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Bitcoin (CRYPTO: BTC) has rewarded investors with stellar returns over the past year, prompting newcomers to jump in and see how much they could ‘earn’. So far, the cryptocurrency has hit new highs every month of 2021 as more investors flock to Bitcoin to seize diversification and opportunities.
Now, there is another incentive that makes investing in Bitcoin an option for those who haven’t taken the plunge yet or those who just want to add more to their wallet: $ 1,400 in stimulus checks. On March 11, President Joe Biden signed the American Rescue Plan Act, authorizing $ 1,400 in stimulus checks to eligible taxpayers and dependents of all ages.
If you’re tempted to spend your entire stimulus check on Bitcoin, here are a few things you should consider before your $ 1,400 leaves your checking account.
Image source: Getty Images.
Check your financial house
It’s easy to wake up, see thousands of extra dollars in your account, invest in the hottest assets, and dump all of your financial responsibilities. But don’t be so quick to make moves in the market when you haven’t been minding your financial affairs.
First, make sure you’ve paid all of your bills and funds are set aside to transport you for the next two months. The worst thing you can 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 are in dire need of funds.
Take the time to review your income and expenses over the next few months. Next, look at your assets and debts. Are you in the best position to invest right 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 objectives and potential risks
If you are ready to invest, you need to identify your investment goals in order to create the best plan for you. Don’t just invest in Bitcoin and other assets because everyone else is. The clearer you are about your investment goals, the easier it will be to choose the assets that match them.
Then consider the risks. Bitcoin has generated big profits, but the journey hasn’t always been filled with consistent wins. This cryptocurrency is very volatile, experiences daily dips and rises that can occur when you least expect it. So if you need the cash next month, you might be taking a big risk. Also, you might get stuck with a huge tax tab that could eat into your profits if you sell too early and find yourself in a high tax bracket.
Start with some money
If you’ve checked the box on the items above and understand what you’re getting into, you can figure out how much to invest in Bitcoin if that’s right for your wallet.
Right now, the price of bitcoin is just over $ 56,000. Fortunately, you can buy fractional amounts and grab a chunk of Bitcoin for $ 100 or $ 1000. How much you invest is up to you. If you have the extra funds available to grab Bitcoin shares, this provides a great opportunity to earn while you learn. Then you can set up an investment strategy in which you contribute a little more each month.
So take a look at your finances and see how much you can comfortably invest. Remember, you shouldn’t invest what you can’t afford to lose. Like most other assets in the market, there is no guarantee of profit and you can lose all of your money. But on the other hand, don’t be so afraid of losing that you are missing out on an incredible learning opportunity. Bitcoin has been one of the best performing assets of our time and the technology behind this cryptocurrency could 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 into your pocket. Take care of your financial house and make prudent investment decisions that can put you in a better financial position down the road.
Bitcoin’s meteoric rise is impressive and the potential for even more gains is very alluring. But don’t get so focused on missing out on an opportunity that you don’t see the opportunities ahead. There will always be opportunities in the market. But you want to make sure that you manage your financial base first so that you start using more of your money to earn more 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! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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