It is one thing to make money, it’s another to preserve it. Just because you can make money doesn’t mean you have the skills or know-how to preserve it so it will be there when you need it in the future. I found myself in a situation recently where I was privy to a conversation about making money. It was in reference to the crypto bull run that we’re currently in. There is a running joke for those of us who’ve been through multiple crypto market cycles.
Its easy to convince yourself that you’re a pro trader and a genius in a bull run
My first official cycle was the cycle that played out in 2017, and believe me, I was that guy that thought he was a genius for “making bank” during a bull run. Yes, I did make a good bit of money, enough to pay off my student debt. But the truth was I knew nothing about keeping, preserving, or growing money. You can do both, (making, and preserving) but not necessarily at the same time.
Here are the rules
Pay Yourself First
Make your money work for you
These two things have become easier than ever to accomplish with the help of cryptocurrencies. You might have read these financial literacy tips before in other places, but staying true to my ethos of keeping everything out of TradFi, I’m going to tell you how to apply these lessons to the world of cryptocurrency.
Keeping Money: Pay Yourself First
It doesn’t matter if you put away $10, or $50, or $500 from every paycheque. The point is to put some money away for a later date. This was the lesson I received from my grandfather, as well as both my parents. However, times have changed, and things are not as simple anymore.
Saving in CAD is not a viable solution for planning for the future any longer. Mainly because I don’t have confidence that saving in CAD is going to allow me to preserve, grow, and then draw from my savings in the future. So it actually matters what you save in.
Make Sure your Savings are Liquid
I found myself in a conversation about NFTs recently, and if you’re not already aware, NFTs are extremely illiquid. That is, they’re not easy to sell once you have them. Just because you have an NFT, and the “floor price” (minimum price that the NFTs are selling at) is above what you paid for it, doesn’t mean you have a buyer for your NFT should you need to sell it.
This brings me to the first sub-point of paying yourself first. Make sure your savings are liquid. Make sure that at any point and time, you can sell whatever you have chosen as your preferred store of value for “cash”. Otherwise, what good is your savings?
It is for this reason I don’t recommend buying the 1000th coin on coinmarketcap.com, or stacking your wallet full of NFTs with your retirement fund. Don’t worry, you can have your cake and eat it too.
Give yourself some Money to have fun with
Part of paying yourself first is having money to play around with. May that be for leisure, entertainment, gambling, or high-risk investments. We’re all human, and we like to have fun. This point is not necessarily for everyone either.
For me, I prefer to save every damn penny I find on the roadside. ( I literally saved every coin I found on the street for more than a decade from when I was 7 to 22). As I am getting older, and my nest egg is growing, there is more money available to me to slow down, and smell the roses so to speak. I was only able to get here by saving 80%+ of my money for the last 15 years.
I personally love to go out and eat at restaurants. So I give myself the freedom to do so approximately 5 times per month. Sure that’s like $250 per month that I could be buying Bitcoin with, but life is worth enjoying. I love trying new foods and enjoying an evening out with Mrugakshee. It is money very well spent.
Save Consistently: Put your savings on autopilot
I’m buying $10 worth of bitcoin for the foreseeable future, regardless of what the price is. I’ve set up this recurring buy on ShakePay. Every day at 6:00pm, $10 comes off my account, and about 10,000 satoshis come into my account. This is essentially putting your savings on autopilot.
To be clear, you don’t need to spend $10 per day like I do. If $1 is all you can manage, then that’s amazing. JUST DO IT.
Making Money: Make your Money Work for You
This goes back into choosing how you save. For example, holding plain old dollar bills is not a great way to make your money work for you. Interest rates at banks are low, and to be a private lender for other people, you need to have a meaningful amount of money ($100k+) before you really start to see your savings grow. So if you’re not saving in cash, then the next best option is to buy an asset, and ideally one that produces an income of some sort.
Assets that Give you Cash Flow
This is why I love cryptocurrencies. Pretty well any single cryptocurrency can be loaned out to others within a single click of a button for an extremely appealing interest rate. Compare this to traditional assets that give you cash flow like bonds, equities, houses, and businesses. Each one of these things have a barrier to entry, or some maintenance cost to holding them. Cryptocurrencies have virtually 0 maintenance/upkeep cost, and are capable of providing you with cash flow.
Keep in mind that there are risks to having cryptocurrencies such as the volatility of the underlying assets. It doesn’t matter if an asset gives you a 20% APY if the asset fell by 50% within the year. That’s still a loss, and not exactly helping you achieve your long term savings plan.
This is why I love bitcoin so much. There is a reliability built into bitcoin that other cryptocurrencies simply do not have. I am willing to extend my favour to other cryptocurrencies that have been around for longer and have established themselves as anti-fragile decentralized networks.
Until then, I remain firm on my stance that Bitcoin is the most flexible, versatile, resilient, liquid, and accessible currency ever built. It is easy for me to acquire, then lend out to earn interest. When lending bitcoin, the payments are typically made in bitcoin meaning that as bitcoin rises, all past earnings are worth more (as long as I’ve kept the bitcoin).
Build Yourself a Virtuous Cycle
Assuming Bitcoin doubles year over year.
Picture this.
You’ve bought $1000 worth of Bitcoin to get started.
You’ve set up a recurring buy of $10 per day.
You started lending it at 5% interest rate that pays out weekly.
Once per month you deposit all newly bought bitcoin into the same 5% earning term.
In 2 years you will have more than twice the amount of money you started with.
As well as quadrupled (doubled year over year) the amount of money you have in fiat terms
Keep that 5% interest rate going, and the $10 per day recurring buy
In about 10 years you will have more than 1 million dollars in fiat terms
That 5% interest rate is suddenly producing you $50,000 worth of bitcoin
$41,66.67 per month of additional income
You can either put that money towards growth, or spend it
The point is, at this point, you’ve created yourself a reliable, dependable virtuous cycle. This is what financial freedom looks like.
Regards,
Keegan
Here are a few of my past letters that either help you make more money, or preserve more money.
Making Money
Preserving Money
Resources
Cryptocurrency Memes / Podcasts / Charts - v5HP7yBZAzuGVVJ&