The Bitcoin halving is approaching, crypto is in the news again, money printers around the world are going brrrrrr, COVID-19 has presented the world economy with its biggest challenge since the global financial crisis. And you're thinking about money, or specifically, cryptocurrency.
That's fine. I get it. So am I. The lure of financial freedom or, even just the thought of wiping the slate clean and being debt free, is a powerful one. But remember this. Nothing, well almost nothing, in life is free.
If you don't own any cryptocurrency and you want some, there are basically four ways you can get it: buying, gifting, earning or stealing. Let's take stealing off the table right now, that leaves just three ways on this planet to acquire an asset that might, just might, increase in value.
Now, life is short, and for the average person with either a full time job or other commitments it will take years before they start to feel comfortable with what cryptocurrency actually is and what it could be.
I know this because I am an average person with a full time job and a family and despite spending almost every moment of my spare time, and some time when I should have been working, in this space, it has taken me years to have even a vague idea of what is actually going on.
So, you'll probably ignore this, I did when I started on my journey, but if you simply can't wait I have three words for you. Dollar. Cost. Average.
That's it. No one is going to gift you a sizeable chunk of crypto out the goodness of their heart. If you're in a position where right now you can start earning crypto somehow you're probably not reading this. That leaves buying. Spending your hard earned money, real fiat money, that you would have spent on something else, but instead you're going to spend it on cryptocurrency.
So let's think about this for a second. You're just tentatively getting into the idea that maybe there's something in this whole blockchain thing that could "change your life". But you want want to get rich quick right!? Life is short after all.
Forget all that. You're just starting out, yes this is exciting, yes this could change the world and your life for the better. But, you know nothing. If you can't wait until you've spent months reading, learning, researching, talking to people, going to meet ups. If you have to start now, then dollar cost average.
Step one is to sit down, preferably with a spreadsheet open in front of you (hey, cryptocurrency is money right of course spreadsheets are involved!) and write down all the money you have coming in every week or month and all the money you have going out. With me so far? Good.
Now you have a budget. If you've now realised you have more money going out than you've got coming in. Make some readjustment to your life. Sorry, now isn't the time to start spending money on crypto. If you're OK though, congratulations, read on.
Next thing, is you'll need to mark up those aspects of your spending that you can't do anything about. You need somewhere to live, you've got bills to pay, you need to eat, you need clothes etc. Maybe you can change your eating habits, or live somewhere cheaper, or reduce your bills but be realistic. Either way, all those outgoings in your life that are essential and inescapable, mark them as red.
Next, you've got things that technically you don't need to spend money on but life would be miserable for you, or would make people you love or that depend on you miserable without them. Mark these in yellow.
Finally, hopefully, we're getting to your disposable income. Beer? Cigarettes? Coffee? Games? Movies? Fine wine? A hobby? Some other luxury or service? What's your poison? Mark these in green.
Like I said earlier, by changing your life you may be able to shift some of your spending from the red or yellow outgoings into your green. But the key thing is if you're going to start buying crypto, only do it from your green pot of money. From your disposable income. How much, that's up to you. You'll need to decide on the opportunity cost, maybe you'll give up smoking and buy crypto instead, whatever.
Only now are you able to say to yourself OK, I can afford to spend x amount per week buying crypto currency. What do you do next? Easy, once a week, the same time every week, you spend that set amount of money you have, purchasing cryptocurrency.
I hope this has been helpful, in my next blog post I'll share my thoughts on how to automate your dollar cost averaging and what cryptocurrencies you might want to think about buying. Good luck!