Any money you might need for a short-term goal, like buying a house, should be hidden in a safe place, like a savings account. It is also important to keep enough money in your savings account to cover three to six months of essential living expenses.
But if you have more money on hand, you may be eager to invest it. And it's a smart idea.
Invest it is a great way to grow wealth for many years. Frankly, it's something you need to do if you want to have a chance at having a comfortable retirement.
When it comes to investing, there are several assets that you can look at. Stocks and bonds have long been popular choices, but these days, an increasing number of people are having success investing in cryptocurrencies.
But is it the right move for you? If you ask financial guru Dave Ramsey, he advises you against it for some big reasons.
Because Ramsey doesn't like cryptocurrencies
While cryptocurrencies seem to be a pretty cool investment, Ramsey has some major problems with them. First of all, cryptocurrencies are quite unstable. Sure, the same can be said of the stock market, which has certainly seen its share of volatility over the past couple of months.
But the cryptocurrency market tends to experience even more wild and drastic swings than the stock market. While stocks can plummet overnight, they tend to fall gradually and get stuck in a rut before regaining value. With cryptocurrencies, you may see your wallet's value plummet overnight, rise the next day, and plummet the next day.
Furthermore, the future of cryptocurrencies is somewhat uncertain, especially since it is an asset that hasn't been around for a long time. Cryptocurrencies didn't exist 20 years ago, while many investors today own stocks that have been around for decades. As such, we don't know how much long-term power cryptocurrencies have. This alone could make it a precarious choice for a long-term investment.
Finally, Ramsey thinks cryptocurrencies are just a hard thing to understand. As he puts it, if you can't explain your investments to a 10-year-old, then you have no reason to invest in them to begin with.
How much risk are you willing to take?
Dave Ramsey is just a financial expert, and to be clear, there are many finance wizards who recommend cryptocurrencies. But ultimately, the decision to buy them or not should depend on your specific risk appetite.
Ramsey insists that cryptocurrencies are not a great way to build long-term wealth. Instead, he recommends putting your money into the large stock market. You can do this by purchasing low-cost mutual funds or index funds.
If you decide to buy cryptocurrencies, you are not necessarily preparing for losses. You could, in fact, earn a lot of money by investing in digital currencies. But make sure you understand the risks involved before diving in.