It’s easy to invest in cryptocurrency with just a few taps of your smartphone. With crypto appearing in the news and conversations with friends, it’s tempting not to get in.
Crypto coin might not suit you, depending on your financial situation and willingness to take risks.
Tyrone Ross, CEO and founder of Onramp Invest (a crypto asset platform that registered investment advisors can use), said, “I am probably the most crypto hippie you will ever talk to.” He warns against investing in crypto. “I don’t believe the general public should invest in crypto.”
Imagine your finances as an ice cream cone. Crypto is the cherry on top. It is a small part of the overall sundae, and not everyone needs one.
Before you can take that cherry out of the jar, you have to put together the rest of the dessert. This is not ice cream. It means you need to build a solid financial foundation and learn everything you can about cryptocurrency before you invest any real money.
1. Financial safeguards should be in place.
It would help if you were prepared for the unexpected.
Workers who lost their income due to the pandemic have had to draw on savings, borrow money, or enroll in hardship programs to pay their bills. This has served as a stark reminder about the importance of an emergency fund.
“You can feel like Superman/Superwoman when you’re young,” but when the bubble bursts, it is possible to lose your job for up to nine to twelve months,” states Theresa Morrison, a Tucson-based financial planner. “Don’t underestimate the impact of systemic shocks on the market.”
Morrison suggests saving six months of living expenses for singles and three months for couples who share costs. Even a few hundred dollars saved can help you when you have an unexpected expense. You can also pay down high-interest debt like credit card debt to improve your financial situation.
Also, review your insurance coverage as these policies can help you get through difficult times. If you have dependents, life insurance is critical.
Start thinking about your long-term, medium- and short-term financial goals once you have enough money saved for emergencies. You should save money for retirement, especially if you have a plan that offers an employer match. However, you should set goals for saving money for other critical life stages.
2. Invest in the future and save!
“Most people want the freedom to travel every year, purchase a house in 10years, and get married in 10years. These things are expensive,” Morrison states.
“Calculate how much it will cost in today’s terms, and then figure out how much you can save each month from your paycheck. My experience shows that this can easily be as low as $1,000 per month (EUR1,164).
3. Learn more about cryptocurrency
You have the money, and you are ready to jump on the crypto train. But you don’t know how someone buys it. Crypto. Or how it fits into your overall financial plan. If it is too risky.
Take your time. Do not spend your money on things you don’t know. Spend some time learning about crypto.
It is essential to understand the mechanics, but it is equally necessary to determine your type of investor. This will affect the types of investments that you would be a good match for.
To determine if this asset class is suitable for you, there’s a process. What is your plan? What age are you? What are your goals, and how old are you? Are you tech-savvy? Are you able to understand the implications of holding these assets without them being insured? What happens if you are not there? Who in your family will be able to retrieve the stuff? Ross said.
People don’t do their due diligence before investing money in something. Although it isn’t a sexy answer to your question, it is the truth.
Also Read: Le Bon Coin can we still sell and buy? 2021
Start small if you still want to dabble in crypto.
Once you understand how everything works, you can start to consider allocating some of your extra cash toward crypto. Keep your investments small and manageable. Ross suggests investing $500 (EUR582) or more. You can be sure that even if you lose everything, you have a specific budget.
“If you invest in crypto, it is dead money. A Denver financial planner, Danny Lee, says that money is something you will never be able to get back.”
“It’s going be a speculative investment at the end of it all.”