So for me, successful investing about balance, discipline and making sure the money going into investment is money we can afford to leave there for the long term.
Perhaps, let the money you invest in bitcoin because the amount of money you can afford to lose, yes, for the sake of your peace of mind and long-term success.
You may be right on the message you want to share, but your choice of word totally contradict the point you are trying to make. You invest only using discretionary income, which is the money you have left after settling all essential needs.
Someone who earn $1000 at the end may $100 left after settling all essential needs which includes rent, food and other bills. That 100 left is his discretionary income. However, having $100 left doesn't mean he should invest all of it in bitcoin. He can use a percentage to buy bitcoin, keep some for emergency fund, and reserve the rest as a financial cushion.
You are correct that guys might end up having only around 10% or 20% of their total income that fits into the category of discretionary income, which, like you said, is the money that is remaining after all of the basic expenses have been accounted. In your example, you give 4 categories in regards to how discretionary funds could be used, yet you are really ONLY providing 2 categories (invest & save) and skipping one category (discretionary consumption).
You mention emergency fund, reserve and financial cushion, and all three of those are forms of savings. They only count as 1 category, even though you wrote them down as three categories.
You totally skipped mentioning discretionary consumption. Do you believe that discretionary consumption is not necessary? or maybe you don't know the difference between discretionary consumption and basic consumption and you think that they are the same? Guys have to make sure that they know the difference between basic consumption and discretionary consumption, and surely even within basic consumption, sometimes guys will include some items or some extra costs that are really a part of discretionary consumption but they count it as if it were basic consumption.
Don't get me wrong. You can do whatever you like, yet if you are not really understanding the categories and/or you are counting them wrongly, then you are likely losing out on some ways that you could get more value from better understanding and applying the categories to your personal circumstances.
The point is that you shouldn't treat bitcoin investment as money you must be ready to lose. The goal is to accumulate bitcoin with money you can comfortably set aside for the long term, without putting yourself under unnecessary financial pressure.
You are communicating this portion badly too. There is an expression that applies to investing and trading, which is don't invest/trade any more than you can afford to lose. The idea is that you are using money that you do not need for your basic expenses and also money that you are not emotionally attached to, so that your emotions should not be getting in the way of whether you profit or not from the money that you are using.
Of course, no one wants to lose money, yet at the same time, when you invest into bitcoin, you may well be investing for 4-10 years or longer, and you may well have to go through extensive periods of great volatility and even periods in which your coins and/or storage of your bitcoin could be attacked. Even if you take all kinds of precautions with your bitcoin investment, you cannot have 100% confidence that you won't end up completely losing 100% of your investment due to your own execution or due to some external factors. There is one thing that if you were to consume with the money that you put into bitcoin right away, you would get the value of that consumption whether if that consumption item were to hold its value or not (such as consuming an ice cream cone or buying a car, there are differences). Also, if you were to save the money in dollars rather than investing it into bitcoin, you would have the cash value of that money, whether you recognize that the cash is ongoingly losing its purchasing power, if you had chose to hold the money in cash rather than buying bitcoin with it, you would have the nominal cash value whether you ended up using it within a short time later, such as within a week, month or a couple of months or if you ended up using it 1-2 years or longer down the road you would have that nominal value, even if the nominal value might not have had been well preserved in purchasing power.
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What an investor need is a long term plan, not “target”. I think giving yourself target comes with a lot of pressure to accumulate a certain amount of Bitcoin within a particular timeframe. You may end up over stretching yourself even when your income does not allow.
I have a hard time appreciating the difference between the ideas of having a target, plan, goals and/or other descriptors that might attempt to specify where a guy might want to go, how he might get there and perhaps various ways of attempting to measure progress along the way.
It is quite likely in the beginning a guy's goals and plans will either lack specifics and/or the specifics might ONLY be loosely tethered to reality. And, surely the longer that the guy may be working directionally towards "improving his financial circumstances" then the more capable he may well be able to become about the various milestones that he might want to reach along the way and even more particular about his end-point goals - even though surely there also could develop quite substantive ways in which end goals might change through the years.
And what do you mean by “know when to be aggressive and less aggressive”? That part is sounding like you encouraging folks to time the market; to know when to buy more and when to reduce amount. Is that why you said they should approach Bitcoin professionally? Tbh I don't think all these things you mentioned are necessary if you want to accumulate bitcoin long term. A simple DCA plan beats all these your talk of being an expert and knowing when to be more or less aggressive.
Of course, I cannot speak for I_Anime, yet I can acknowledge that he was referring to tools that bitmover and I have created in terms of getting help in terms of figuring out goals and perhaps even helping to think about bitcoin accumulation strategies. In terms of bitcoin accumulation, I frequently talk about investing in bitcoin ways that are as aggressive as guys are able to be without overdoing it, and aggressiveness does not have to do with timing the market, yet abilities to be aggressive likely relates to having good senses about your own cashflow management and to know how much of your discretionary funds that you want to allocate towards buying bitcoin.
I am not really sure how well the tools that bitmover and I have created help with cashflow management, even though they likely help with setting goals and even managing bitcoin holdings once there might be considerations of sustainable withdrawal, for example, so surely there is a bit of subjectiveness in determining aggressiveness in bitcoin accumulation and it does not necessarily have to do with trying to time the market. Personally, I tend to think that guys who try to time the market and hold back value in order to attempt to buy on dips are tending to be less aggressive than guys who are trying to DCA buy their BTC in regular, persistent and consistent ways.
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Guy sacrifices or no sacrifices, no one is advised to used up their funds for Bitcoin investment, our basics needs should be the first priority, then the next should be our investment, and what is needed for our Bitcoin investment is our discretionary income, so I do not see it as a big deal if we know what our discreationary income is and how to get it figured out, people must make excuses, that is what I understand, they don't beg tired of that, real and potential investors, does not play with good financial management, since they understand the importance of their Bitcoin investment, the know what to do at right time, and important their basic needs is to them, they also make sure that there Bitcoin acumulation is not joked with.
If someone has already settled their essentials then what's the need of sacrificing the reserve funds to solve same problem, is the reserve funds not the remainant of funds are settling essentials? You're right dear, one can only use the reserve fund to build up emergency and backup funds not settling essentials.
If the reserve funds should be sacrificed for essentials that means the person isn’t good at managing his income to settle different issues including essentials, emergency and money for investment without affecting each other.
Your description is quite confusing @Sunshine1525, including your using terms incorrectly and in confusing ways.
Maybe I can attempt to clarify?
Discretionary funds are what is remaining from a guy's income after he has accounted for all of his expenses.
With his discretionary funds, the guy can choose to invest, save and/or discretionarily consume.
Within the savings category there are back up funds, which include emergency funds and reserve funds.
Emergency funds are considered to be money that is being saved to be used for basic expenses in circumstances that income might go down and/or expenses go up. Emergency funds tend to be the last amount of cash that would be available prior to having to dip into bitcoin.
Reserve funds are flexible and can be used for anything including but not limited to buying dips, emergencies, basic needs or discretionary wants, saving up to buy a bicycle for your kid, etc etc. Reserve funds would likely be exhausted before emergency funds.
If you do not use the terms correctly, then you may well be confused about the ideas, and you may well be confusing others when you are describing what you are doing or what you plan to do.
This reserve fund is of immense importance for long term Bitcoin holdings. I did not give much importance to this issue at the beginning of the investment. I thought that the availability of discretionary income was the most important thing. I have come to understand the importance of emergency funds and also the reserve fund. I am now able to understand the need for discretionary income for regular Bitcoin accumulation and the importance of adjusting this fund to manage each cycle properly.
Emergency fund is only for securing Bitcoin holdings that will be used for any emergency needs without withdrawing Bitcoin from the portfolio. Reserve fund has many uses including meeting family/personal extra expenses and aggressively buying Bitcoin during bearish periods in the market. Apart from this you can also use this reserve fund for small emergencies.
The need for a discretionary income In bitcoin investment cannot be overemphasized, everything you do in regards to bitcoin investment, ranging from buying bitcoin, down to building the emergency funds and any other backup funds to protect your bitcoin holdings, all boils down to the discretionary income. It is from an investor’s discretion income he can decide how much to use and buy bitcoin and also how much to use for building up the emergency funds/reserve funds.
Discretionary income is used to invest, save and/or discretionarily consume.
How come so many guys fail/refuse to account for discretionary consumption? Do you know the difference between discretionary consumption and other consumption (such as basic consumption)? Do you think that you do not need to account for discretionary consumption?
Sure, discretionary consumption can be low or even close to zero, and almost no one has zero discretionary consumption, even a monk.
I am a little confused, is the emergency fund and alternative fund created from the reserve fund? Or is the reserve fund also a backup fund like the emergency fund and alternative fund? I know that the reserve fund is also a part of the backup fund.
The money that remains after meeting the basic daily needs is discretionary money and from this discretionary money we allocate some money for investment and some part for the backup fund. We again divide the backup fund into several parts where there is a reserve fund, emergency fund and other necessary funds. The reserve fund is mainly used for car repairs, home repairs, purchasing necessary devices, improving one's skills or recreational activities. We can consider these as essential expenses, but not basic daily needs.
Alternative funds is vague word what do you mean by that? Reserve funds is your backup funds that can be used for various reasons. Because it can be used for whatever stuff possible, some lot use it to buy bitcoin or for any kind of expenses. Person can even use some portion of it to add to and increase emergency funds if that is what they want, I don't think that there is a rule against that. But using reserve funds to build emergency funds from scratch can deplete it on time, which is why it is better for person to use discretionary income to build emergency funds.
Imo, the reserve funds is the money that person can even be using for various expenses before tapping from their emergency funds. After using up this funds on expenses, person can start tapping from their emergency funds especially for those expenses that are unexpected.
If the reserve fund is considered as a general fund that can be used for everything from buying Bitcoin to meeting various expenses, then there needs to be a certain limit on its use.
Why do there need to be limits? Reserve funds are built from discretionary funds which means you can use it however you like. Yeah, if you use up all of your reserve funds then you won't have any more back up funds except your emergency funds, and you might put yourself in a pickle.. so you have to figure out how to use good judgement.
Just because a fund can be used for various purposes does not mean that it is a wise decision to use it for all purposes.
It is your choice. Do whatever the fuck you want with it, and yeah, if it is limited in its amount, you are going to be fucked if you use it all up.
The main purpose of an emergency fund is to maintain one's financial security in unexpected financial situations. So that if a sudden problem arises, one does not have to sell Bitcoin or take a loan. The reserve fund can be used for various planned or irregular expenses. A part of the reserve fund can be used to increase the emergency fund. I agree with this. However, it is more effective to set aside a certain part from regular discretionary income instead of relying entirely on the reserve fund to build an emergency fund.
You know what the funds are for, so why keep going over it. The devil is in the details of your own specific application.
If money is spent repeatedly from the reserve fund, it can quickly run out.
Sure. The less money you have, the fewer options you have, so you have to figure out how to manage that.
Then a financial security gap may arise before the emergency fund is built up to a sufficient amount. Having a reserve fund can be used as additional financial flexibility. However it is not right to consider it as money that can be spent without any planning whenever necessary.
By definition, reserve funds have flexibility and emergency funds do not. Each person decides how much value he feels that he needs to keep in each category.
Its real importance lies in understanding what money is for what purpose and when it should be used.
Each of us decides those matters especially when we are dealing with discretionary funds and various funds that we create to support ourselves in terms of whether we are holding the money for basic expenses (generally thought to be emergency funds fitting in that category) and/or for discretionary matters, and reserve funds are kept for discretionary matters, yet reserve funds can also be reassigned to become emergency funds if you make a determination that you need to build and/or maintain more emergency funds.
