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Now you may have a question that how much emergency fund should an investor keep ready. In this case, if an investor's income is stable or fixed, then the investment journey can be started by keeping the amount of all expenses for the previous three months as an emergency fund.
I would imagine the majority of investors into bitcoin are not coming to bitcoin by already having three months of cash for their expenses in place, and if they do come to bitcoin with that level of extra cash, they may well be better off to invest 1/2 of that into bitcoin and build their bitcoin up at a rate similar to building up their back up funds, and sure I don't see any problem in building the bitcoin up at a faster rate.. even though sure the end goal might be getting the back up funds somewhere in the 3-ish months of their expenses category - and yeah, there could be differences between investors who have stability in their income/expenses as compared with guys who do not, and guys who do not have certainties in their income/expenses would likely need to keep more back up funds to a count for such uncertainties.
Even though each guy can choose his balances, it seems many cases of getting in to bitcoin and treating bitcoin with some intension and seriousness would likely end up building up back up funds and bitcoin simultaneously - otherwise if a guy has almost no bitcoin, yet at the same time he has a bunch of cash, then that seems quite imbalanced on the side of cash, which would likely mean that he is either not very serious about bitcoin or that he is overly whimpy about bitcoin.
Of course, whimpiness versus aggressiveness are personal choices, yet for any bitcoin investor either of the levels or some variation in between should be reached with intention rather than by accident or out of ignorance.
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Earlier on in my investment journey, i didn’t really didn’t have much of a choice than to keep my backup money in local currency or whichever currency that was most liquid and least volatile at the time because i surely didn’t want to expose the back up money to exchange rate fluctuations or to an assets whose value can drop when i suddenly need cash.
But as the pile of backup funds continued to grow, it got to a point where the opportunity cost of leaving everything sitting in cash started to feel kinda heavy for, and at that stage i could only think of diversifying part of those reserves into USDT; this didn’t mean that i was trying to create another investment portfolio in form of USDT, the main reason behind that move was that my trade-offs shifted proportionately as my overall financial position got stronger.
At the end of the day, you just gotta keep adjusting the balance of your situation as it improves, while still protecting the core purpose of the emergency fund simultaneously as well.
I have had similar experiences, and it seems that early in my bitcoin investing journey, I was so reluctant to keep cash, but then when some shortage of income and/or increases in expenses come along, it is nice to have options.. rather than having to scramble to figure out what to do and what to sell first to come up with the needed money.
So yeah, it seems that the longer that we are building and maintaining our bitcoin, the more we might feel comfortable in keeping more and more money in cash, since we know that our bitcoin is working for us, even though it also has long periods of ups and downs in its path.. So then if we are building bitcoin and our cash is also building up, we might also start to think that we have too much money in our local currency.. so yeah, there could be other places to put it, especially if our bitcoin is building and maintaining well, and also if we have various forms of cash that are available that we can draw from first if we have some urgent situation, and even in an urgent situation, there likely are not too many scenarios that we we would need the equivalent of weeks and weeks of our expenses all at once, even though we could end up having various expenses that continue to draw from our back up funds and as we are depleting whatever back up funds that we have, we might have to consider other resources that we have available that we can draw from, and yeah, the more depleted that we get, then we may well end up running out of resources, and have nothing left but bitcoin to draw upon. None of us can really anticipate all of the situations that we might come into, yet we can still try to prepare so that we are not easily taken out and we have sufficient resources available, and if we ever go through periods of loss of income and/or increases in expenses, we may well end up being quite proud of ourself to have not had to touch even 1 satoshi of our bitcoin stash in order to resolve the situation that we had found ourselves in.
That was when I suggested that, he should rather hold whatever money he earns in bitcoin but it should be treated as an emergency fund and not his savings or investments which means that, whenever there is an emergency, he can withdraw without guilt and the reason for this is that, you'll agree with me that if maybe, we plan our emergency funds per weekly and maybe you set aside $50 for weekly emergencies, you would agree with me that, if one leaves a peaceful life, there might not be any emergency for a whole week and for such weeks when there are no demand for the Fund and for such weeks, the money might then be counted as his investment.
When you build an emergency fund with Bitcoin, you will have to face some uncertainties.
I assume that you need $500 for an emergency. You may have calculated that amount and put it in Bitcoin. But when your emergency situation arises, the market price is significantly lower, so selling your Bitcoin may not be enough to get the necessary money. Then you will have to raise money from other sources, or sell a larger part of your investment. Which will ruin your long-term plan. Even if it were logical to keep the emergency fund in Bitcoin, there would be no need to keep a separate fund called an emergency fund.
Again, it is unreasonable to consider the money saved for that week as investment money just because there was no emergency in a week. Just because there was no danger, there is no guarantee that the money will not be needed in the future.
Yeah. Emergency funds and investment funds should be used for different purposes.
Saving it in Bitcoin can be a good idea but we all understand that Bitcoin is a volatile asset, the best approach is to invest for the long term.
It is not a good idea at all to have emergency funds in bitcoin, and if a guy has absolutely no cash or other resources to use for emergency funds, then he has no choice but to tap into his bitcoin, which may well be at a time that is not of his choosing and may also not be a good time for tapping into the bitcoin.
Even if the bitcoin is in profits, it may well not be a good idea to be stuck with no option except bitcoin. The cash is supposed to give us options about which we choose to spend, but if we don't have any cash, and all we have is bitcoin, then we have to spend from our bitcoin.
And, of course, several times, I have tried to suggest to guys that building bitcoin can take 4-10 years or longer and along the way bitcoin is going to be up, down and sideways, and the mere fact that bitcoin is up does not provide enough justification to either stop buying it or to sell some of it.. and so if guys are seriously trying to build their bitcoin holdings, then they likely are going to need to continue to buy for 4-10 years or longer before they might change strategies.
Of course, there are guys who come to bitcoin, and they do not realize that bitcoin is an investment and that the timeline for investing in bitcoin is 4-10 years or longer. Their thinking might be sloppy and undisciplined, so sometimes there are needs to learn and needs to reinforce building the bitcoin and buying it every week for 4-10 years or longer and the seriousness of the investment thesis is reinforced, and part of the reinforcing of the bitcoin investment thesis involves building up side-funds that are in cash and that will cover fluctuations in income/expenses so that bitcoin can continue to be bought during the period that the bitcoin holdings are still being built up...so yeah, an overwhelming majority guys are going to be better off to be keeping some cash so that they do not have to sell any of their bitcoin and so that they can continue to build their bitcoin stash by buying only techniques.. since even the process of selling bitcoin can detract the serious bitcoin investors from continuing to build their bitcoin holdings because they might get put into a waiting posture rather than a posture that involves ongoing, persistent, consistent, regular and perhaps even aggressive buying of bitcoin.
The price changes make it a bit risky to hold Bitcoin as an emergency fund, it’s very risky to depend on your Bitcoin when an emergency arrives. It’s better not to keep emergency funds in Bitcoin, rather to keep them in cash. Instead of investing money you may need in short periods in something that the price is unpredictable.
Well. At least it seems that you understand the idea, and you might consider ways to be a bit more adamant about the need to build and maintain back up funds that are in cash while bitcoin stash building is likely to be happening simultaneously, and many of us know that it tends to take quite a bit of time to really build up a decently good sized bitcoin stash, even for guys who have relatively good income and resources available to them, and surely guys who are more serious and focused on balancing their bitcoin building and the strengthening of their cashflow management (including back up funds), then those guys may well end up outperforming guys who have way more resources than what the more poor person has.. .but ongoing focus and organization can still put the poor person in an advantageous position based on his balancing the use of the discretionary funds that he has in terms of ongoingly (perhaps weekly) considering how much to allocate towards 1) bitcoin investing, 2) back up funds and/or 3) discretionary consumption.
Yes we do, because some people are still backward in knowledge and reasoning, and it's a big shame that someone that has been here for a long time is the one suggesting such a pathetic and myopic idea, which may cost him his investment, if he is even investing in Bitcoin. When you keep your emergency funds in Bitcoin, you are gambling with it, by trying to make profit from it, which should not have been the case if it's is kept in fiat that is stable, and with no volatility to worry off.
Nothing is as bad as facing an emergency that threatens your bitcoin holdings with an emergency funds kept in bitcoin that has really depreciated in value because of the volatility of the market. That shows that you are not serious or ready to invest and hold strong for years.
That sounds rude, although we know that there are people who are still holding their emergency funds in Bitcoin. The thing is some folks seem to take this inflation stuff very serous that they can't sit and watch inflation coming to eat their money up so they feel saving it in Bitcoin will be the best idea but it's definitely not moreover the money is not something they are holding for longer period of time rather, it is something they will spend within a short term so even though there's inflation I Believe the value will never drop to the point where it can't go a Long way in terms of figuring out emergency.
The inflation (or the debasement of the fiat) is justification to not keep as much back up funds, so 4-6 months may well become greatly unmanageable and losing value faster than it can be replaced.
Yet, debasement/inflation is not justification for not keeping 1-2 months of back up funds in cash, and yeah, we work towards having 3 months of cash and maybe more if we are ongoingly building our bitcoin, then we might feel justified in keeping higher levels of cash, even though the cash is ongoingly losing purchasing power, it still comes in quite handy to have it but yeah, we have to pay attention to our balance and it likely is quite a bit smarter to make sure that the bitcoin is growing way faster than the cash, especially when the cash gets up to higher amounts, we might want to make sure that the cash is not losing value as fast, so we might consider alternate ways of keeping it to try to preserve some value while trying to also pay attention to its liquidity characteristics and lack of volatility characteristics, too.
However, Since emergency is something that could happen without us noticing it then it is wise to store it in a place where we can access it freely or without experiencing anything like drop in value or even finding it difficult to access it. So in this case saving it in Bitcoin isn't the best, we need to understand that whatever that enters in our Bitcoin investment can't be access so easily so for that the idea of saving our emergency money in Bitcoin is not valid.
We might not always know how accessible our funds are or even their lack of volatility until we are practicing and getting used to a variety of situations that happen from time to time....and yeah, it would be kind of problematic if we kept all of our cash in one place (such as at our house) and our house burned down or something unexpected like that..so maybe we keep 1/3 of our cash at our house, 1/3 in a bank and 1/3 at some other location.. and yeah, for each person this will be different and sometimes logistically challenging to create and maintain in reasonable ways.
