How many did you get?
I read this post by J Money last year, and thought it would be a good fit for RetireJapan too.
So here are the goals, adapted for Japan 🙂
15 Goals to Hit On Your Way to Financial Freedom
Not all of these are necessary, or even desirable. It will depend on your situation and outlook. However, they might be helpful or inspiring. As an additional challenge, pick one of the ones you currently fail at and set a deadline to achieve it by 🙂
#1. Build a starter emergency fund of 100,000 yen. Check. I overpay the account my mortgage comes out of each month, and the excess builds up and pays my property taxes. It’s at about 150,000 yen now.
#2. Organize your important financial information in a binder or eFile. Fail. I started doing this but need to finish it and update it. This will be vital if something happens to me and my family need to untangle the web of exactly where our investments are.
#3. Develop a monthly budget habit. Fail. I am not a fan of budgets. I think it’s important to know where your money is going, but find it easier to ‘pay myself first’ and just decide how much to save each month. I don’t worry about the spending side of the equation much.
#4. Pay off all of your debts. Check. No debt, apart from the mortgage at 0.5%. We could pay it tomorrow but prefer to invest the capital.
#5. Build a mid-level emergency fund of 1 million yen. Check. We actually have two of these: a personal one and one for my wife’s business. The business one is at least 6 months’ operating expenses.
#6. Cut your expenses. Check. Cheap mortgage, cars bought for cash, MVNO for mobile phone. We spend too much money on food and travel, but manage to save/invest more than half our income so I think we have earned it.
#7. Be aware of your credit score. Fail. I actually have no idea how credit scores here in Japan work, but I am planning to do a blog post about it soon. Stay tuned!
#8. Earn extra income. Check. I’ve had a part-time or second job (or jobs) since my second year in Japan. Tough at times but worth it for the extra income, the skill-building, and the sense of achievement. The key for me is to upgrade the jobs so that over time you are doing higher-value or more interesting work.
#9. Read the top personal finance books. Check. I think I have read a lot of these, although I am always on the look for more. You can see some of them on the further reading page.
#10. Automate your savings. Kind of check. I don’t have to think about this as it’s the same amount every month, but I do log in and make the transfers by hand.
#11. Automate your bills. Check. Easy. I pay all our bills with a credit card, including my wife’s kokumin nenkin, electric, gas, NHK, etc. This makes it easy to track them using MoneyTree and also gets us some air miles.
#12. Automate investing. Kind of fail. Our iDeCo and THEO accounts are automated, but I do everything else by hand. I kind of enjoy it though, and again it is mostly just doing the same thing every time, following the plan.
#13. Write a 5 year financial plan. Check. I have a spreadsheet that estimates where we’ll be for the next fifty years (yeah, I’m kind of optimistic). I deliberately set the annual numbers slightly low, so we beat the estimates every year 🙂
#14. Start maxing out your retirement account every year. MAJOR CHECK!! Yep, we max out iDeCo and NISA every year and then try to invest a little on top. We also pay into the pension scheme here and I pay into the UK one too.
#15. Complete your emergency fund so you have at least 6 months’ expenses saved. Check. Yep, we actually have about a year in our personal one, as well as the 6 months for the business.
So there it is! 15 financial goals to hit by 40 (or whenever)! I hit 40 last year, and it looks like I achieved 11 of these.
How about you? How many points did you get?
“Develop a monthly budget habit”
Dude…You Need a Budget (YNAB)…worth every penny.
Heh, I tried it. Lots of people love it. I’m just not a budget person.
We save 70% of our income, so I don’t have much incentive to try and optimize our spending.
I have tracked spending in the past, but it’s not an ongoing thing and frankly it bores me.
Now, tracking our investments with endless spreadsheets? Huge fun 😀
Well, I guess I’m 15 out of 15; I’m well past 40 but have had 15 out of 15 for many years. Yay me 😉
Would have expected no less!
#1. Build a starter emergency fund of 100,000 yen.
Really? See points #5 and #15, long since satisfied.
#2. Organize your important financial information in a binder or eFile.
I have a file *drawer*. A binder just would not work
#3. Develop a monthly budget habit.
The wife and I go over it all every two to four months for common stuff. But since we both worked/work, we choose/buy our own cars (+alpha: insurance, shaken, etc) as we please, and my beer bill is ‘off budget.’ We see what was expensive, or when we had a cheap month, but don’t act very specifically on that. Actually, our dachs, which we take for a bath and trim monthly, is one of the higher recurring bills.
#4. Pay off all of your debts.
We’re more than 20 yrs past any debt.
#5. (see #1) (and really, what’s the logic of separating #1, 5, and 15? They should instead be 1a, 1b, and 1c.
#6. Cut your expenses.
We know our expenses. (see #3)
#7. Be aware of your credit score.
We don’t use credit.
#8. Earn extra income.
We’ve both always worked, so no need. “Help maintain each other’s life quality” would be my substitute for this. (E.g., I cook, clean, do laundry, etc.)
#9. Read the top personal finance books.
I’ve never read a finance book. But I’ve been at it a while–my first market “experience” was ‘87.
#10. Automate your savings.
>> Maximize your savings.
#11. Automate your bills.
Always have. (Credit cards: rarely use them apart from online ordering.)
#12. Automate investing.
>> Invest. Know your risk profile. One of my best is a “sin” stock, MO, basis is 19.24 (x900 shares) and it now pays close to $2400/yr. One of my worsts was MIC, bought at about $35, sold at $17, and unfortunately didn’t buy back in when it was under $2.
Unfortunately, there are a couple things that I can’t sell. Something like -ABC- that has done well, but that I bought when the yen was at 80, so I’d get killed on taxes. Someone will have to inherit to get the stepped up basis, and sell then.
#13. Write a 5 year financial plan.
As a recent retiree, I browse instead for different versions/angles on the 4% rule. And at the outside, a 25-30 yr outlook will probably be enough…!
#14. Start maxing out your retirement account every year.
Never had one. IDECO and NISA came too late for us. (I’m retired, wife has a few years to go.) I’m U.S., so I save/invest there.
#15. Complete your emergency fund so you have at least 6 months’ expenses saved. (see #1, #5)
#16, 17, & 18. Send your kids to school in Japan. Both our kids went to university here, and both to 国立大学. This wasn’t really planned, just how it worked out. They’re satisfied, and we are, too. From about ten years ago, this is something that was hugely cost-effective in our lives. We just paid out of pocket, along the way, and did not have to use any savings. (In contrast, we could have been out $40k/yr or more, sending them to the states.)
Nice example of someone that did everything (or most things) right, and is now reaping the benefits 🙂
#2 I use a password manager. All the logins are in a folder. This particular service allows a designated person to request access which is granted after a certain amount of time. Unless manually rejected by me. This way, if something happens to me, my wife will be able to find and access everything.
#2. Organize your important financial information in a binder or eFile.
Wondering if you write down the passwords in various places? It seems safer not to; but now I wonder how family members could access my funds if I suddenly wasnt here anymore. Wife is always blase about financial things, and I think my online broker (Interactive) would not easily disclose information…
I don’t bother with passwords and logins, but I have a list of institutions and account numbers, as well as a rough idea of what is in each one. This will make it easier to find/claim the assets after my death or incapacitation (morbid!).
Credit scores are hugely over-rated. I refuse to play that game. Life is so much easier if you don’t go into debt to buy most things (a house is a very logical and good exception)
I guess I don’t need to know mine… but for the sake of RJ readers I will find out and document the process 😉