What is It?

Bitcoin is a currency. It can be sent digitally. It can also be stored securely, either digitally or on paper. Unlike traditional money, it can’t be easily forged. Unlike traditional currency, bitcoin transactions are both public and largely anonymous.

Why is Bitcoin Valuable?

Bitcoin does a number of things that traditional money, gold, credit cards and checks do, but it does it without a central bank. Bitcoin also does it digitally and in a way that is very difficult and arguably impossible to forge. These characteristics are so desirable that many people are trading traditional currencies for bitcoin. In fact, so much of this is happening that it’s causing the price of bitcoin relative to traditional currencies to skyrocket, creating an investment opportunity for many people coming into the currency.

Like other currencies, bitcoin’s value is driven by supply and demand. Bitcoin has a limited supply (today there are only 16 million bitcoins and the currency will only ever have 21 million coins). This is a limited global supply but an in increasing global demand. Bitcoin is becoming more widely accepted and easily transferable. It’s now possible to send money from person to person and country to country, without it going through a bank.

While this may seem basic (that’s the point), it’s transformative. It’s was previously impractical for people to be their own bank. You could store money in a vault or under your mattress but it was difficult and impractical to do so because ease of transfer and portability are important. This is why centralized digital payment companies like credit cards, PayPal and Venmo took off. They made payment easy and portable. But these methods are centralized. Anyone who has had their credit card stolen or had their PayPal account locked up knows how crippling this can be. The differentiator of bitcoin is that it’s decentralized.

Why Does Society Think Bitcoin is Valuable?

• It can store your money.
• It can protect against forgery.
• It can be used to pay people securely.
• It can be exchanged globally for goods and services.
• It can appreciate in value (investment).
• It is decentralized so that no government or individual bank is in control.

Technological disruption often eliminates middlemen. It allows people to deal directly rather than indirectly. Bitcoin is eliminating the arbitrage of a bank. It allows people to control their own funds directly.

What’s Wrong With Bitcoin?

For all the things that are positive about bitcoin, there are a number of problems worth discussing. These problems are being worked on by teams around the world, and given the decentralized nature of bitcoin, will require consensus to solve.

• Bitcoin is slow. Transactions, sending money and receiving it is slow; currently too slow for real-time purchases. Bitcoin is faster and more secure than sending a check, but it’s often measured in minutes and hours, not milliseconds.
• Bitcoin uses a lot of electricity. Part of the algorithm of bitcoin is designed to make it difficult to create new bitcoins. This process is intentionally inefficient. Because of the rapid scale of the currency, it’s estimated to be using enough energy to power about 2 million homes.
• Bitcoin is currently an unstable currency. It’s so new that it changes price daily in 10 percent swings both positively and negatively. This can equate to even larger weekly fluctuations. I expect it will settle, but it’s hard to tell how long this will take. In the meantime, there will be investment winners, losers and inevitable bubbles.

The Future of Cryptocurrencies

Global wealth is measured in the $100 trillion range and up. Cryptocurrencies, including bitcoin, are in the $200 billion range. I believe that the future will have more cryptocurrencies rather than fewer. My predictions:

• I expect cryptocurrencies such as bitcoin will grow north of 1 percent or $1 trillion in global value in the next year. Over the next few years, I expect it to be 5–10 percent.
• The decentralized encryption technology behind bitcoin (blockchains) will be used for many new things including accounting, medical records, insurance and more.
• New cryptocurrencies may begin to grow even faster than bitcoin as the performance and energy issues with bitcoin become more pronounced.
• When the growth rate stabilizes, we’ll see more personal payment solutions (similar to PayPal) as well as traditional banking solutions built on top of cryptocurrencies.
• Governments and tax agencies will begin to pay a lot more attention. Bitcoin is considered an “intangible property” by the IRS. Expect further regulation and taxes around cryptocurrency to measure and track capital gains.
• Exciting new technologies will become more popular. New currencies and blockchain tools like Ethereum will allow a new breed of apps to be built and run in the cloud. This is still in the experimental phase, but people are already using Ethereum for identity, crowdfunding, voting, and even breeding digital cats (yeah, really.) More complex and sophisticated apps will evolve to use the technology that will further digital currency and decentralized trust.

I believe that many aspects of cryptocurrencies will become inevitable. Not everyone wants to trust banks with their money, but to date, it’s been impractical to do otherwise. The collapse of Lehman Brothers, the fraud at Wells Fargo and others have created new opportunities for bitcoin and beyond. I believe the future is bright for digital currencies.

Warning: Never invest in something you don’t understand and don’t risk money you’re not willing to lose.

Last year, I came into a crunch time. I was developing a training pilot, wrapping up the manuscript for my second book, coaching clients and managing personal strains, including my boyfriend’s father being in the hospital for months. I felt like I had no spare time. When I did have room to breathe, I wanted to spend it with the people I loved or asleep — not at the grocery store shopping.

That convergence of pressures brought me to finally not only hire people to help with my business activities but also to get help with day-to-day life. This included grocery shopping, cleaning and errands. The benefits to myself and my business have been remarkable. I wrote my second book on “How to Invest Your Time Like Money,” but in that process, I also learned that you need to invest your money to get more personal time.

Here are three principles that can allow you to have more time and money for what’s most important.

1. Growth requires letting go of control. A lot of overachievers have a pretty strong distrust that anyone can do what they do as well as they can. They also can feel overly cautious about spending money on non-necessity items. However, as your business grows, you must let go of control of more and more activities so that you can focus on what’s most important and handle a larger scope of responsibility. If you don’t, you end up in time debt. Your internal and external expectations will exceed your time budget. This means that you need to invest money in either automation or delegation so that you have more time to then invest in strategic revenue generating activities. That could mean having someone else set up your business appointments, do shopping, or handle your finances. Yes, it’s scary to not know exactly how everything will go. But when you trust others, you’re free to pursue more.
2. Optimizing on the micro is not the same as optimizing on the macro. In my book, I talk about how optimizing on the micro level may not lead to optimizing on the macro level. For example, organizing your files perfectly may save you a few minutes each day, but if it keeps you from moving ahead on important strategic projects, it’s not an optimal use of time. Or it may seem more efficient to only go to the post office when you can do multiple errands at once. But if you wait to go to the post office until you have a large block of time and then end up paying your bills late, leaving you to spend time, money, and energy sorting out the resulting issues, you haven’t optimized your time investment or minimized your stress. The same holds true with your money. Yes, it will cost a bit more to pay others to do items you could do. They also may end up spending a little more here or there since they’re making decisions based on lists you gave them instead of being able to weigh the benefits of different deals. But if you can bring in thousands more because you have more time and energy, an extra five or ten dollars spent on order delivery or a grocery bill isn’t a big deal.
3. Abundance can only be enjoyed when it is shared. The most successful and happy people in life see themselves as flow-through entities. That means as they receive more time and money into their lives, they give more of their time and money away. That flow of resources makes room for them to receive more success and fulfillment through their lives and businesses. As your business grows, if you’re generous with your money and allow other people to support you, you can be more generous with your time. When you pay other people for helping you, they benefit. You benefit because you can fully take advantage of the new opportunities coming your way instead of being overwhelmed. Keep a list of all the items that someone else could do for you. Then as you can, delegate them. That way you can reserve your time outside of work for refreshing activities, like spending time with family, exercising, volunteering or simply relaxing.

If you want to see your business grow in this coming year, consider how you could invest money in creating more time to work and to live.

Don’t Mentally Move in Until You Strike the Deal

If you have already mentally moved into your home before closing, you will lose your ability to objectively determine whether that particular property is the best fit for you and your family. You may also lose leverage in negotiating fair terms since the seller can tell if you have taken the bait, hook, line and sinker.

If you proclaim, “I absolutely have to have THIS house,” is the seller likely to drop the price or make any repairs that might be found during the home inspection?

Instead, when you think you may have found your ideal home, do your best to blanket your excitement when negotiating with the seller and stay objective on whether it is indeed the best home for you and your family.

Set Aside Money for Home Repairs

Your potential new home may seem to be operating just fine, but damages may surface just a few weeks down the line. Make sure you set enough aside to cover big ticket expenses.

For example, my friend recently purchased a home with a driveway that needed repairs which reached $12,000, and Alex’s home will need a new roof. When buying a home, it is wise to err on the side of being conservative as to how much home repairs are likely to run.

If the seller has either disclosed flaws in the home or a home inspector identifies problem items, be prepared to spend money to fix those right away. If the seller has disclosed a troublesome hot water heater, washer and drawer, roof, etc., odds are it will need to be repaired sooner rather than later.

Set Aside Money for Interior Design

In addition to home repairs, you will likely want to make some design changes, including purchasing furniture and other items for your home. I personally am budgeting for patio furniture, since I know I’ll be itching for it once I move in.

Prepare to Close on a Mortgage

Some first-time home buyers are surprised that it costs several thousand dollars to close on a mortgage for their home. It is smart to plan ahead and ask your mortgage broker for an estimate of how much the closing costs will run when you get pre-approved for a loan and not wait to find out how high closing costs will run a few days before closing.

Strategically Select Your Mortgage

A 30-year fixed mortgage is not a one-size-fits-all solution for financing your home. I’m working with a savvy mortgage broker to see whether a seven- or 15-year mortgage would best fit my circumstances as I may sell my home in the next few years.

Gather All Necessary Paperwork and Information

Getting approved for a home loan can be a tedious, stressful process. Just when you think you have provided every single last possible bit of your financial details, the mortgage broker is likely to ask you for one more piece of information.

To keep from going crazy from the paperwork, plan for the time it will take to complete it. Alex and I had to remind ourselves to ask our broker how much documentation we would need before loaning a large amount of money to a complete stranger.

Time Your Home Purchase Around Other Life Changes

There are only so many hours in a day, and finding your ideal home, purchasing the home, getting approved for a mortgage and planning a move can be extremely time consuming. It’s ideal to focus on buying a home when you do not already have other big time commitments going on in your life. For example, try not to purchase a home when you are having a child, planning a wedding or changing jobs.

Beware of Your Own Hubris

The idea of paying a real estate agent 2.5 to 3 percent of the purchase price of your home might seem absurd at first, but you should involve an expert when you are making one of the biggest investments of your life. Get the help you need and don’t be overconfident that you can figure out all of the home-buying wrinkles on your own. The right real estate agent is likely to earn every penny of his or her commission by not only being a knowledgeable resource but by also being emotionally supportive and trustworthy. You will be glad you had one during the home buying process.

Buying a home is an exciting but also a stressful time. Hopefully these tips will help make the process one more of celebration than of regret.

Alex King is a co-author and an attorney at Bend Law Group, PC, a law firm focused on small businesses and startups.

But these tips are also valuable to all the business owners out there, whether you invest or not, as these are also good ways that you can attract investors to your business.

Identify the Opportunity

As odd as it may sound, it is sometimes difficult for those who wish to invest in new businesses to find an opportunity to do so. If you are a well-known investor in the business community, you may be approached about investment opportunities. But for the most part, entrepreneurs don’t advertise their need for startup capital. Most of the time, investors learn of the possibility of a startup investment from family, friends, or their network of colleagues.

Know Why the Startup Needs Investment

Most times, startups are trying to raise money from investors because they are unable to get financing through traditional sources, such as a bank loan. It is important to learn why the entrepreneur is not seeking traditional financing. However, it is also important to remember that just because a startup isn’t using traditional financing does not mean that the company cannot succeed. Financing for startups is extremely difficult to obtain and even businesses who have been operating well for several years report difficulty with bank financing. In addition, some business owners try to avoid starting the company with too much debt, believing that investors may provide them with more reasonable financial backing than a loan with high interest.

Consider the Business Structure

In order to protect your liability, it’s important to understand the different IRS and legal structures of a new company. If a small business fails, an investor could be liable for unpaid bills or liabilities. Because small businesses do fail with some frequency, it is important to protect yourself from liability for these expenses. However, you can consider creating a limited liability corporation (LLC) in order to protect personal assets should the business fail. Never invest in a business based on a handshake, no matter how close you are to the person you are going into business with. Always draft official documents and put things in writing to protect yourself and the other party.

Recognize That Returns May Be Slow

Keep in mind that when you invest in a company, you may not see returns on that investment for many years. When a business starts, they need as much cash on hand as possible, which means that earnings are reinvested or returned back to the company for the first few years. If you need to see a return on your investment quickly, consider lending the company the money rather than doing it as an investment. Because the loan is between individuals, you can set fairly reasonable terms so that it does not cause a hardship on the startup. Be sure to put all loan terms in writing to provide you with legal recourse should the loan not be repaid.

Have an Exit Strategy

One of the most important things to keep in mind when investing in a startup is to have an exit strategy. A startup company could use all of your capital investment even before the doors open and it could take years before they begin turning a profit. Even when the company is successful and you begin receiving dividends, you may have difficulty withdrawing the original investment. Therefore, when preparing to invest in a startup, discuss what your exit strategy may be. An exit strategy not only protects your investment but also protects the company owner from damages should you decide you no longer want to be part of the business. An exit strategy may stipulate who you may sell your stake of the company to — approval by the company owner of any future investor — or it may state how long you must wait before you can request a refund of your initial capital.

You can find good startup investments and protect yourself from liability or financial difficulty should the company fail. By entering into the agreement in a businesslike, legal manner, both you and the business owner will benefit greatly.

Every year, new trends take hold and the financial markets change. With these shifts come opportunities for investors to earn money; if their forecasts are correct and investments are timely. But, as with most things, investing does not always go according to plan.

Here are the investments that most savvy, yield-focused investors stay away from:

1. Restaurants: Mario Batali and Wolfgang Puck may be uber successful, but they are the exception to the rule. In fact, investing in restaurants is actually one of the worst financial decisions you can make. The National Restaurant Association cites that over 60 percent of all restaurants fail within their first three years of business, and 75 percent are gone within five years.
2. Movies: The structure of most film investments puts individual investors at a disadvantage from the start. According to the Wall Street Journal, “Movie investors are generally the last ones to get paid — after lenders, distributors, actors, the crew, even the caterer.” Though the ROI for investing in the production of a film can be 50 to 100 percent in the case of a wildly successful venture, more often than not, things go wrong: the production budget could be miscalculated, the producer may never find a distributor to get the movie into theaters, or the movie might perform poorly. These investments are best left with the Paramounts and Fox Studios of the world.
3. Boutique hotels: The hospitality industry is notoriously volatile. During recessions, hotel stays can fall precipitously as vacation and business travel drops. Although hotels look like real estate, they act as operating businesses. Boutique hotels are not able to advantage themselves to the global reservation systems that drive sales or enormous economies of scale that cut costs. Moreover, an enormous amount of capital is required to build a successful boutique hotel where you must make major assumptions around style, target audience and location.
4. Bitcoin: If you are looking for volatility and instability, Bitcoin is the right investment for you. As of late February, Bitcoins were valued at just under $253. On January 15th, they were at $177.28. On August 20th, they were $511.93. And on June 3rd; $665.73. Headlines like “How I Lost Half of my Retirement Investment in Bitcoin” and “Bitcoin is the Worst Investment of 2014” are not uncommon to see, in part due to these severe fluctuations.
5. IPOs: IPOs can be extremely challenging to access as an individual, as brokers often save large volumes of shares for preferred clients. Unfortunately, the best-priced IPOs are given to top clients, making it difficult for retail investors to enjoy the frequent run-up as they shake off the underwriter’s initial discount. Additionally, IPOs have many unique risks due to their lack of market-price discovery. This makes them different from the average stock, which has been trading for years and has copious, truly objective information on past performance.
6. Currencies: Investing in currencies is a true gamble, especially without a sophisticated knowledge of international economics. An investment in a currency is heavily influenced by changes in exchange rates and foreign taxation, along with ever-occurring political shifts. In 2014, according to Bloomberg, every major currency fell against the U.S. dollar.
7. Entertainment Venues: With door charges, markups on alcohol and lines a block long, the entertainment business might seem like an easy win. Wrong. Opening a venue in desirable locations can require millions in real estate and startup costs. Identifying a market need and executing the timing to a tee can requires significant research, along with a hefty amount of luck.

Even ruling out all of the investments mentioned above, there are thousands of opportunities to invest wisely and build a diversified, high-yielding portfolio. Whether its in the stock market, investing in real estate through investment crowdfunding, bonds, or another strategy, due diligence and diversification are key across the board.