On this episode of How To Money, Matt and Joel are answering listener questions about everything from cryptocurrency savings accounts to buying a house from a submarine to why people earning less than $12,000 a year should still file a tax return. Cryptocurrency is a major headline these days, and one listener has gotten interested in opening a crypto savings account because they promise incredibly high interest rates – as much as 12% in some places. With regular banks only offering a half a percent for savings, it’s no wonder she’s tempted. But Matt and Joel caution against it. Not only is cryptocurrency extremely volatile, none of the crypto banks are insured by the FDIC or the SIPC – so you could lose everything. They think we should keep our savings and our investments separate, and only play with high-risk investments with “money you wouldn’t lose any sleep over,” or less than 5% of your overall portfolio.
Another listener made less than $12,000 in income this year and wonders if that means she doesn’t need to file a tax return. While it’s true that if you make less than the standard individual deduction ($12,500), you don’t need to file or owe any taxes, you might also be leaving money on the table. If any taxes were withheld from your income, you won’t get your tax refund; you also won’t be eligible for the earned income tax credit, any incentives for investing money in an IRA, or other low-income tax credits. Additionally, a tax return isn’t just about the taxes: Things like home loans are often based on tax returns. To save a headache in the future, and to make sure you don’t miss out on any free money, they recommend filing a tax return even if you make less than the standard deduction.
A couple of callers ask about purchasing real estate – including a sailor in the Navy who listens to the show from a submarine. While they agree that owning a home, or becoming a landlord, is a great way to build wealth, there’s no reason to purchase a home unless you’re sure you’re going to live in it (or rent it out to tenants) for at least seven years, because transaction costs and market volatility could throw a wrench into your plans. If you’re not sure about your time frame, there’s nothing wrong with renting. “Renting is not throwing money away,” Joel says firmly. Get all this great information, including a great breakdown of investment products like solo 401ks and SEPs, on this episode of How To Money.
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