Financial YouTuber Humphrey Yang Shares the No. 1 Way People Become Poor

Humphrey Yang

When it comes to managing finances, it’s often the obvious expenses that get scrutinized, like housing or daily coffee habits. However, financial YouTuber Humphrey Yang reveals a less apparent but significant expense that could be draining your wealth: car ownership. Read on to learn how this common aspect of modern life can be a substantial financial burden, often sitting unnoticed in plain sight.

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Understanding the Real Cost of Car Ownership

Yang highlights a societal tendency to associate luxury cars with success, which often prompts individuals to spend more than they can afford on vehicles. This trend is exacerbated by the rising costs of vehicles and hefty dealer markups. According to AAA, the average annual cost of owning and operating a new car was about $12,182 in 2023. For the average American, this represents a significant slice of their income.

The Biggest Expense: Depreciation

One of the largest costs of car ownership is depreciation. Yang uses an example of a 2018 Honda Civic to illustrate this point. New cars lose value rapidly, making them poor investments. He advises purchasing a used car, ideally three to four years old, to bypass the steepest part of the depreciation curve, thus achieving better value for money.

Tackling 4 Other Car-Related Expenses

Car ownership involves a myriad of costs beyond the initial purchase price. Humphrey Yang outlines practical strategies to manage and reduce these additional expenses effectively.

Reducing the Number of Cars

Owning multiple vehicles can substantially increase your annual transportation budget. Each car adds to expenses like insurance, registration fees and maintenance. By minimizing the number of vehicles in a household, you can significantly reduce these recurring costs. This approach not only saves money but also simplifies the complexities of managing multiple vehicles.

Shopping for Insurance Annually

Insurance is a major recurring cost for car owners. Yang suggests that annually comparing insurance rates can lead to significant savings. Insurance premiums can vary widely based on factors like your driving record, location and the insurance company’s policies. By regularly shopping around and comparing quotes, you can often find better deals or negotiate lower rates with your current provider.

Fuel Efficiency

With fluctuating and often rising fuel prices, opting for fuel-efficient vehicles can lead to considerable savings. Electric cars or hybrids offer an alternative with lower running costs compared to traditional gasoline-powered vehicles. Besides saving money on fuel, these vehicles are often more environmentally friendly, contributing to reduced carbon emissions.

Basic Maintenance Skills

Acquiring basic car maintenance skills can significantly cut down on long-term repair and servicing costs. Simple tasks like changing oil, replacing air filters or checking tire pressure can be easily learned and executed. This DIY approach not only saves money but also extends the life of the vehicle, ensuring it runs efficiently for longer. YouTube and other online platforms offer a wealth of tutorials and guides to help even novices learn these valuable skills.

Good To Know

Yang stresses the importance of lifestyle decisions. Living closer to work or opting for a car-free lifestyle can significantly reduce transportation costs. He suggests that the money saved from these choices can be more effectively invested in avenues like the stock market, which can offer better returns than the depreciating value of a car.

Final Take

Humphrey Yang’s perspective on car ownership challenges the traditional view of vehicles as mere transportation. He emphasizes the importance of understanding the full financial implications of car ownership. By making informed decisions about transportation, individuals can avoid a common trap that erodes wealth over time and instead direct their resources towards more fruitful investments.

Editor’s note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates’ editorial team.

This article originally appeared on GOBankingRates.com: Financial YouTuber Humphrey Yang Shares the No. 1 Way People Become Poor