The purpose of this guide is to help you adopt a full Bitcoin standard. This involves converting all your main stores of value and income into Bitcoin, as well as becoming accustomed to spending it regularly.
This guide has two sections:
- Money Management Wisdom: This section explains how to take full control of your money through zero-based budgeting, eliminate all wasteful spending by becoming and staying 100% debt-free, and increase your ability to generate more income by setting aside 10-20% of your money for giving.
- Bitcoin and Your Net Worth: This section provides a framework for balancing your net worth on a full Bitcoin standard, breaking it down into three components: Money, Consumption, and Capital. It introduces the "rule of thirds," which suggests keeping at least one-third of your net worth in Money, no more than one-third in Consumption, and no more than one-third in Capital.
To fully adopt a Bitcoin standard, follow these steps in order:
After completing these steps, review your net worth and adjust it according to the rule of thirds. Ensure you maintain this balance moving forward.
This guide is designed to assist Bitcoiners who are transitioning from a fiat standard to a full Bitcoin standard and are facing various challenges and decisions along the way.
If you already own Bitcoin and recognize yourself in any of the following statements, this guide is for you:
- You currrently practice dollar-cost averaging into Bitcoin.
- You like to keep some fiat currency as "dry powder" to buy more Bitcoin during price corrections.
- You've tried growing your Bitcoin stack through trading but decided you'd rather buy and hold.
- If you have and use any of the following: credit cards, personal loans, lines of credit, a mortgage, auto loans, student loan debt, or a home equity line of credit.
- You're hesitant to spend your Bitcoin or afraid to sell it in any significant amount.
- You believe there's such a thing as good debt and bad debt, and you'd consider taking out a zero-interest loan to buy more Bitcoin.
- You have a rough idea of your income and expenses, but you don't know the exact numbers.
- You have tried orange-pilling your family and friends, but they didn't take your advice as seriously as you'd hoped.
- You're willing to allocate more of your money to Bitcoin, but your partner or spouse isn't fully on board.
- You have a fiat job and don't have direct Bitcoin income streams.
- You'd like to increase your total income, but you are not 100% sure how to go about it.
- You plan for retirement and find yourself wondering how much Bitcoin you would need to own so you don’t have to work.
- Because of Bitcoin's high volatility, you don't advise newbies to go all in.
- Sometimes, you feel like you don't own enough Bitcoin.
- "Fiat is for spending, Bitcoin is for saving" sounds reasonable to you.
Bitcoin is a fundamentally different form of money compared to what we are accustomed to. Since its creation in 2009, Bitcoin's purchasing power has increased dramatically, while fiat currencies have steadily lost value. However, this growth has been extremely volatile, with multiple price crashes of over 80% followed by massive rallies. While Bitcoin's price volatility is decreasing over time, using it as your primary money still presents significant challenges.
The famous Bitcoin pizza transaction illustrates this volatility. In May 2010, Laszlo Hanyecz paid 10,000 BTC for two pizzas worth about $30. At the time of writing this (November 2024), 1 Bitcoin is worth approximately $90,000, meaning those 10,000 BTC - now worth $900 million - could buy over 60 million pizzas.
This incredible increase in purchasing power has come with equally dramatic volatility. For example, since the author's "get off zero" moment in July 2014, when Bitcoin was around $600, its price has increased over 100 times in just over 10 years. But along the way, the author has witnessed Bitcoin's price crash by 80% or more multiple times, only to recover and reach new highs.
Some examples of this volatility include:
- In December 2017, Bitcoin peaked at $20,000, only to drop to $3,300 by November 2018 (an 85% drop).
- In March 2020, during the COVID crash, Bitcoin briefly fell to $4,000 before recovering.
- By November 2021, Bitcoin reached nearly $70,000, only to drop to $15,000 by late 2022 (an 80% drop).
- As of December 2024, Bitcoin is trading at around $95,000, more than 1200% increase over the past five years.
This kind of volatility can be intimidating, especially for beginners who aren't accustomed to it. There are many strategies that people use to manage it. Some take a conservative approach, buying Bitcoin only with money they won't need for years and dollar-cost averaging small amounts over time. Others try to trade the volatility, buying low and selling high.
However, the author has found a third approach to be most effective: using Bitcoin as your primary money.
Using Bitcoin as your primary money means converting all of your current and incoming money into Bitcoin and arranging to be paid in Bitcoin (if possible). You do this regardless of the current exchange rate. When it's time to pay for expenses - usually denominated in fiat - you exchange Bitcoin back into fiat to complete the payment (or pay directly with Bitcoin if accepted).
Today, services like Bitcoin debit cards make this easier by converting Bitcoin to fiat at the time of purchase. If you don't have access to such services, you can still use Bitcoin as your primary money by planning ahead. For example, if you need to pay rent in fiat next week, you can convert the required amount of Bitcoin to fiat a few days in advance.
To do this effectively and safely, you need to consistently practice three key money management principles:
- Zero-based budgeting - Plan every dollar of your income and expenses.
- Living debt-free - Eliminate all debt from your life.
- Setting aside 10-20% of your budget for giving - This timeless principle not only fosters generosity but also increases your capacity to earn.
These principles are critical when using Bitcoin as your primary money. Bitcoin is a powerful but still misunderstood technology, and without proper financial habits, its volatility can have both positive and negative effects on your financial life.
In 2024, Bitcoin can be compared to electricity in its early years. When electricity was first introduced, most people were afraid of it because they didn't know how to use it safely. Over time, people learned how to handle electricity properly, leading to its widespread adoption.
Similarly, most people today have heard of Bitcoin, but only a small percentage own it, and even fewer use it as their primary money. Just as we've developed safety mechanisms for electricity, like circuit breakers and insulation, you can develop financial safety mechanisms to handle Bitcoin's volatility.
When you implement the money management principles outlined in this guide, you'll be able to use Bitcoin to its full potential. Instead of fearing its volatility, you'll embrace it. Instead of trying to predict Bitcoin's future price, you'll learn to respond to changes in its purchasing power by rebalancing your budget.
You'll also shift from the fiat mindset of "consume now, pay later" to the Bitcoin standard of "pay now, consume later." By eliminating debt and practicing generosity, you'll not only improve your financial health but also increase your ability to earn and grow your wealth.
This guide is a work in progress, and I welcome your feedback. If you have any suggestions or questions, feel free to email me at [email protected].
For personalized advice, you can schedule a call using the provided link.
If you’d like to support this work, you can use the included Lightning address or donation link.
I hope you find this guide helpful and I encourage you to put its suggestions into practice. Together, let's build a future on the Bitcoin standard.