Buying Beyond Your Means
This continues my series aimed to help crypto newbies avoid costly mistakes. Know some people new to crypto? This should be helpful.
Buying cryptocurrency is exciting. The past few months, bitcoin rose from $1000 to $5000, ethereum rose from $14 to $400, and many other tokens saw similar crazy returns.
Were you sitting in the sidelines? It must have been hard to watch, and I'm sure you're impatient to hop in get a piece of that action.
If you do, be careful and don't buy more than you can afford to lose completely. Crypto should not make up more than 5% of your investment portfolio, and even less than that, if you're buying it as an investment. Do you have a 401(k) through work? Make sure that's being matched before you put money into crypto. Do you have 3-6 months in a savings account for emergencies? Are you carrying a whole bunch of credit card debt? Student loans? [1]
I ask these questions because they're going to be the cause of misery if you're not looking at a bigger financial picture. If you are living paycheck to paycheck, buying some cryptocurrency as if it is a lottery ticket is a horrible idea. You will be pressured to sell when you can't pay your bills, you will sell at the absolute worst time possible, and you'll watch with complete regret as your just sold token moons without you.
Many people suggest dollar cost averaging, putting in a small amount of money consistently over time. That's a good way to avoid using scared money.
Don't be like Brian
I hope this was helpful, and that it might help at least one person avoid being scammed in the future. If you liked it, and want to see more articles like this, please click the button below!
[1] I am not a financial adviser. You should consult a finance professional before you buy any cryptocurrency. I hope this information will cause you to think and make your own decisions...not blindly buy something and blame me. Dave Ramsey has some great information and advice about how to pay off your debts, and he's much smarter than me.