Bitcoin (CRYPT: BTC) has rewarded investors with stellar returns in the past year, making it attractive for newcomers to come in and see how much they could “earn”. So far, the cryptocurrency has reached new records every month in 2021, as more investors flock to Bitcoin to capture diversification and opportunity.
Now, there is another incentive that makes investing in Bitcoin an option for those who have not yet dived or for those who simply want to add more to their portfolio: $ 1,400 stimulus checks. On March 11, President Joe Biden signed the American Rescue Plan Act, authorizing $ 1,400 stimulus checks for qualified and dependent taxpayers of all ages.
If you are tempted to spend all of your Bitcoin stimulus check, here are a few items you should consider before your $ 1,400 leaves your checking account.
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Check your financial home
It’s easy to wake up, see thousands of extra dollars in your account, invest in the most important assets and kick all your financial responsibilities to the curb. But don’t rush into the market without taking care of your financial affairs.
First, make sure you have paid all of your bills and have some funds set aside to charge you for the next few months. The worst thing you could do is throw all your money into Bitcoin, watch the price drop a few weeks later and be forced to sell at a loss because you desperately need the funds.
Take some time to review your income and expenses in the coming months. Next, look at your assets and debts. Are you in the best position to invest now? 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 goals and potential risks
If you are ready to invest, you must identify your investment goals to create the best plan for you. Don’t just invest in Bitcoins and other assets because everyone else is doing it. The clearer you are about your investment objectives, the easier it will be to choose assets that align with them.
So, consider the risks. Bitcoin has generated huge profits, but the journey has not always been filled with consistent wins. This cryptocurrency is very volatile, experiencing depressions and daily rises that can occur when you least expect it. So if you need the money next month, you may be taking a big risk. In addition, you may be stuck with a huge tax tab that can erode your profits if you sell too early and are in a high tax range.
Start with a little money
If you checked the box above and understand what you’re getting into, you can determine how much to invest in Bitcoin if it’s right for your portfolio.
At the moment, the price of bitcoin is just over $ 56,000. Fortunately, you can buy fractional quantities and get a piece of Bitcoin for $ 100 or $ 1,000. It depends on you how much you invest. If you have extra funds available to purchase Bitcoin shares, it is a great opportunity to earn while you learn. Then, you can define an investment strategy that contributes a little more each month.
So take a look at your finances and see how much you can comfortably invest. Remember that you must not invest what you cannot afford to lose. Like most other assets on the market, there is no guarantee of profit and you can lose all your money. But, on the other hand, don’t be so afraid of losing that you miss out on an incredible learning opportunity. Bitcoin has been one of the best performing assets of our time and the technology behind this cryptocurrency can revolutionize financial services.
Make the best decision for you
At the end of the day, it’s your money and you want to put yourself in a position to maximize every dollar that flows out of your pocket. Take care of your financial home and make prudent investment decisions that can put you in a better financial position later.
Bitcoin’s meteoric rise is impressive and the potential for even more gains is very attractive. But don’t be so focused on losing that you miss opportunities ahead. There will always be opportunities in the market. But you want to ensure that you manage your financial base first, so that you start using more of your money to make more money easily.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even our own – helps all of us to think critically about investing and making decisions that help us become smarter, happier and wealthier.