Re: Discretionary Income vs Emergency Funds: Why It Matters for Bitcoin Investing

I also plan to use my emergency fund for my child's needs, as he will start school in about a year, and I can use my emergency fund for future needs and beyond as much as possible without having to use Bitcoin prematurely.

Indeed it is correct that everyone should clearly remember about a separate savings section as the emergency fund is like a financial safety net. Using an emergency fund for a child's needs doesn't seem like a complete healthy plan to me and this plan should be shut down immediately. In terminology it can be said that these things are basically part of your financial plan so it may be appropriate to use personal savings or other reserve savings to enter at that moment. In fact an emergency fund may not be created to cover such expenses, basically everyone tries to save that money to deal with unexpected and confusing financial pressures. It's true that if you don't want to use Bitcoin prematurely, so definitely need to find other options or alternatives but you probably shouldn't touch your emergency fund at all because these funds should be used properly based on risk tolerance and for unexpected moments.

To be honest with you, i didn't have the ideas of creating out emergency fund more of have a discretionary income to use for an investment but ever since i joined this forum i have learnt allot in the forum and this discretionary income i have use it to invest instead of saving it in the bank and it is in this forum that i understand how important emergency fund it is, ever since i have be practicing using my discretionary income for investment and emergency fund that can be of help to me not touch my discretionary income incase of any unforeseen circumstances and i have also spread it outside Bitcoin investments too, so as I'm investing and with emergency fund, I'm also having emergency fund outside my investment.

Sure. We can accept your representation that you have gotten better at managing your income/expenses and keeping back up funds, yet your ways of describing the various funds is very confusing.

Essentially if you are receiving an income every week or month, and then you have various expenses, then you would either pay your expenses from your income or at least account for the expenses prior to determining what is your discretionary income for that pay period.

With that discretionary income you can determine if you are going to consume beyond your basic expenses, invest or put the extra into your back up funds (which is either emergency funds or reserve funds).

If you run out of discretionary income then you can tap into your back up funds. You don't spend from your back up funds prior to running out of discretionary funds, even if your back up funds had previously been built from discretionary funds that came from earlier pay periods.

Many times when we are in the process of building up our back up funds so that we want to get them to at least 3 months of our expenses, we are not necessarily going back and forth tapping into them. Each pay period we get more money and we might put some of the discretionary income from that into our investment (bitcoin) and/or consume with it and/or put some in our back up funds.

Frequently we suggest that it could take 1 -2 years for a guy to build up both his back up funds and the amount that he put into bitcoin to add up to 3 months of his expenses in each, yet of course, the more discretionary income he has, the greater progress he can make. A guy putting less than 10% of his income into bitcoin and back up funds is going to take 3x longer than a guy who is able to put 30% of his income into bitcoin and his back up funds...

And, don't get me wrong. I am not suggesting that it is normal for guys to be able to invest/save 30% of their income, even though some are able to do it, and more commonly normal people struggle to get into a habit of regularly saving/investing 10% of their income.. so any newbies to bitcoin and/or investing likely have to struggle to try to get into the habit of being able to reach 10% for their investment/savings and work their way up to higher numbers, so that they make sure that they are not overdoing anything and/or making mistakes that involve their learning some new skills and putting them into regular practice... which can be fun, but at the same time may take some discipline and some going over various numbers and trying to fix mistakes that might be made along the way.

Yeah, you explained it really well, and it makes a lot of sense now. The changes Bitcoin has done in my life is something I won’t forget in my lifetime. For me, being a student, I have to be extra careful with how I handle my money since my main income isn’t super steady. I do some part time work on the side to get a bit more cash, but the temptation to spend is always there.....I remember telling someone here that I bought my first Bitcoin back in 2020 for $20 it is always something I will keep reminding people as part of my Bitcoin journey Grin

. Now, with the extra cash flow I have been able to save from part-time work and allowances, it gave me more edge to stack Bitcoin little by little with much higher amounts than that first $20.

What’s been helping me is treating my back up funds like untouchable money until I have actually used up my discretionary income. With my current situation, I’m able to save 30% of my income now, even though it wasn’t easy at first......It’s a bit of a balancing act with studies, part time work, and saving, but over time, those small contributions really add up. Honestly, it makes me appreciate Bitcoin even more, knowing that even with little steps, I ambuilding something that grows over time.