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You've raise quite a solid point here. I agree that it can be pretty difficult for folks who just started out their financial journey to know how everything works, especially when they're just building their backup funds, that thing line between the emergency fund and the reserve fund can really get blurry. Theoretically, it's way more easier to distinguish between them, but practically, the unpredictability of life can sometimes mess with those neat desperations. Several factors such as unexpected expenses, underestimations, and even an irregular cashflow could potentially force someone to tap into funds that initially intended to keep away purely for actual emergencies.
But yeah, it's always way more better to dip into an emergency fund than the actual investment. Bitcoin might be liquid, but it's also very volatile too, and if one sells during a downturn simply because you need some money and don't have any backup fund, even if you manage to have that financial need covered, you're also locking in a potential loss which of course would be causing a disruption to your long term strategy. And that is why the emergency fund should be readily available at all time because it acts as some sort of a shield to protect your Bitcoin stash.
I would say that it is a good idea for beginners to start little below their financial capacity in order to have a larger backup funds and emergency funds due to situations like this. Underestimations can be very stressful to deal with and could even go beyond the emergency funds to cause a premature sales of part of your bitcoin stash. As a beginner, you can invest below your actual capacity in your early days in order to have time to plan your cashflow management skills. Any miscalculation or underestimation that made anyone dip hands into his emergency funds can also lead into dipping hands into your bitcoin stash so I would advise newbies to avoid greed and concentrate first on how to secure their accumulated bitcoin first.
Let's say a person has a discretionary income of $500 monthly, it could be wiser to only invest $100 into bitcoin as a beginner and spread the rest through backup and emergency funds which would allow his investments enough cushion until he gets better with his estimated prices and would also allow some trial and errors test to establish nearly what he actually needs as his backup funds before he could think of improving his DCA allocation.
That's been said, it's very very realistic that some folks might take around a year or even more to fully set a 3-6 months worth of their living expenses as their emergency cushion. And during this period, the chances of an emergency or some setbacks not popping up are pretty low, like it's almost inevitable. But even if it actually does pop up, the key remains not to consider those setbacks as actual failures, but more like an inevitable part of the process. While you're still on your way to financial stability, it's normal for folks to use the funds when the need arises and then commit themselves to replenishing them, it's more like a cycle, until they've actually gained financial stability.
Using up your emergency funds on emergency is not an odd practice since those were the reasons for having them. The reason for going through all this stress is to ensure the security of your bitcoin stash at the first instance. When emergency situation arises and a person fails to handle it properly, it could regenerate and no amount of financial stability too can be exact about having an enough emergency funds or backup funds since no one can tell the exact nature of the next emergency situation that could be fall him.
It is crucial to folks to learn how to balance the risks involved in investing. Yes, Investing more would potentially make one to reach their desired goal faster, but it is worth noting that an imbalance risk could potentially affect their investment if not properly balanced, that is to say that, if an investor commits more to Accumulating more Bitcoin and then neglect their backup funds, they'll be endangering their investment because the odds of them liquidating their Bitcoin later when an emergency occurs are drastically increased, which of course would be undermining their reason they chose to invest in the first place.
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You're very correct. It's not about having pursuing your accumulation target with greed or a limited time. Your bitcoin accumulation should not interfere with your normal daily lifestyle and basic responsibilities in order not to affect your bitcoin and cause premature sales and even losses. Some people are too aggressive to admit that emergency funds and back up funds are very necessary, they are not also good at their cashflow management and most times, they end up making mistakes that risk their bitcoin stash.
Maintaining a good balance between your financial security and bitcoin accumulation can only be possible when one has understood the need to shun greed and also taken his time to master his cashflow management. Even when the market looks too juicy and you wish you could invest all you have in bitcoin, also remember that a negative balance in your financial security could ruin all your bitcoin holding potential.
The truth is that, a lot of people often underestimate the power of consistent contributions, no matter the size. Even if you're putting in as low as $20 or $40 towards your emergency fund every week, as long as you stay consistent, that compounding effect will definitely build resilience overtime, and as soon as you notice that you've gathered a sizable amount for emergencies, then those free money can be directed towards Bitcoin with far greater confidence.
I agree with you that in the early stages, flexibility is very necessary, but in order to ensure long term sustainability, discipline in rebuilding becomes very crucial, because without that discipline, the emergency fund, instead of being treated like a true shield, now stands the risk of being considered as a revolving door.
Slow and steady they say wins the race not fast and furious. A little patience could save someone from loosing his assets over an unnecessary and avoidable financial mistakes. Many people are caught up while trying to be more aggressive in their bitcoin accumulation process instead of being dedicated to their DCA approach and keeping it consistent and if need be, improve their DCA allocation gradually as their finances grow larger.