2024 Investment Plan - Limited FIAT Dollars

2024 Investment Plan - Limited FIAT Dollars

• Where do my limited FIAT dollars go?
• Should I invest while in DEBT?
• High-Level Summary of My Plan in 2024
• High-Risk Investment - Bitcoin/Ether
• High-Risk Investment - Web3 Gaming.
• Investing gains can be greater than "debt interest"?

Where do my limited FIAT dollars go?

Each paycheck I get to add to my bag of FIAT US Dollars. Depending on your spending habits, you might have a negative cash flow or surplus each month. This is often measured by doing a budget and looking at where the money goes. This also differs from one's networth (which might not follow the same pattern). Some people will have a negative cash flow, meaning their bills are greater than all the income that comes in. Other people will have a positive cash flow meaning after paying all their bills, there is CASH left over.

This is often the first step in understanding where you stand financially. If you have a negative cash flow, you might need to cut spending or increase your income. You will need to get your DEBT under control or you might end up like the US Govt (with $34 Trillion in debt).

Should I invest while in DEBT?

I have the same bills that everyone has. Often you feel like the money is spent before the paycheck comes in.

If you have a mortgage, car loan, student loan, personal loan, home equity line of credit, 401K loan, and credit card debt, then you know what I mean. They often have a monthly due date on a payment and you know it's coming.

Having bills/debt due causes each person to face these decisions on what to do with their CASH each paycheck. I will cover what I'm doing with my limited FIAT resources.

At the same time, I'm saving in my retirement plan while having DEBT (car loan, credit card debt, and personal loans). This is not the way Dave Ramsey would do it! His famous plan requires you to pay off MOST DEBT in Step 2. I used to be debt-free with a poor CREDIT SCORE, and over the years switched to learning when to borrow while letting my assets grow in value.

High-Level Summary of My Plan in 2024

• 401K plan - $9K yearly (with $4K in matching funds --> 13K a year).
• HSA (Health Saving Plan) - $7K a year
• ESPP (Employee Stock Plan) - $5K a year (15% discount on stock).
• Insurance (Health, Life, AD&D, Suppl, disability, etc).
• Debt Repayment - $70K in debt (car loan/credit cards and personal debt).
• Real Estate - 0. I have zero dollars in real estate! No primary home!
• High-Risk Investments - Between 1%-3% of salary each year / with a target of it being 1%-5% of networth. Bitcoin/Ether and Web3 Gaming.

Without getting into too much detail, you see that I have decided to allocate money to my 401K/ESPP plans even if I have debt today. I don't believe you need to be debt-free before you invest in a retirement plan (different from Dave Ramsey).

The average American barely saves about $5K a year. Most have 401K plans worth under 200K. I post my 401K balance so people can follow how I went from 0 to 100K in the last 7 years (2017 to 2023). This will continue to grow as I expect to continue working for the next 10 or 15 years.

When you're starting, your income and the percentage of savings are often the biggest factor in building your foundation of wealth. Once your asset's bags grow, there is a point where your passive earnings will match or expect your annual contribution of new cash flow.

This is where I'm at. I have assets. I have 401K, IRA, and stock investments. The S&P 500 yields 1.3% so money in my 401K is earning 1.3% a year in dividends alone. I also own dividend stocks which pay me over $12K a year (not counting the SP500's dividends).

Some of my paycheck goes to servicing my debt and paying the interest rate on those loans. Some of the interest are low like my car loan at 3.25% for the $33K I borrow for a car. I have credit card debt and personal loans like many Americans with interest between 10% to 22%.

In a future blog, I will cover why I like to invest in the stock market as well as how insurance plays a role in my plan. I currently have zero invested in real estate.

High-Risk Investment - Bitcoin/Ether

For the last two years, I have been adding more exposure to BITCOIN and Ether holdings. I was doing this before the SPOT ETF was approved in Jan 2024. I leverage the GRAYSCALE's Investment Trust using money in my IRA.

You can see I made most of my purchases between Oct 2022 and Jan 2023 (4 months). Then I added another High-Risk Bitcoin Miner to my plan in Oct 2023 using CIFR

Bitcoin/Ether are long ETF positions. The CIFR holding is 100 shares of the stock, one Covered Call Option, and one LONG CALL option. I often like to show small bets can make a big difference without going "all-in". I'm a big fan of RISK management and I don't need to take any large risk.

High-Risk Investment - Web3 Gaming.

The next area that is high risk is #play2earn Web3 gaming. I like to think of it as #play2own gaming as many of these games have NFT assets that you control and own. If you are playing a video game, why not play something that has some potential to create value? I play for entertainment, but I can also treat it as a business or an investment. The in-game assets have a value that drives users to purchase, rent, or sell to/from others.

Currently, the games that I care about right now are:

• Splinterlands (TCG)
• Big Time (MMORPG)

While there are hundreds of Web3 games out there, these are the ones I'm currently playing. Both of them can earn assets each day in the form of crypto tokens (like a bitcoin or ether) and NFT (in-game assets).

In a future blog, I will get into details of how Splinterlands and Big Time are doing and how I decide when to add more FIAT into the game.

Investing gains can be greater than "debt interest"?

Now let's circle back to why this blog has a theme of "Investing with limited FIAT Dollars". If I had "unlimited" resources, investing would be so easy because I have enough to go around for everything I want and need.

The fact is we have to make hard decisions. Sometimes I can only afford $50 a month to put into a high-risk investment, while I'm in debt. The reason why I do this is because I believe I can make more than my 3.25% interest on my CAR LOAN (debt). I also believe I can make more than the 20% interest rate from the credit card debt!

How is this possible?

• 401K Plan
  50% matching fund. If I put in 1K each year, I can get $500 each year.
  Tax-deferred will lower today's taxes.
• ESPP
  15% discount on the lower price of the two dates (start and end date).
  I work for a company with a dividend yield of over 3%.
  This puts this near the 20% interest rate of the credit card interest.
• Stock Market Gain/Dividend
  Last year the market was up 24+%
  Historical returns are around 10% annually.
  This combined with the 401K Plan matching is key.
• Bitcoin/Ether
  Bitcoin and Ether on average have outperformed every asset class so far.
  While it is high risk, it doesn't mean you should avoid it. This is why I invest in Bitcoin while I'm in DEBT.
• Web3 Gaming
  So far I have a negative return in this asset class.
  However, I believe one project will beat the 10% I'm getting in the stock market.

The goal of investing in assets is to get a positive return (ROI).
The goal of investing while in debt is for capital to be invested in assets that exceed the cost to service the debt (Interest Expense).

Not every investment will have a positive return. This is part of the fun as an investor. You search for good investments and you build a plan around how you are going to implement that plan. In the end, you create wealth which leads to more time freedom to do the things you love.

This is the first of many in this series of how I'm investing in 2024.

Have a profitable day!
Solving Chaos