Friday, January 12, 2018

I came across an article this morning about people going into debt in order to buy crypto currencies.

Don't do that. Just don't.

People make this mistake in every hot market, be that stocks, bonds, housing, and now this.

The temptation is there because it's hard to have what most would consider significant gains without first having significant capital. Scoring these thousandfold gains that some cryptos have delivered certainly blows the mind when it's on a basis of tens of thousands of dollars. When it's on a few hundred bucks, not so much. People want that one, huge, life-changing gain.

Or is it?

A gain is a gain, period. It will change your life, however great or small, only the time frame involved might be long or short (and of course, people want "short").

A blogger and podcaster that I follow named Simon Black frequently cites something called "The Universal Law of Prosperity" (I don't know if he coined this or learned it from someone else): "produce more than you consume." That's it, that's all there is to it.

I bought Ripple coins when they were .19 cents each. As I write this while reports that Ripple is at $2.14, I have a gain of over 1025%.

With Bitcoin, I've scored even more. And now with Bitconnect, I'm building up more gains.

Huge, right?

In and of itself, yes, absolutely. How much is it in actual dollars? That I'm not going to say, I'll just state that it is not "life changing" in terms of instantly freeing me from the need to work (so far...).

But it's a nice step in the right direction.

It all started from modest amounts of initial capital, too. I've not borrowed a penny to make any of my investments in this space, and I never will. In fact, I actually put $2 toward debt for every $1 that I invest. That slows my investing, but there's very good reason to do it.

And that is my final and most important point for this post: when viewed in terms of your total balance sheet, the "boring" liability side of the ledger and not just the "hot" skyrocketing asset side, the most important figure it the net amount, and a sure fire way to bring that figure up is to pay off debt faster than you speculate on the future, which may hold gains or losses. $3 split 2-to-1 between debts and investments is an increase of $3 of net worth, even though the money you put toward your debt might feel like it's "gone." But outside of your day-to-day spending habits, the debts you carry are largely what stop "small" gains on your investments from being "life changing," and creating a debt to create an investment is frequently just to run in place (at best...).

Further reading: The Richest Man in Babylon, the book that got me started on all of this stuff, and the source of the 70/20/10 money management strategy I've used for nearly two decades now that has gotten me to the point of possibly retiring within a few years, at age 42.

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