Written by R. A. Stewart
Cryptocurrency has been around for over a decade and has received a lot of publicity, not all of it positive, therefore it is assumed that if you are reading this you will be aware of what it is and no further explanation is required.
If you are thinking about investing in cryptocurrency there are some questions you need to ask yourself before proceeding. Here they are:
- Why are you investing in this?
Be honest! Are you investing in Bitcoin because you are hoping that the price will skyrocket and you will get rich as a result? This is as good a reason to invest in something just as long as you can afford to lose your investment. Investing in bitcoin should only be done with discretionary spending money. That is money you would have spent on an overseas trip, on nights out, or your hobbies. In other words; transfer your discretionary money to bitcoin investments. That way, if you lose your money, then there is no harm done.
- How does this fit in with my future?
This applies to whatever you are investing in. What is the purpose of this investment? Is it for the long term, medium term, or short term. Bitcoin does not fit into any of these categories because it is too volatile. Bitcoin should never be used as a substitute for your retirement fund but rather, just as an added string to your financial bow.
- Can I afford to lose this money?
A most important question. Only discretionary spending money should be used for purchasing cryptocurrency; that is money which you can fully afford to lose. Examples of discretionary spending money is money spent on gambling such as horse racing or the lottery, travels, alcohol, cigarettes, and non essential consumable items. It is just a matter of diverting some of your discretionary spending money in cryptocurrency.
- Is this money better off invested elsewhere?
Are there any other areas where you are better off investing your money other than cryptocurrency? If you have any kind of debt then you are definitely better off paying that off first. Some of your discretionary spending money can be used to make greater contributions to your retirement fund or to your house deposit account. Where you spend your discretionary spending money can make a real difference to your finances in the long run.
- Will I be able to handle the volatility?
It is no secret that Cryptocurrency is volatile; if you do not have the mentality to cope with all of that then you should give Bitcoin a wide berth and invest in something safer. Emotion will affect your judgement if you allow it to, and this applies to investing in the share market as well.
Summary
The questions you must ask yourself before investing in cryptocurrency are:
- Why am I investing in this?
2.How does this fit in with my future?
- Can I afford to lose this money?
- Is this money better invested elsewhere?
- Will I be able to handle the volatility?
Once you are able to answer these questions truthfully, you will have a handle on whether you should invest in cryptocurrency.
About this article
The information provided is of the opinion of the writer and may not be applicable to your personal circumstances, therefore, discretion is advised. You may use this article as content for your blog, website, or ebook. Check out my other articles on www.robertastewart.com
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