7 Requirements Before Investing and Trading In Cryptocurrency

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This afternoon while browsing my news feed on Facebook, I stumbled on a Facebook post of one of the Filipino financial gurus that I look up to, Vince Rapisura, about investing in Bitcoin, or cryptocurrency in general. I found the topic interesting so I took some time to read the whole post.

There are a lot of people who are attracted to Bitcoin nowadays because it just reached its all-time high, and to other cryptocurrencies at the moment because of having huge potential gains.

He asked a question, “Should you invest or trade in cryptocurrencies?”

According to him, you can only enter into the cryptocurrency world, or the world of trading and investing in cryptos if you meet these seven requirements.

 If you already have an Emergency Savings/Fund

I think some of you do not know about the Emergency fund so let me share what I know about it. An emergency fund is saving 3-6 months worth of your monthly expenses, which includes your expenses in electricity, food, water, and other bills. This is what you use in case you got fired from your work, or there are unexpected events that happened like what we are experiencing at the moment, which is the global pandemic. You can also use it in case of what you identify as an “emergency”.

If your monthly expenses are 10,000 pesos or about $200, then you should save 30,000 to 60,000 pesos to build your Emergency Fund.

In my case, I already have established my Emergency fund and I’m planning to add more as I make some money.

If you already have appropriate insurance coverage

Having life insurance will save your family from financial problems when you pass away. Having health insurance will save you from a lot of medical bills in case a critical illness hits you.

I don’t have any insurance yet as I don’t have the guts to pay for a yearly premium that will cost me thousands of money, especially that I don’t have a stable income yet. I plan to get health insurance once I find a job, which is maybe about 2 years from now after graduating from college.

  If you have Passive income (actual cash inflows, not paper gains or drawing)

Passive income is any income earned with very minimal or even without active involvement, like interest income, dividends, and royalties. The income you get from renting out your properties can also be included as a passive income.

In my case, I have a very small amount of interest income from my savings in the bank. Other than that, I don’t have much passive income yet that doesn’t involve cryptos. My passive income from cryptos comes from staking and flexible saving.

You have a net worth that is appropriate to your age

I encountered his list of net worth that is appropriate for a certain age when I was 19. I forgot how much is my supposed net worth already at the age of 20. Sorry. Can’t say much about this.

But if you know your net worth, and you keep building it, congratulations to you.

You have a financial plan

A financial plan or goal is something long-term, not just a plan of your finances in the next 3 or 5 years. You can also include your retirement plan, house plan, car plan, and any plan that involves finances.

I have a lot of financial plans, and I’m working on them.

 If you have no debt.

For me, having debt is like digging up your own grave so it is a must to clear your debts before venturing out to anything.

I also hate lending money now after lending almost 10,000 pesos in total to some of my friends. Please don’t apply this famous tagline, which is “utang kalimutan”.

 If you are willing to invest based purely on trust.

Invest not because someone told you to, but because you trust what you are investing into so that when in case your investments fail, you have no one to blame but yourself. But of course, if you a0re going to invest, trust and be hopeful that it will succeed.

That’s it! These are just guides for you before putting some or all of your hard-earned money on investing or trading in cryptos. Always remember to “trade/invest at your own risk“, and “only invest what you can afford to lose”.

Happy Investing and Trading, everyone.