Bitcoin Simplified: A Daily Use Guide - #202
TL;DR: In this article we discover the right tools and strategies for managing your Bitcoin finances.
Dear Reader,
I recently had a friend tell me that he was hesitant to start using Bitcoin because he wasn't sure how to keep track of his transactions.
As someone who has been living on Bitcoin for over a year now, I understand where he's coming from. It wasn't easy at first, but I've developed some processes that have made it a lot easier for me to manage my Bitcoin finances.
I wanted to share some of my insights in case they might be helpful to others who are considering making the switch to living on Bitcoin.
Take Control of Your Finances with Bitcoin
Bitcoin offers many potential benefits for those seeking financial freedom and sovereignty.
By using Bitcoin, you can hedge against monetary inflation and take control of your own financial affairs.
It's important to have the right tools and strategies in place to make the most of it and achieve your financial goals.
The Three Bank Structure: A Simple Way to Manage Your Bitcoin
One of the key tools I've been using is the Three Bank Structure (3BS).
This is essentially a system of three different wallets that I use for different purposes.
My "commercial bank" (cache) is the Sparrow Wallet, where I keep the majority of my Bitcoin and use it for mid-term savings. I like Sparrow because it allows me to label and mix my coins for added privacy, and it's connected to my full node for added security.
For my "checking account," (spendl) I use both the Edge Wallet and Phoenix Wallet.
Edge is great because of its zero knowledge security and the ability to export transactions to QuickBooks, which is useful for tax purposes.
Phoenix is more like cash in my wallet – I use it for smaller, daily expenses — and I’m able to connect it to my home node.
And finally, I use a few hardware wallets and an old computer running Bitcoin Core as my "central bank" (hodl) for long-term savings.
Integrating Bitcoin into Your Budget
In addition to having the right tools, it's also important to have a solid personal finance strategy when living on Bitcoin.
For me, that means setting up a budget and using the 50/20/30 rule. With this rule:
50% of my income goes towards essential expenses…
20% goes towards my needs and wants and…
30% goes towards savings.
I find that this helps me to stay organized and make the most of my Bitcoin income.
Tracking and Managing Bitcoin Transactions
One thing to keep in mind when using Bitcoin is that not all wallets offer the same level of tracking and transaction exporting.
Some wallets, like Edge Wallet, do a great job of keeping track of your transactions and exporting them for accounting purposes. However, many wallets don't offer this feature, so you may need to find other ways to track your expenses.
Personally, I've found it helpful to create my own spreadsheet to keep track of everything.
It's free to download and has been a useful tool for me in managing my Bitcoin budget.
Conclusion
Living on Bitcoin isn't always easy, but it can be a rewarding experience with the right tools and strategies in place.
By setting up a budget, using the Three Bank Structure, and finding ways to track and manage your expenses, you can confidently incorporate Bitcoin into your everyday life.
Until next time!
Edit: After talking with Paul Puey, CEO of Edge Wallet, you can connect Edge to your own node.