There’s no shortcut to building wealth

Whenever I think about cryptocurrency, I think about sitting exams as a teenager.

I had friends who’d go into each exam having put in about 12 hours of revision. They’d have it all mapped out. They'd work out how much they were going to revise and when. They’d study the syllabus. Most importantly, they stuck with their plan and didn’t try to take shortcuts. As you might’ve guessed, they’d usually be rewarded at the end with the outcome they deserved. 

Meanwhile, I’d try to get by with as little planning and revision as possible. Sometimes I’d get the same grades as my studious classmates despite doing just two hours of revision. It was often a complete fluke. But when we compared grades over the course of a year, who do you think did better? They did, of course.

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You can’t fluke your way to wealth

In some ways, buying crypto is like trying to fluke your way through exam season. Some people see blockchain technology as revolutionary and genuinely believe it has a future, but most people buy Bitcoin, Ethereum and… ahem… Shitcoin as a way to get rich quick.  

These coins are seen as a fast track to wealth and overnight success. The occasional fluke lulls people into a false sense of security. When their coins rise in value dramatically, they assume it’ll always be that way — even though they might not have a clue how it all works. 

Unfortunately, as with any type of investment, the value of your portfolio won’t always go up. 

At the time of writing, crypto is no longer a $1 trillion market. Bitcoin lost 68% of its value in the last 12 months. Then, to make matters worse, the total crypto market capitalisation slid to $870 billion in just a matter of days, partly due to currency exchange FTX’s liquidity issues. 

Concerns have been raised that the exchange could become insolvent and it’s triggered a mass sell-off of many currencies. FTX’s native token FTT fell more than 80% in just 5 days. 

Volatility is part and parcel of investing. The value of our investments won’t always go up. But for those who’ve bought crypto in the hope of getting rich quick, the decline of some of the most popular coins could be causing panic or worse — financial ruin.

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Wealth building takes time

I’ve been an investor for 15 years and a financial planner for 19. There’s only one route I can think of to lifelong and life changing wealth and that’s to take a little bit of the labour value that we have each month and exchange it for appreciating capital. By doing this for as long as possible, we can turn our income into sustainable wealth.

With cryptocurrency, there’s an assumption that there’s a shortcut. The idea of investing £700 a month for 29 years to retire a millionaire doesn’t appeal to people. They want a way to be a millionaire by this time next year. So when influencers or crypto enthusiasts talk about 10 ‘exxing’ your investments in six months, of course people sign up — even if it involves digging out their credit card and enrolling in a questionable online course or community. They can become trapped in a cycle of constantly chasing the next big thing. 

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The long way is often the easiest way

As a teenager, the realisation that I could get the same grade as my classmates with just two hours of revision was exciting. It felt like I was cheating the system, though in hindsight I was only cheating myself. When I didn’t do as well as my classmates at the end of the year, it came as a shock.

It’s a good job our exam results are rarely a topic of conversation in adult life, despite what our teachers might have told us at the time. Getting a B, C or even a D is unlikely to have a lasting impact on our career success. There’s no shortage of millionaires who did badly at school.

But your finances, particularly when it comes to building wealth, are less forgiving. Before taking on an ‘exciting investment opportunity’, ask yourself if it’s worth risking your future self’s financial wellbeing. 

For every crypto millionaire, you’ll find thousands of people who invested everything they had only to end up broke. If you’ve seen the GameStop documentary on Netflix, you’ll have seen how this can play out in the stock market too. 

While crypto’s winners might flaunt their extravagant lifestyles, crypto’s losers can be left with little more than debt and regret. I cast my mind back to my school days and there were similarities there too ⁠— my classmates’ education was probably much more peaceful than mine. I was plagued with panic and stress! 

Thankfully, financial planning saved me and I no longer have the mindset that I did in school. 

I tell everyone that if they want to retire early and live off their investments, this can be achieved with good financial planning, perseverance and a level head. Ironically, the long way is often the easiest way.