How to Invest in Crypto by Avoiding Debt?

How to invest in crypto by avoiding debt? Cryptocurrencies have become very popular in the past decade and a lot of people took a fancy to it with a large number of people investing in and/or trading with these digital assets.

The primary reason for this growing affinity among people is that cryptocurrencies run on an innovative and new blockchain technology that allows making faster transactions without the need of any external intermediaries.

It is very easy to invest in cryptocurrencies which need just a few taps on the phone and it offers a lot of growth potential and returns.

With talks about crypto all over the world and breaking news coming up every now and then, it is quite tempting to dive into this exciting space.

Few people even go out of their way and even borrow money to invest in crypto.

This is however not recommended because crypto is extremely volatile and there is a high risk of losing all your money.

Therefore, you being a sensible person should not get into it and end up being a debtor.

There are lots of ways in which you can invest in crypto by avoiding debt.

Here is an article that speaks about the ways and considerations to make so that you can avoid debt while investing in crypto.

For example, you should first determine your financial situation before you get into it.

Moreover, you should also be aware of your risk tolerance level because, as said earlier, this type of investment and trading involves a lot of risks.

If you lack both these traits, crypto investment is not your cup of tea, at least not right now.

How to Invest in Cryptocurrency by Avoiding Debt?

How to Invest in Crypto by Avoiding Debt

Most crypto investors and traders have made millions from this digital asset but one thing that is common in all of them is that all of them were and are very strategic about their venture.

If you want to invest in crypto and want to make some handsome amount of money you should also do the same.

The most important thing that you should do is try to avoid getting into debt before, during or after making your investment.

Remember, one can be the biggest crypto hippie and may know a lot about the digital asset but that does not mean they will be able to make money from crypto investment if they take on debt in the process.

Ideally, you have to be very smart and plan your moves in the best way possible to invest in crypto and avoid debts.

Like most successful crypto investors you should consider your investment portfolio or your finance just as an ice cream sundae with crypto being just the cherry on the top.

This means that crypto should comprise only a small portion of your entire investment portfolio otherwise it will be a perfect recipe to incur debt.

Another thing that you should keep in mind is that not everyone likes a cherry on an ice cream sundae.

However, if you like one, then you should first make arrangements to make the rest of the sundae before you fish out the cherry from the jar.

Now, coming out of the ice cream concept and speaking in financial terms, all this means that you should first build a strong financial foundation and learn more about crypto before you invest your hard-earned money in it.

For any investor, the worst case scenario is when they put in their money on something that they know very little or nothing about.

This, sadly, is the case with most of the crypto investors today. It is so popular right now that people are investing a lot of money in it without even knowing what they are doing or getting into.

As a result, they end up on the losing side, and a lot of them end up with a lot of debt against their names.

Therefore, to be smart and avoid debt while investing in crypto you should first ask yourself a question:

Does the rest of your investment portfolio look like it is ready to take on the additional burden of crypto investment?

If the answer is ‘no,’ then shun the idea of investing in crypto. If your personal finance is not solid then you will surely have a very bad time ahead.

Therefore, first understand your strengths, and more about your weaknesses, and invest in crypto only that much amount that you can afford or are willing to lose.

Typically, when it comes to taking financial risks, most people get nervous while a few others grab the potential opportunity and seize the moment with both hands and jump into it.

Be very honest to find out where exactly among these two extremes you belong to.

This is a very important point to consider because it will help in the later stages when you have to determine what portion of the portfolio you should invest in.

If you are the nervous type, do not go for crypto.

Instead, try other investment opportunities available out there that may be a lot more feasible and productive for you because these are not as volatile as crypto.

On the other hand, if you like to take risks, go for it but invest only the amount that you can afford to lose.

This will be pretty helpful in minimizing your losses when things move south.

Remember, in crypto there is no ‘same amount investment’ rule.

This means that you do not need to invest the same amount as your friend has invested in crypto. You can invest more or less than that.

It all depends on your financial condition and your risk tolerance level. If you want to take on more risks, invest more or invest less if you want to limit your risks. Staying within your limits and willingness to lose is the key here.

Next, you should know that investing in crypto should not be your only investment option today but rather it should be one of your several investment options.

You should not consider crypto investment to be the safest way to invest your hard-earned money no matter how aggressively it is endorsed for its safety and its immense potential and opportunities.

After all, it should be your ‘Just another investment option.’

Read Also:  How to Mine Cryptocurrency?

Once you are okay with this aspect, the next important step is to do your homework.

This does not involve reading the reviews about crypto coins alone because most of the time they will speak about the good things of it only.

It is not wise to jump into the crypto space simply relying on the positive testimonies of people.

Crypto coins as well as the space are known to create a lot of noise and hype but you should avoid them when you invest in any particular coin if you are smart and want to avoid debt in the long run.

It will certainly not help you to make money in crypto but will make the already risky investment further risky.

Asking the right people for the right idea and making your investment decision according to your financial conditions and based on calculated risks in the key.

It is not wise to rely on what the crowd says about a specific crypto coin.

If, in any case, the price of the coin falls all of a sudden, it will result in a terrible and irrecoverable loss.

The crypto market is undoubtedly highly volatile, which should be another big concern for you.

It is certainly not a safe and low-risk type of haven for your money. Therefore, every step you take in this space should be taken cautiously.

You should never let FOMO, or Fear of Missing Out, influence your decision because more often than not it will be a wrong one.

And, most importantly, you should remember that investing crypto is surely not a ‘quick and easy way to make money’ kind of an investment.

Also, since crypto is very volatile, you should not invest all your money in one particular crypto coin.

In fact, it is wiser to proportionate your total investment amount in crypto in more than one type of crypto coin.

This is a very good strategy to reduce your risks, though it has its own complexities.

It is better to invest in more than one crypto coin because it is highly unlikely that all of them will fail at the same time or the prices of all will drop simultaneously.

This means that if you lose on one investment, the profits you make on the others will negate it along with the effects of the losses.

There are thousands of different crypto coins available out there apart from Bitcoin that are good to invest in as well.

However, just keep your eyes open because there are several, especially the newer ones, that may be scam projects.

Research and review a lot so that you find the real coins to invest in.

Study a lot of the price charts and different indicators so that you eventually find a coin that comes with quite a good growth potential.

Then calculate the risk and proportion your investment amount accordingly.

The main objective behind this is to alleviate the risk of losing all of your money.

Remember, investing in crypto is not a child’s play.

You have to be precise, wise, educated, calculative, and arm yourself with the right kind of tools to taste success.

And, you have to be patient.

So, with all that said, if you still are considering investing in crypto, here are a few smart ways to start with and ensure that you build a platform that will allow you to make the most out of it.

Financial Safeguards

Before you invest in crypto, if you do not want to incur debt down the lane, you should safeguard your financial condition.

It is recommended that you have enough money to meet your living expenses for up to six months without having to rely on the income you may, or may not, have from your crypto investments.

This is if you are single. Otherwise, if you are living with your working partner or spouse, the same should be for at least three months.

Remember, stashing away even a couple of hundred dollars will prove to be extremely helpful when you have to meet some unexpected expenses.

Moreover, if you have any credit card debt or any other debts that carry a high rate of interest, which is a common thing to have today, it is wise to pay it or them down before you start your crypto venture.

This will strengthen your financial position even further.

Also, take a look at your insurance policies and coverage and make sure that the premiums are up to date and you have enough money stashed away to pay them as and when these are due.

Keeping your insurance coverage alive and kicking will provide you with the much required money during trying times.

If you have dependents on you, make sure that life insurances are taken proper care of.

Future Plans

You must remember that investing in crypto will not make you rich overnight.

Typically, the rewards are higher if you hold your coins for a long term.

This means that you will have to look at the future while investing in crypto.

So, make proper future plans so that you do not have to take on more debt down the lane.

Once you are sure that your finances are properly safeguarded, you should now focus on your short term, medium term, and long term financial objectives.

In this aspect, you should focus more on your retirement. This is a big thing that you should save for.

Therefore, take a look at your retirement accounts and contribute to them regularly, especially if you have a plan with your employer.

Apart from that, you should also have proper plans and savings for other important things in your life.

It could be anything such as buying a house in the next ten years, getting married a few years down the lane, or even your annual travel plans.

This fund will be enough to allow you to meet your daily and short term needs such as:

  • Your monthly rent
  • Monthly utility bills
  • Car payments
  • Mortgage
  • Groceries and
  • Other bills.

Therefore, consider all these aspects and calculate how much it will cost with respect to today’s prices.

Then figure out the amount you will need to save from your paycheck for that every month.

It may vary from one person to another based on their needs and preferences but typically it should not be less than $1,000 a month.

Learn More

Getting educated about crypto is the key to success in your venture as well as to avoid accruing debt in the process.

Read Also:  How to Maintain Crypto Rig for Longevity & Productivity?

You may have the money and you may also have the traits to be a crypto investor but if you do not know how to buy crypto or whether it is too risky for your overall financial plan, there is no point jumping into the bandwagon.

Therefore, take some time out and learn more about crypto investing, the possibilities, and the ways in which you should move ahead and lots of other vital aspects along with all of the intricacies in it.

It is very important to understand the mechanics underlying crypto.

In addition to that, you should also know the type of investor you are.

This will help you to determine the type of investment that will be best suited for you.

For all these, you will need to follow a specific process which typically involves finding the answers of a few specific questions such as:

  • What is your actual plan?
  • What is your age?
  • What are your financial goals?
  • Are you tech-savvy enough?
  • Do you know what it means to hold crypto assets that are not insured?
  • Who else in your family should know how to retrieve these assets should something happen to you?

Once you have the right answers for all these questions, you should do your due diligence.

Most crypto investors skip this part but the truth is that it is the most unwise thing to do while investing in crypto.

It is vital to carry out a deep study in any type of crypto investment and trading.

If you favor any specific type of crypto coin then you have your job cut short but not eliminated.

This will not only make you knowledgeable about the specific crypto coin but you will also know about its utility and contribution to the crypto world.

Such knowledge will clear all your doubts about the coin and your investment and also enable you to take proper steps so that you do not suffer serious loss like those ignorant investors who did when the price of Bitcoin and other Altcoins fell dramatically in 2017.

Start Small

If you really want to succeed in crypto investment and avoid incurring debt, you should always start small.

This will ensure that your losses will be budgeted.

This will not only minimize the magnitude of losses, if any, but at the same time it will allow you to gain some knowledge about crypto and the volatile space.

Once you have a proper understanding of how everything works, you can start thinking of putting in more money into it.

However, at all times make sure that you keep the total amount of investment small enough so that it is easy to manage.

Remember, crypto investment does not start and end with putting in your money but also managing it properly, if not professionally.

The best way to go ahead with investing in crypto is to think that it is dead money, something you will never get back!

After all, at the end of the day, it is nothing but a speculative investment.

Get Out of Debt

If you have debt, the first thing you should do is get out of it.

Once you do that, you should ensure that you do not take on any more debts unnecessarily.

Remember, having debt is not a crime, since nearly 80% of Americans have some kind of debt or the other, but being in debt perpetually or not repaying it is.

And, since debt is the biggest threat and a hindrance to attain a better and healthy financial future, you should get out of it first.

Therefore, here are the ways in which you can get out of debt fast making it your topmost priority.

Remember, there are several other ways apart from these but these are the most significant and effective ones.

First, you should pay at least the minimum amount on all of your debts, though this is not a good practice.

However, this will at least keep your debts from attaining a huge and unmanageable figure in due course of time.

You will be better off if you pay more on those specific loans that come with a higher APR since these loans will cost you more every month, make a chart if you have multiple loans according to the APRs and pay them according to that order.

This way, you will be able to save more money if you want to get rid of these loans first.

You may also use one of the most commonly followed methods by most of the debtors to get out of your debt, which is the ‘Snowball Method.’

This process involves paying the minimum amount due on all the debts but paying more on those particular loans first that have the lowest outstanding balance.

This will allow you to pay off those debts more quickly and reduce the number of debts in your debt chart.

The Snowball Method is, however, not the most efficient or the recommended way to get rid of your debt but still it will provide you with a huge psychological relief and reward when you see that your debts are being paid off.

In addition to ensuring that your debts are paid off fast, you should also focus on these important areas before you invest in crypto.

These are:

  • Maxing out your 401k match
  • Contributing to your Roth IRA
  • Creating a fund for emergencies and
  • Automating your personal finance.

These areas are explained in detail in the following section of this article.

Emergency Funds

Apart from saving money from your paycheck every month for your future living expenses, as said earlier, you should also create an emergency fund that will act as a parachute when you experience financial hardships and worst-case scenarios.

These scenarios include and are not limited to:

  • Loss of job
  • Emergency medical treatment or
  • When the economy tanks.

It is an emergency fund that will protect you and your family during these times and you will not need to take on more debt when you deal with volatile assets such as crypto.

If you really have to live on your emergency funds, remember, you will have to make some sacrifices or else you will again fall into the debt trap.

This means that there will be no more Uber rides, cancellation of your Netflix subscription, and even doing away with your gym membership.

Read Also:  How to Accept Crypto Payments & Know Feasibility?

However, you may not have to make compromises with your lifestyle if you factor in these things while determining your goals to create an emergency fund.

You may feel that creating an emergency fund is quite difficult. On the contrary, it is quite easy.

Here are a few proven steps that you can follow to create an emergency fund of nothing less than $1000 very easily within three months.

If you do the math you will find that to make $1000 in three months you will need to save $11.11 a day only!

First of all, track your spending and find out those that you can do without as of now.

Look for those big budget items and find out some way to reduce the expense.

Secondly, you may even take up a second job provided you have the time and energy after managing your crypto investment (It needs it, remember).

Thirdly, you may even sell off a few things in your house that you do not use and save the money.

Sometimes, this can add up to quite a good amount.

Next, make sure that you do not use your emergency fund frequently thinking that you will make it up later.

An emergency fund should be created only for emergencies.

Make sure that you find a safe place to park your emergency fund. Setting up a separate and a free account with a bank or a credit union is good to go ahead.

You may be better off if you set up automated contributions on a daily or weekly basis from your checking account to the newly created emergency fund account.

The amount of contribution is however your preference but it should not be less than $11.11 at any cost.

Finally, make a list of the emergency things according to you.

These should be the things that are not a way to make money.

This will ensure that you spend only on these items from your emergency fund.

Automate Personal Finance

If you are not good at traditional budgeting and want to skip it, a good alternative to that is to automate your personal finances.

It is a much better and more effective method as compared to traditional budgeting and this is how it works.

You set up an automatic payment system.

When you get your paycheck every month at the beginning, the money will go immediately to where it is supposed to.

The places where the money should go and the efficient ways to set up your automated payment system are:

  • 50% to 60% of your paycheck to fixed costs such as rent, utilities, internet, and of course, debts
  • 10% to other recurring investments such as 401K and Roth IRA plans
  • 5% to 10% towards savings for things like weddings, vacations, down payments for home, and other unexpected expenses and
  • 20% to 35% to other guilt-free expenses which can be movies and nice dinner at times.

Once you have such an immaculate automated payment system in place, you will not have to spend more than an hour a month just to check whether or not everything is in order or whether you need to make some minor changes here and there.

The time saved can be spent on managing your crypto portfolio.

This way you will not only avoid debt but also increase your chances to make more profits from crypto.

Look for Alternatives

If investing in crypto is asking a bit too much from you and your time or if you are not sure that you will be able to stay away from debt while managing your crypto portfolio, then stay away from it.

Try other alternatives instead.


You can try 401k. This is an extraordinary account to invest in which will take care of your retirement as well.

These are usually offered by the companies to their employees.

The best thing about this specific investment account is that you can invest your pre-tax income and it is a 1:1 match from the company.

Ideally, you will be able to invest much more money in your 401k than you would in any other usual investment account.

Another good thing about investing in a 401k investment account is that your money is managed by a professional investment company.

This means that you are saved from the hassles of managing your funds as well.

You may also be allowed to choose from a large range of investment options depending on your risk tolerance and age.

When you leave the job, you can roll the money accrued in your 401k into a traditional IRA or Individual Retirement Account.

If you invest it here, your money will continue to grow.

As said earlier, investing in a 401k is pre-tax and you will be taxed only when you withdraw the money when you attain the retirement age.

Roth IRA:

This is another good alternative and perhaps the most powerful investment vehicle you can consider.

However, this is an after-tax income investment but the good thing is that, unlike your 401k, you will not be taxed when you retire and withdraw the amount.

In this account however you will not be able to contribute as much as you can in a 401k but, due to its compounding nature, the amount you earn in the end can be quite a lot.

You will have to open your Roth IRA account yourself unlike your 401k which is done by the employer or the company.

However, it is quite simple to do so. All you have to do is find a good brokerage.

Once your account is created, you will then simply have to choose an investment option you like.


Investing money in different asset classes and staying away from debt is not an easy job.

Now that you have reached so far, you are surely ahead of your peers in investing in crypto or any other stocks and stay away from debt at the same time.