I Could've Made $26,000 if I'd Invested in Crypto Earlier. Here's Why I Have No Regrets.

It's important to have a safety net before taking risks.

At the start of this year, I'd saved around $8,000. I was lucky enough to have kept working through the pandemic. And anxiety about what might happen combined with pandemic restrictions that curtailed a lot of my normal spending helped me sock away a good chunk of money.

If I'd used that $8,000 to buy Ethereum (ETH), it would be worth $38,205 today -- a profit of over $30,000. But I don't regret my decision to wait at all. Here's why.

1. I beefed up my emergency savings

One reason I saved hard in 2020 was that COVID showed us that anything could happen. I sleep better at night knowing I have money to cover a job loss or unexpected house repair. Indeed, when the roof started leaking a few months ago, my emergency fund meant I could easily cover the repairs. If all my cash had been tied up in Ethereum, I might have had to sell it at a loss to pay the builders.

Having money to cover more than six months' worth of living expenses also empowered me to take risks with crypto further down the line. I know I have a safety net, and I know I'm only investing money I can afford to lose.

2. I increased my other investments and retirement contributions

The older I get, the more aware I am of the power of compound interest, which means you can earn interest on your interest. I want to be financially independent in at least twenty years' time -- and the earlier I put money aside, the harder it can work to get me there. With that goal in mind, I put an extra $5,000 into my stock market investments and retirement fund before I spent any money on crypto.

On average, the stock market has historically paid a 10% annual return. It varies, but even if we take a potential 7% return, compound interest means that $5,000 would be worth almost $20,000 in 20 years.

Now, you may be thinking that I'd have made that money (and more) in less than a year with Ethereum, which is true. But you can't invest in hindsight. The jump in cryptocurrency prices this year may not have happened -- they just as easily could have lost value. You can lose money on the stock market, too, but it isn't as untested and unregulated as the cryptocurrency industry.

Many financial experts advise that crypto investments should make up no more than 5% (possibly even 10%) of your overall portfolio. That way, the higher risks in crypto are balanced out by safer investments, like in stocks or real estate. In turn, crypto hedges against stock market failure or hyperinflation. The trick is to build a diversified portfolio that reflects your tolerance for risk and your stage of life.

3. I wasn't ready to lose that $8,000

One of the golden rules of crypto investment is to only invest money you can afford to lose. That way if the worst happens and the market crashes, you'll still be able to put food on the table and pay your rent or mortgage. It would be hugely disappointing, but not devastating.

It was only by first safeguarding my short and long-term futures that I felt able to dive into cryptocurrency. It meant I could invest without panicking every time the market dipped. It also gave me time to research and plan my crypto investments, rather than rushing in because I was scared of missing out.

I worked out how much of my monthly income I could comfortably put into crypto while meeting my other saving and investment goals. Some cryptocurrency exchanges let you set up automatic monthly contributions to make this even easier.

Cryptocurrency investments are risky: We don't know what will happen with regulation or if the bottom will fall out of the market. And we don't know if the technology will be superseded by something more advanced.

I believe that blockchain technology has the potential to transform the world we live in. And -- while I know that many cryptocurrencies will fail -- there could also be significant long-term potential in several of the currencies on the market today, especially Ethereum. As such, while it would be nice to have an extra $30,000 right now, the cryptocurrency portfolio I'm building up could be worth a lot more in 10 years. The important thing is, even if it isn't, I'll still be able to live and retire as planned.