An emergency fund should be considered essential by anyone considering long-term Bitcoin investment and not wanting to disrupt their Bitcoin balance every time they need cash. However, I recommend everyone have a steady job with a regular income stream so they can manage it carefully, including allocating a portion of their income to an emergency fund and using the rest as capital to buy Bitcoin.
To invest or create an emergency fund, we need a source of discretionary income. If you do it with your fixed income source, it may not be very sustainable. For example,
*Discretionary income is the amount of money left over from your fixed income after deducting all expenses. It is better to invest with discretionary income because you do not need this amount of money very much. The money that is left after meeting all your expenses is discretionary money. If you invest with discretionary income, it becomes much easier for you to maintain it in the long term.
If you do not have an emergency fund, you can create it along with your investments. You can keep some money aside for an emergency fund from the amount of money you wanted to invest from your discretionary income. If you do not have an emergency fund, you can do emergency fund and investment at the same time.
If you invest with fixed income, you may not be able to maintain your investments in the long term. For example, if you need the money, you will have to sell your holdings. So you should invest with discretionary income.
I don't really understand what you mean by fixed income, does that mean all your income (pay) which I don't think anyone can make such mistake of investing with his entire income. Everyone has a bill to pay either personal or extended.
I think that Loyang is misusing the term fixed income, since frequently the term "fixed income" relates to some kind of an already set income like a social security benefits or a pension or some other financial product that is set to pay out regularly and perhaps even have some periodic (such as annual) adjustment to its payout amount somehow tied to the inflation rate.
Pay from work is usually not considered to be "fixed income," even if it might have an established amount, like a salary or maybe a fixed set of hours worked every week. Loyang seemed to have been attempting to describe a person who has a job that has a somewhat regular income, even though surely any of us can realize that income could come from a variety of places, so maybe he was just being loose with his attempt to just describe an income that is coming in regularly and perhaps at a rate that does not change very much, whether it is weekly, monthly or some other periodic basis.
You're right about investing with discretionary income only because that is the best way to achieve a sustainable bitcoin long-term holding but I also want to clarify that you don't invest with all your discretionary income. You only invest a part of the discretionary income and share others into your emergency funds and back up funds. This is a more trusted way of ensuring a long-term holding since no bitcoin stash can make it long without an emergency funds and back up funds.
This all makes sense, not only from the perspective of investing and building up some back up funds at the same time, yet discretionary income is also used for a variety of discretionary consumption reasons in which a person may or may not put a lot of priority in terms of having money for various consumption reasons, and surely a person might suffer from some psychological trauma or even have some blow back in social circles if he is not spending money on discretionary consumption.
So maybe if a person has an income of $1,500 per month, and maybe $900 per month for the items that he considers to be basic expenses such as lodging, food, clothing, utilities, basic transportation to and from work (and these days various basic communication devices such as phone and/or data services - which might also have had historically fit in the category of utilities), So then in this hypothetical, he has $600 per month remaining in his discretionary income. maybe he would invest into bitcoin with $300 per month and use $150 per month to build up his emergency funds and/or reserve funds, then maybe he has $150 per month remaining for various other discretionary expenses such as entertainment or luxury items or even upgrades to some of the basic expenses to make them nicer or more comfortable.
He can divide these as he likes, and presumptively once he gets his emergency funds up to 3 months of his expenses (which would be $2,700 in this example) then he may well divert that money for any of the other discretionary purposes or he could even use that extra money that he had been using to build his emergency funds into reserve funds or use that extra money for buying more bitcoin.
The idea of discretion is that you can do whatever you like with that money, even burn it if you like, but if you are overly focused on investing and you are not properly paying your fair share in various optional social circumstances, your
social status could suffer from your behaviors (and the perceptions of others regarding your behaviors), and in the end, you still have the choice to decide these kinds of spending matters, and sometimes you might not realize some of the ways that some of your discretionary spending might sometimes seem that it fits into a category that may well be more about basic ways that you should be spending (some of your basic expenses) rather than being considered as something that you have a choice about, even if technically you do have choices regarding some of the social expenses.. ...
For example, if you would just like to buy your 10 year old daughter a card and put $20 inside of it for her birthday, your wife and your daughter expect that you are going to be buying her a bicycle that costs around $150, and there may be quite a few ways that you are obligated to spend somewhere in the ballpark of $150 unless you can figure out some creative way to keep everyone happy in the event you figure out some ways to spend less.
A similar thing could be true with your wife. Maybe every year, you have a tradition of taking her out for dinner and maybe even going on a long weekend vacation, which tends to cost around $500 to $700, and it is once a year. Surely you have a choice about spending this money, and you might even be able to figure out ways to spend less, while still satisfying your wife's beliefs in regards to your financial and/or support obligations.
You can consider these as discretionary or you can consider these as things that are mandatory for you to save up for so that you have enough money at the time that you need to make those expenditures. They seem like discretionary spending amounts, even though you might want to categorize them as basic expenses, and sure maybe either classification can work for you, even though it seems to me that sometimes guys are proclaiming that they are spending 100% of their discretionary income on either investing into bitcoin or putting that money into emergency funds, yet it seems to me that if we are trying to be realistic and more accurate in our calculations, we are likely going to find that we have some discretionary expenses that we have to make that are going to take away from how much we can put into either our bitcoin investment and/or put into our back up funds.
Having a stable source of income is paramount in setting up your DCA approach to bitcoin investment. This is because you analyse your cashflow and set up a good financial management strategy to allocate every bit of the income to your responsibilities until every of your basic responsibilities are met or taken care of.
You don't need to have a stable source of income in order to carry out DCA. DCA can be done whenever discretionary funds are available, and it does not have to be stable or regular, even though maybe guys try to prioritize their bitcoin investment, sometimes they might not be able to buy bitcoin every time that they get paid, yet they still can employ DCA at times that they have determined that they have sufficient discretionary funds to accomplish such.
Don't get me wrong. I frequently emphasize that guys should be investing into bitcoin as aggressively as they can without overdoing it, yet that still does not mean that guys have to have a steady income or that their bitcoin buying has to be every week, even though I frequently suggest that bitcoin buyers (especially newbies) should be trying to set up bitcoin buying systems and practices so that they are buying bitcoin every single week, yet if they don't have enough money coming in, then they likely need to figure out ways to accomplish buying bitcoin every single week within their own systems or to figure out what works best for them under their current budgetary and/or psychological circumstances.
The money left after handling these responsibilities is what you refer to as your discretionary income from where you also set aside the amount that will go into your emergency funds and the ones that will go into the backup funds with which you can compensate for any excesses in your planned responsibilities. At all, the amount left of your Discretionary income is referred to as the investment funds which is what goes into the bitcoin accumulation.
Your description is confusing, even though you are correct to say that discretionary income is what is left after accounting for expenses and discretionary income is from where you build your various back up funds whether emergency funds and/or reserve funds. Each of us can choose the extent to which we use our discretionary income to buy bitcoin, add to our back up funds and/or engage in consumption with that money...
Of course, if we spend all of our discretionary income then we can draw from our back up funds to engage in additional spending, and surely some of us have suggested that it is good to keep some extra funds such as reserve funds that have flexibility in regards to how they are spent, and maybe to protect us from tapping into our emergency funds absent an actual emergency... yet at the same time, we can choose how to manage and prioritize our uses of various funds, which goes back to our chosen level of aggressiveness or whimpiness which relates to how much cushion that we might keep in various funds and perhaps how much we might be choosing to buy or invest into other things other than bitcoin...
Those are surely choices that we have, and even if some of us recommend that guys should be striving to buy as much bitcoin as they can without overdoing it, at the same times, guys have to make choices regarding how much that they are willing to do and what kinds of back up systems that they have in place so that they do not end up overdoing it.
If someone can be succinct in his cashflow management, provided he has a source of income, the wouldn't be much possible reasons to sell off his bitcoin prematurely. Disobeying your set cashflow system would also affect your bitcoin investment at anytime.
These are never really easy choices. Surely in the earliest times of BTC accumulation, a guy may well be focused on BTC accumulation, and it might not be ambiguous to him about what to do, even though surely in the very beginning, a guy still might not have confidence in whether it is a good idea to invest in bitcoin rather than investing somewhere else. Even you Tonimez only have less than a year in bitcoin (if we go by your forum registration date), so I find it difficult to understand how you would have had personally experienced some of the difficulties that go with keeping on accumulating for a whole cycle including that a lot of guys here, who have only been in bitcoin since 2022 or later, they have largely have ONLY been experiencing bitcoin while the prices have been going up, and surely I am not going to claim that it is easy for them, yet their perspectives can become skewed in regards to what to do or how to handle various matters if they have not even personally experienced a whole cycle.
Don't get me wrong, I am not trying to discourage any members from trying to hypothesize themselves through various experiences or even to draw on the experiences of other forum members, yet it still seems to become problematic that we have so many members who are relatively new to bitcoin and they are giving all kinds of advice that seems to touch upon cashflow management and investing into bitcoin, yet their suggestions seem to be so much hypothetical rather than having some attachments to their own circumstances or maybe in the context of asking more questions rather than trying to suggest how guys should be attempting to balance their investing into bitcoin an their cashflow management systems and practices.
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It's very mandatory for every individual to have the flexibility of adjusting their backup fund levels as well as designations based on their individual circumstances and financial position. Yeah, it's true that some folks would rather prefer to just have a larger emergency fund and not bother having other reserve funds, but it think it's important to have desperate backup funds, such as the reserve and float funds, as this may prevent one from always tapping into the emergency when minor financial needs or emergencies comes up, because this will help the emergency fund remain standby for actually emergencies which is the main purpose it was initially built, using it for all emergencies, including the minor ones might potentially deviate the individual's focus from the true purpose the emergency fund was initially meant to serve which could potentially result to a financial mistake.
But ultimately, the key remains to strike a balance between Building wealth through investing in Bitcoin and simultaneously maintaining a safety net that'll help mitigate potential risks.
Ultimately my own purpose in regards to trying to distinguish between the three forums of back up funds (emergency funds, reserve funds and float) is in order to attempt to establish priorities to the differing kinds of funds, yet for example there still could be cases where guys are calling their funds emergency funds, but they are really treating them as reserve funds... and the same is true with the float. They might not know what the float is, so they call their reserve funds a float.
Maybe it does not matter so much what they are calling each of these fund categories, even though as you seem to be suggesting, sometimes if guys are thinking about their various kinds of back up funds in the wrong kinds of ways, then they might end up with mistakes that could have had been avoided. .which surely if we are tempted to tap into our emergency funds and we have quite a bit of emergency funds and we expect to replace the tapped into amount within one to two pay periods (saying that pay is every week), then maybe we are sufficiently assessing the additional risk that we are taking by tapping into such funds and maybe the fact of the matter, when we are in the first year or so of building up of our emergency funds, we are going to have to be more flexible in regards to how we treat that fund, and maybe we are ending up treating some of it as reserve funds rather than emergency funds until we get it up to 3 months and then maybe we start to have some funds that are outside of the emergency funds, so then we end up not tapping into it any more after it has reached a larger size and we spent more time building our various back up funds and thinking about the various ways that we keep the funds so that we may well have easy access and protecting their safetiness and even considering the security of each of the ways we are keeping the funds, which makes way more sense on a personal concrete and application level when we are practicing these matters (and flowing with them from month to month.. with weekly variance too) rather than just theorizing about them.
It's also very crucial to acknowledge the fact that the priorities and financial situations of every investor is capable of changing overtime, and in such a case, it's important for their back up strategy to also be flexible enough to also adapt to those changes accordingly. By regularly reviewing and adjusting (when necessary) their emergency funds and reserve funds allocation, it'll be easier for investors to adequately prepare themselves for unexpected events while also pursuing their long term financial goals.
Maybe initially when we first set up our emergency funds, it took us more than a year to build them up from $600 to $2,700 and our monthly expenses were right around $700 when we started, but after a year some expenses changed and they became $900), and then maybe after another couple of years our monthly expenses become $1,100, so then we start to consider that we need $3,300 in order to maintain our emergency fund at adequate levels. We also might have learned some ways to fix some matters, and maybe even reduce some of our monthly expenses, so then after the next year we reduce our emergency fund back down to $2,700 based on changed conditions.
The growth of our bitcoin stash could also affect our ways of considering how we treat various forms of money that we keep on hand, and surely if our bitcoin amount might have had gotten to around 6 months of our expenses invested into bitcoin, yet at the same time, if the BTC price might have had doubled or tripled in price during that process, we might consider some of the matters differently, yet surely I will remain concerned if guys are making any changes based on their valuation of their bitcoin based on spot price versus valuating based on the 200-WMA.... even though surely if a guy is accumulating bitcoin for a whole cycle or more, it may be too early for him to make any changes to what he is doing, even though he may well create various spreadsheets to assess where he is at versus where he thought that he would be, and he might feel that he needs to make some adjustments to his buying practices and/or how much of his time, energies and/or value he is dedicating to his bitcoin investment.
None of us are likely able to answer these kinds of dedication matters (or level of aggressiveness matters) for someone else unless we know enough of their personal factors and/or their priorities.
