Getting into Crypto? Don’t Use New Money!
Thinking about getting into cryptocurrency, either by investing or mining? Are you ready for the volatility? Remember, every single dollar you put into cryptocurrency could disappear overnight. The coins or tokens or NTF’s could all become valueless in a heartbeat. You could also make a ton of money on them as well. Or, if you’re like me, you could be somewhere in the middle — win a few, lose a few.
Most investors look for ways to limit their losses. I’m no different. I like to make sure that no matter what I do, there is a hedge against a severe downturn. One way to do that is to never use new money when purchasing crypto, or devices to mine crypto.
What do I mean “new money”?
New money is money that is new to you. Money that you earn through your hours spent working. Or it could be money that is earned through investments. The point is that the money is new to you.
So if you’re not using that money, what other money is there?
Well, there’s the money that you have already spent, and you have derived value from it, and now you liquidate what is left.
What, exactly, is that?
To paraphrase famous real estate investor Robert Kiyosaki, anything that you own that isn’t making you money is costing you money.
So, to determine what is “old money”, or money that you can use to invest into crypto, start thinking about things that you already own, that aren’t making you money, and liquidate them to generate cash.
An example for me, is that the next items I’ll be converting to cash are some guitars that I own. I have over a dozen guitars. Electric, acoustic, Martin, Gibson, Fender, Strat, 335, Firebird, Les Paul, six-string, 12-string, classical, and so forth. And, in the words of my intelligent wife, more than I can play at one time.
The point is that I have more than I need.
That is money that I have already spent. I’ve already written that money off as entertainment value. Like a movie you see in the theater, you spend your $15 for 2 hours of entertainment, and you will never see that $15 again. Likewise, I’ve spent hundreds of dollars on guitars (ok, thousands of dollars) and I’ve enjoyed playing them. I’ve gotten entertainment value for my hours spent playing those guitars.
They aren’t making me money. I’m not good enough to make money playing them, so for the most part, they sit and collect dust. If I only had one guitar, I would play that guitar 12 times as much as I play it now, because I divide my playing time between 12 guitars right now. That’s a lot of money tied up in dust collectors.
So, I will liquidate some guitars. The money I get from selling them is serendipity. It’s money I had not counted on having. And if I lose it all on a crypto investment, I won’t have any less money than I had before I sold the guitar.
So, to summarize — don’t use new money for crypto investment. Liquidate assets that aren’t making you money to use as investment dollars. The upside is unlimited, and the downside is limited to money that you already spent once.
