Scenario:

I took all of my excess cash and invested in crypto during this last bull run. I’ve done this before with penny stocks, too. Now my investments are worth very little and I’ve come into hard times financially so I’m considering taking the money out. What should I do?

What I’d do:

First off, I’m not a CFP so this is not financial advice - I can’t tell you specifically what to do with investments.

Without knowing your income specifics, is there any opportunity to increase your income? Is there any opportunity to take the losses and offset other income? Consult with your CPA on this one.

That said, it appears there is a miss match between your time horizon and your investments.

You’ve gotta stop jumping at the next hot investment with your liquid cash!

This is your safety net that lets you ride out the market changes.

When you recover from this situation, you need to evaluate when you’ll need your money.

I’d encourage you to build up an emergency fund in cash that covers your short term needs.

Then contribute to your long term needs (if you believe in crypto long term, then maybe you can earmark the investment with this long term horizon and ignore the short term moves).

Then you can fill in the medium term needs.

A solid financial situation has the short term covered and consistent contributions to the medium and long term.

That is a bulletproof foundation!

When you save money, it’s important to consider the time horizon of when you’ll need the cash.

For example, if you put your emergency fund into crypto and pull it out everytime there is a change in the market, your time horizon isn’t aligned with the investment.

You must match your time horizon with the investment so you don’t make short term decisions with long term money!

It is helpful to thing of your money in buckets - less than 2 years, 2-5 years, 5+ years.

When you have money in your short term bucket, don’t be taking big risks! This is your liquidity at risk!

What did one wall say to the other?

I’ll meet you at the corner.