Since the introduction of Bitcoin in 2009, cryptocurrency has grown tremendously and now has a market worth over $3 trillion. With the value of crypto rising daily, you may feel tempted to buy in on the fear of missing out. However, financial experts suggest that cryptocurrencies are unsteady, risky investments and that one should only invest what they can afford to lose. So how do you determine the right amount of money to invest in crypto? That is where budgeting comes in. To figure out how much of your Income you can put into such a risky venture, you must first take a good look at your finances and ensure that you’ve made provision for the most important of things.
Here are some things you may want to consider in your budget before investing in cryptocurrency.
- High-Interest Debt
Paying off high-interest debt like credit cards and personal loans should be the first thing. On your to-do list. That is because unpaid debts can accumulate over time and become overwhelming. So, you must sort your debts out before investing in cryptocurrency.
- Emergency Fund
After you’ve successfully made your debt payments, the next important thing to do is to set aside some emergency funds. If you want to find out what amount of money would be appropriate for an emergency fund, add up all your monthly expenses, including bills, food, rent, and insurance. Then multiply whatever figure you get by the number of months you intend the fund to cover.
Once you allocate funds for debt payment and emergency, you have to take another look at your finances to see if other necessary things need funding. You can set aside money for miscellaneous expenses like education funds for children, home renovations, etc.
After setting aside funds for the expenses mentioned above, you can then look at what’s left of your income and decide how much you want to invest in cryptocurrency.