Cash poor, need advice.

[inaka_rob]

No point in going into reasons why right now. My wife and I have plenty tied up in investments but are very cash-poor atm. The emergency fund is currently mostly drained because of an expensive move (who am I kidding, it's expensive to move down the street in Japan). It did its job.

We are worried that if we need to go to a funeral or have another financial emergency any time soon we need to figure out where to get the cash from.

I am debating between two choices.
Nisa. It's tax-free, right? So cashing out what we need is unfortunate but won't "cost" us anything except lost interest gains during the time it would take to replace.

The 2nd option is a 0% interest loan.
I know how this sub feels about crypto, but I have enough put away in a crypto lending bank that offers 20% LVT collateral loans at 0% interest. So my understanding here is I lose control of the collateralized crypto until I repay the loan, but this would also be a 0 tax event too right?

So Nisa is not doing all that great. Earning like 4 to 6% last I looked. While my crypto bank is paying out 8% interest currently. So if they are both equal otherwise, Nisa would be the better option.

[Haystack]

So this is a "what if" scenario?

Okay,

1. Take stock of your portfolio and all holdings including cash, map out your tax-advantaged, taxable and cash like assets. (This take a few minutes in Google sheets/excel)

You would want to sell Bonds, before stocks. Taxable before tax-advantaged.

2. Are you crypto holdings with an exchange approved by the FSA? If not, I would be very wary about an loan agreements.

3. Check the interest rates on your credit cards and other lines of credit. Make a chart of best to least.

4. Start hoarding cash until your have 3 months of savings. Then jointly invest and hoard cash until your have at least 6 months of living expenses for both of you. (Including mortgage/food/insurance, etc).

.....................................................

I am a huge advocate for at least six months of household spending in cash as an emergency fund.

As OP stated emergencies and moves in Japan can be expensive. A large cash buffer is required. I think it is acceptable too to have 3 months in Cash 3 months in short term bonds etc. But 6 months + of very liquid assets is a must.

[fools_gold]

I know how this sub feels about crypto, but I have enough put away in a crypto lending bank that offers 20% LVT collateral loans at 0% interest. So my understanding here is I lose control of the collateralized crypto until I repay the loan, but this would also be a 0 tax event too right?

So Nisa is not doing all that great. Earning like 4 to 6% last I looked. While my crypto bank is paying out 8% interest currently. So if they are both equal otherwise, Nisa would be the better option.

I'm intrigued as to how crypto banks can pay 8% out on deposits and lend at 0%. How does that work?

[mikele3]

So Nisa is not doing all that great. Earning like 4 to 6% last I looked. While my crypto bank is paying out 8% interest currently. So if they are both equal otherwise, Nisa would be the better option.

I wouldn't touch NISA, it is supposed to be a long term investment in savings to have available during retirement.

Also, from what I understand of your situation, I wouldn't take on any more risks by borrowing money against your crypto... I'd rather rely on credit cards for a while, much more forgiving. (BTW repaying a crypto loan is a taxable event)

If I was you, I would consider selling some crypto (or other investments (but not what you have in your NISA) and get enough cash for a 6 months emergency fund like other advised ... you'll get better sleep and peace of mind.

[inaka_rob]

I know how this sub feels about crypto, but I have enough put away in a crypto lending bank that offers 20% LVT collateral loans at 0% interest. So my understanding here is I lose control of the collateralized crypto until I repay the loan, but this would also be a 0 tax event too right?

So Nisa is not doing all that great. Earning like 4 to 6% last I looked. While my crypto bank is paying out 8% interest currently. So if they are both equal otherwise, Nisa would be the better option.

I'm intrigued as to how crypto banks can pay 8% out on deposits and lend at 0%. How does that work?

Yeah. Great question. Banks like Nexo do not 100% make sense to me. First, only platinum members can get 0% interest loans. And be a platinum member you need to have a certain amount of your holding on Nexo in their Nexo coin. So most members are NOT getting a 0% interest loan. And then people buy the Nexo coin, they make money from that. I am sure there are other streams of revenue. They have an exchange on Nexo with pretty terrible rates, which I assume goes into their pocket (so if you know better buy your coins somewhere else and transfer there). They will hold ADA, and pay like 4 to 6% interest, but they probably turn around and stake that and make like 7 to 8% staking returns on it. I really have no idea why anyone would put their ADA on Nexo and not stake it themselves. I have asked on Reddit and never get a good answer in return. It's crypto... Does any of it really make sense?

I am not touting Nexo. Just explaining what I think I understand about them. There is also DeFi loans and lending which I think is similar, but not exactly the same as what Nexo does.

[inaka_rob]

So Nisa is not doing all that great. Earning like 4 to 6% last I looked. While my crypto bank is paying out 8% interest currently. So if they are both equal otherwise, Nisa would be the better option.

I wouldn't touch NISA, it is supposed to be a long term investment in savings to have available during retirement.

Also, from what I understand of your situation, I wouldn't take on any more risks by borrowing money against your crypto... I'd rather rely on credit cards for a while, much more forgiving. (BTW repaying a crypto loan is a taxable event)

If I was you, I would consider selling some crypto (or other investments (but not what you have in your NISA) and get enough cash for a 6 months emergency fund like other advised ... you'll get better sleep and peace of mind.

Yeah... I know. I USUALLY have a 6-month emergency fund as I thought I implied, but we used it... for an emergency. Sometimes they come in twos and threes and if #2 comes before we can fill it back up I will need some cash.

Thank you for your reply though. You said something that I was looking for. "repaying a crypto loan is a taxable event." How is that? Is paying back a car loan a taxable event? Aren't things like a mortgage tax-deductible. How is paying back one loan so different from the other?

How is a credit card better? I have always paid my card back in full every month my entire adult life. Isn't the interest insane if I can't pay it all off at once?

[Haystack]

So Nisa is not doing all that great. Earning like 4 to 6% last I looked. While my crypto bank is paying out 8% interest currently. So if they are both equal otherwise, Nisa would be the better option.

I wouldn't touch NISA, it is supposed to be a long term investment in savings to have available during retirement.

Also, from what I understand of your situation, I wouldn't take on any more risks by borrowing money against your crypto... I'd rather rely on credit cards for a while, much more forgiving. (BTW repaying a crypto loan is a taxable event)

If I was you, I would consider selling some crypto (or other investments (but not what you have in your NISA) and get enough cash for a 6 months emergency fund like other advised ... you'll get better sleep and peace of mind.

Yeah... I know. I USUALLY have a 6-month emergency fund as I thought I implied, but we used it... for an emergency. Sometimes they come in twos and threes and if #2 comes before we can fill it back up I will need some cash.

Thank you for your reply though. You said something that I was looking for. "repaying a crypto loan is a taxable event." How is that? Is paying back a car loan a taxable event? Aren't things like a mortgage tax-deductible. How is paying back one loan so different from the other?

How is a credit card better? I have always paid my card back in full every month my entire adult life. Isn't the interest insane if I can't pay it all off at once?

Every card is different, and their are often different cashing rates and short-term rates. Read your agreements online.

Timeframes mater as well. Do you need this now, or is this part of a plan b strategy. Will you hold this loan for 1 month 2, 3....?

I would not sell out of the NISA unless I faced multi month debt at high interest.

Set your priorities, and you pain point.

[mikele3]

Thank you for your reply though. You said something that I was looking for. "repaying a crypto loan is a taxable event." How is that? Is paying back a car loan a taxable event? Aren't things like a mortgage tax-deductible. How is paying back one loan so different from the other?

well... you borrow USDT and somehow convert and move JPY to your bank ...I can think of three scenarios:
1) you use JPY to buy back USDT and pay back your debt... the difference in exchange rate (USDT/JPY) between borrowing and repaying will cause a loss or gain
2) you exchange coins/tokens to USDT to repay back .. that will cause a taxable event obviously + the difference in exchange rate (USDT/JPY) between borrowing and repaying will cause a loss or gain
3) you have USDT already and use those to repay back ... the difference in exchange rate (USDT/JPY) between borrowing and repaying will cause a loss or gain

In any case returning tokens you borrowed is a taxable event.. the amount of gain or loss depends on the price when you acquired them against the price at the moment of returning (dispose of) them...

A mortgage might be tax-deductible, but everything you do in crypto is a miscellaneous income kinda deal ... basically it is treated like playing with scratchcards

I am not an accountant or a tax advisor... I might be wrong, if so, I'd love to learn better.

How is a credit card better? I have always paid my card back in full every month my entire adult life. Isn't the interest insane if I can't pay it all off at once?

Like Haystack said.
It looks like you are confident enough about this lack of cash being temporary.. then you can take the risk of stay without for a while and in case of emergency use your credit card... in the best case you still get 55days before you need to repay.. in the worse ~25days .. enough to sell off some investment and make sure you do not need to delay your repayment... or you can delay the repayment for a while, interest won't be too much (in JPY) for only a few weeks if you feel you are having a good hand on your other investments and won't let go just yet.

[zeroshiki]

On the topic of CC, you can delay payment by doing bunkatsu barai (which is splitting up one line item to be paid back in multiple months) which while extortionate (15% p.a.) at least doesn't ruin your credit and you won't have a non-payment on record.

[mighty58]

You don't mention how much of your recurring income will go to building the emergency fund back up, and how long that'll take. Are we talking about a plan just to cover a few months before you're back on track?

As the crypto thing is over my head, I don't understand the ramifications of selling so can't comment on that, but I will point out that most emergencies aren't actually immediate (ie. need cash today). As such, I would suggest just keeping your money invested and selling down only if and when required. It depends what's in your NISA, but you can have cash-in-hand within 1-7 days, which should be sufficient to cover most short-term capital requirements.

But for peace of mind, as you expressed concern about a super-short term emergency (like attending a funeral), I'd recommend selling down a small amount now (100,000yen) and keeping that aside in cash. That should be sufficient, as I think you'll find that super-short term emergencies rarely go over 100,000.

If you just do that, given the small amounts involved, the potential tax impacts are probably negligible anyway.