When cryptocurrencies first hit the market, many people were skeptical about its longevity and credibility. However, as time went by, investors started streaming in in their thousands, investing millions in the technology, hoping to land massive returns.
While it’s not a bad idea to invest in cryptocurrencies, there are better investments to consider. Besides, the technology (Bitcoin) has been on a decline from the beginning of 2018 – a 40% decline. Even with such volatility, many investors continue to pump money into this technology.
To back this, Swell, a robo-advisor firm surveyed several millennials aged between 18 and 24 and found that 12% of them would invest in cryptocurrency if they had $5,000. Another survey conducted by neobank Chime came to an interesting conclusion. Cryptocurrency investments by millennials were at a staggering 4 times the rate than stock investments.
If you plan on investing in cryptocurrencies, only invest money you can afford to lose. While this is true for any investment, it’s especially true for the volatile cryptocurrencies. Before you can dive head-first into this investment, it’s wise to make sure you don’t have any debt, you have an emergency fund, and that your future is secure.
Pay Off Outstanding Debts
Financial advisors recommend paying off any outstanding balances first before thinking about any investment. They say this is the first step toward financial independence and they have a solid point. Having said that, start by creating a solid debt repayment plan and stick to it.
If you have several loans, consider paying off the one with the highest interest rate down to the one with the lowest. You can also consider debt consolidation, which is a great strategy for paying off several loans. It works by combining all the loans into a single loan at better terms.
However, keep in mind that paying off debt is no easy task, to say the least. Nevertheless, the fruits of your labor will be visible after you achieve a debt-free status that will be free of the emotional effects of debt.
Also, when seeking ways to pay off your debt, be sure to read between the lines to avoid surprises in the form of hidden charges.
Open a Savings Account
How solid is your safety net? If it’s solid enough, the good news is it can be even better. If you don’t have one, consider using the money you were going to use on a cryptocurrency investment to open one. No one can predict the future and emergencies are inevitable, which is why you must set up a savings account or an emergency fund to counter such times.
Medical bills, car accidents, and home repairs are some of the emergencies that can send you into the deep end of debt. However, with an emergency fund in place, you’ll have the peace of mind knowing you can meet an unexpected expense.
Some people may argue that stashing your money in a savings account will cost you other opportunities for making big money. They are right but in recent months, the interest rates on these accounts have been on the rise, which makes it worthwhile to have a savings account.
You can also use online tools to help you in finding financial institutions with favorable rates. Saving is a difficult habit to form and you land in this category, consider using money apps that can help you reach your savings goals.
Advance Your Career
There’s no better investment than the one on yourself. Not only career-wise but also in your general lifestyle. Instead of investing discretionary money on cryptocurrency, consider investing the money in advancing your career.
Acquiring marketable skills is easier today more than ever, all courtesy of the internet. The best part about it is the affordability of these courses. By signing up for these courses, you increase the chances of your boss saying yes to the promotion you’ve been eyeing for the longest time.
It doesn’t have to be a course. You can also attend a conference that offers you a chance to meet new people in your line of work. Who knows? You can land a higher paying job or can get valuable insights that you can apply at work.
Secure Your Retirement
Again, if it’s discretionary money that you intend on investing in cryptocurrency, a better investment would be to increase your 401(k) contributions. Apart from securing your future, doing this will also lower your taxable income. Here’s how.
Let’s say, at 30 years old, you earn an average of $40,000 each year and already have $10,000 in your 401(k). If you contribute only 3% of your income to the plan, you’ll have $278,875 when you hit 65. However, this is minus the employer’s matched contributions and any pay increase along the way. Also, this calculation assumes a 7% annual return.
Now, let’s bump these contributions by just 1% to 4%. The expected return will shoot to $336,239. Sounds great, don’t you think? What are you waiting for then? Chances are your friends may be in it according to a Bankrate Financial Security Index survey. The survey found that at least 23% of US adults have already increased their retirement saving contributions in the last 12 months.
Other Investment Ideas
Cryptocurrency investments shouldn’t be the only investment in your portfolio. Instead, make it one of the many investments to help you spread out the risks involved and not as your substitute for debt repayment or emergency savings.
Other investment options include opening an IRA account to boost your 401(k). Also, consider savings using certificates of deposit (CDs), which is similar to a savings account. Another wise investment is saving for your child’s college education through a 529 plan.
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