributing to your 401k as well. If you're not contributing up to the match percentage, you should definitely raise your contribution as much as your budget will allow for it. And then make sure you raise it again in six to 12 months if you haven't hit that cap. A lot of people miss out on the 401k match, but honestly, it's one really easy lever to pull that can really supercharge your network. All right, this next one that keeps you from hitting 100K net worth is constantly having a credit card balance. And especially if it's over $2,000 to $3,000. The average credit card APR these days is somewhere north of 21%. And that's a pretty high number. There's no investment that I can ever put you on that would yield 21% of a return in perpetuity. In fact, Warren Buffett's annualized returns over his legendary career don't even hit 21%. I think they were close to 19.9%. But still, it's not beating the credit card APR. If you have a credit card balance over $3,000 or even just in the four digits, I would say your best investment or the best use of your money is going to be paying off that credit card as soon as you can. That's because you can't really get any other investment in the market that can get you a guaranteed tax-free, risk-free 21% return. Now, the mistake here is that nobody really sets out and says, oh man, I'm going to carry a $3,000 credit card balance. I totally get that. That doesn't happen. It's not like you intended to do it. What actually happens is that people say, all right, well, I'm going to spend a little bit of money on my credit card this month, but no worries. I'm going to definitely pay it off the following month. But then what happens is something happens during that next month that they were going to pay it off. Maybe an emergency comes up, like they get hit with a big vet bill for their dog. And then so what happens is they leave the credit card balance on the credit card itself, since they need to dip into their funds to cover the vet bill. Therefore, the credit card starts to accrue interest and the cycle continues from there. The mistake then wasn't actually having the credit card balance when you incurred that emergency. It was actually taking on that credit card balance in the first place. In other words, it could just be poor planning. You might not have had $3,000 in your bank account to cover the credit card balance immediately. And so then you push it off to the next month. There's also the counter example, which is where maybe you just don't have enough funds in your emergency funds. So when you do actually get with an emergency bill, you have to put it on your credit card and that actually puts you in that cycle as well. The biggest takeaway here is that when you are spending money on a credit card, you want to make sure you have the corresponding amount of funds in your bank account ready to pay it off. It's almost like if you were on the gold standard and you had gold to back up the dollars that you were issuing. Of course, that's not how the United States works anymore, but that's how you should do it with your credit card and your funds in your bank account. All right, this next habit, which I also think is a mistake, is that I see a lot of younger people, but also some people my age, getting into prediction markets, day trading, or even just gambling. I'm not saying that prediction markets and day trading are the equivalent to gambling, but all three of these have a theme, which is they are speculative in nature. It's also tricky in that you could actually misinterpret your results as skill. What that means is that you can get pretty lucky one day with a day trade or you can get pretty lucky guessing what the weather is going to be like on Friday, December 4th, or just even straight up gambling. So you think that because you were up, let's say you're up $1,000, you were just the god of this new frontier. A lot of people think that compounding your money at 8% is just way too slow these days and that you should want to shortcut these things. You're going to see a lot of this on social media, especially right now when the crypto market is picking up too. And there's actually been a new crazy social crypto trading app where 95% of people that use it actually lose money. That's actually in the data. So the truth is that most people in these types of industries, gambling, prediction markets, crypto trading, day trading, et cetera, most of these people will lose money over time and everything does revert to the mean. And usually the mean is going to be a losing bet in this case. $200 a month diverted from investing into speculation over 12 years is roughly $25,000 to $30,000 of your net worth that you're not going to have. And that's assuming that you break even on the speculation, which according to the data and statistics, you probably won't. My biggest takeaway here is don't fall for this stuff. This is just as bad as putting $3,000 in a credit card. It's just going to get you in trouble, especially if you're trying to build your net worth in a methodical way to $100,000. If you really want to speculate, maybe you do it after you hit 100K in net worth and only use 1% of your portfolio or less. Mistake number 10 is a short one today because I briefly touched on a related point earlier, but it's not focusing on raising your income enough. That's a mistake. This is especially true if you're living paycheck to paycheck or you have a lower than average salary. So if our friend Kevin was making $45,000 a year, he can do everything I said in this video perfectly, but he still might be scraping by. And if his income doesn't move, then he won't get to 100K in any reasonable amount of time. That's why I think raising your income when you were starting out or on your way to your first 100K is going to be the fastest way to get there. Income compounds throughout your life. So let's say Kevin gets a raise of $10,000 from 65K to 75K. Remember, he's 28 years old. That $10,000 bump at 28 will compound for the rest of his life. The following raises that he's going to get are going to be based up that higher salary number as well. And he also scales his 401k match with it in addition to his social security. So getting a raise and fully cementing his income to higher numbers is going to be the best way to compound his money into more later on. Conservatively over 12 years, that could be worth over $150,000. So if you aren't asking for raises at work on a yearly basis, you are simply going to lose ground to others who are willing to do that. If your employer doesn't automatically give you a raise every year, you should really go ask for it because an employer will only give you what you ask for. Unfortunately, in my experience, big organizations would rather string you along and delay a raise as long as they can in order to continue making profits. Mistake number 11 today is not knowing your savings rate. If I asked you right now, what's your savings rate? Can you tell me? Can you really, really tell me? This is not a mistake that costs you money directly, but not knowing your savings rate can hurt you in the other 10 disciplines and mistakes that we've talked about today. Most people can tell me their salary. Most people can tell me their rent amount, but not many people can say, I saved exactly 25.2% of my income. The only number that predicts how fast you can get to 100K is your savings rate. So from zero to 100K, the overwhelming majority of your net worth growth is going to be the money that you put in. It's not always going to be the money that the market makes you. So if you are saving 5% and you think you're saving 15%, you are three times further from your goal than you believe, and you won't find out for a long time. This fix will only take you less than 10 minutes. I want you to do the AI thing, which is take your bank and credit card statements for the past two to three months, put them into chat GPT or Claude and just ask it to scan it and give you your savings rate. If you want to do it manually, you can also do that too. Just tally up every dollar that you've saved or invested and divide it by your income. If you don't know your savings rate at all, this is one of the first easiest wins that you can do right after this video. Everything else in this video is easier to fix once you know your savings rate. Which one of these money mistakes do you guys relate to the most? Let me know in the comments. And if you're already past 100K, have you actually noticed that you've seen these pitfalls and traps? Let the community know down below. Thank you again to Chime for sponsoring a portion of this video. You guys should really check them out. They're really nice and great sponsors. And if you'd like to check out my next video, I will leave it up for you guys right here. All right. Have a great day. Peace.