Bitcoin (CRYPTO: BTC) investors have been rewarded with excellent returns over the past year, making it tempting for newcomers to jump in and see how much they can “win.” So far, the cryptocurrency has risen to new record highs every month from 2021, as more investors flock to Bitcoin to gain diversification and opportunities.
There is another incentive that makes investing in Bitcoin an option for those who have not yet dived, or those who simply want to add more to their portfolio: $ 1,400 stimulus checks. On March 11, President Joe Biden signed the U.S. Rescue Plan Act, which authorizes $ 1400 stimulus checks to eligible taxpayers and dependents of all ages.
If you’re tempted to spend your entire stimulus test on Bitcoin, here are some items to consider before leaving your $ 1400 checking account.
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Look at your financial home
It’s easy to wake up, see thousands of extra dollars in your account, invest in the hottest assets and kick all your financial responsibilities on the edge. But do not move so fast in the market if you have not taken care of your financial affairs.
First, make sure that you have paid all your bills and that you have set aside money for the next few months. The worst thing you can do is to throw all your money into Bitcoin, see the price drop a few weeks later and be forced to sell at a loss because you urgently need the funds.
Take some time to look at your income and expenses over the next few months. Then look at your assets and liabilities. Are you in the best position to invest at the moment? You can review the numbers yourself or work with a professional who can help you reveal blind spots in your financial plan.
Understand your investment objectives and the potential risks
When you are ready to invest, you need to identify your investment goals to create the best plan for you. Don’t just invest in Bitcoin and other assets, because everyone does. The clearer you are about your investment objectives, the easier it will be to select assets that match them.
Then consider the risks. Bitcoin made big profits, but the journey was not always full of consistent victories. This crypto-currency is very volatile and quickly undergoes daily declines and climbs that can come when you least expect it. If you need the money next month, you may be taking a big risk. You may also be stuck with a huge tax tab that can return you profit if you sell too soon and are at a high tax rate.
Start with some money
If you have checked the box next to the items above and understand what you are paying attention to, you can determine how much you should invest in Bitcoin if it best suits your portfolio.
At the moment, the price of bitcoin is a little over $ 56,000. Fortunately, you can buy partial amounts and pick up a piece of Bitcoin for $ 100 or $ 1,000. It depends on you how much you invest. If you have the extra funds available to get shares in Bitcoin, it offers an excellent opportunity to earn while you learn. Then you can set up an investment strategy where you contribute a little more each month.
So look at your finances and see how much you can comfortably invest. Remember not to invest what you can not afford to lose. Like most other assets on the market, there is no guarantee of profit and you could lose all your money. But on the other hand, do not be so afraid of losing that you miss out on an incredible learning opportunity. Bitcoin was one of the best performing assets of our time, and the technology behind this cryptocurrency could cause a revolution in financial services.
Make the best decision for you
At the end of the day, it’s your money and you want to enable yourself to maximize every dollar that flows through your pocket. Take care of your financial home and make prudent investment decisions that can put you in a better financial position later.
The meteoric rise of Bitcoin is impressive and the potential for even more gains is very enticing. But do not be so focused on the miss, that you do not see the opportunities that lie ahead. There will always be opportunities in the market. But you want to make sure you manage your financial foundation first so that you start using more of your money to comfortably make more money.
This article represents the opinion of the author, who may not be in agreement with the ‘official’ recommendation position of a Motley Fool premium advisory service. We are furry! Questioning an investment thesis – even one of our own – helps us all to think critically about investments and to make decisions that help us become smarter, happier and richer.