When your money grows faster than you can spend it
This year my wife and I made a conscious effort to try to spend more money. We took trips, went to nice restaurants, spent money on ourselves and family.
It’s actually quite difficult to break the saving and investing habit once you grind it for long enough.
But we did pretty well, I think. It’s been a really fun year and we have some nice memories together.
Despite this, our net worth grew by 20% in 2024.
This is not to brag. Anyone with investments did well this year.
And that is my point.
If you are not investing yet, now is the time to start. Last year would have been better, and ten years ago better still. But it’s never too late to learn and take action.
I’m not recommending you suddenly go out and put your life savings into Bitcoin, or Nvidia stock. Far from it.
Instead, open an online broker account. Get a NISA account. Start buying some low cost index funds. Start with small amounts of money and gradually ramp up over time. Learn a bit about what you are investing in. See how it performs over time. See how you react to seeing your investments go up and down.
See your results over the next few years. Save and invest more. Set goals. Make a plan for retirement.
And one day you might also reach escape velocity.
But you won’t if you don’t start.
If you want some help getting started, we’ll be running out flagship personal finance course Your First Ten Million Yen again in February. Sign up here for updates and priority access.
Future you will thank you.
I was wondering if you could explain this a bit more for those who don’t understand the financial numbers.
EG. If you spend 3 million, 4 million, or 5 million a year, how much would that person actually need in savings? Especially for those students of finance who are living on their 300,000 thousand yen a month.LOL
The 4% rule (though going slightly lower is safer) – you can draw that much down from your investments every year and theoretically you’ll never run out of money. So if you were just living off investments, to yield ¥5m per year with 4% draw down rate you’d need ¥125m. I haven’t factored in capital gains tax into that but you get the picture.
It’s a huge topic! First of all, nothing is guaranteed. We’re working off possibilities and using historical data to make projections. The popular 4% rule is based on research and says you should be able to take out 4% a year adjusted for inflation from a stock/bond portfolio and not run out of money for 30 years. This is very conservative though and most people will end up with more money at the end.
At the end of the day you should save and invest as much as you can without making yourself miserable in the present. The process of doing so will teach you more about how things work.
It’s true, for the past 3 years my retirement account has gained more value from reinvested dividends than from my contributions. By the time I start to withdraw I can take out a significant monthly amount without slowing down it’s growth. Great advice!
Congratulations! You may have reached escape velocity 🙂
Hint: try to reach escape velocity well before your 70s… 😉
Yes, after focusing your entire working life on saving and growing your investments for retirement, it is hard to change your mindset to learning to spend and enjoy your retirement nest egg. Also, wise to plan to spend money on things and experiences early in retirement like travel (while you are still healthy enough to do it).
Absolutely. I found the book Die with Zero really helpful with this.
Doing things while you can because you might not be able to later is so important -and very sobering once you internalise that realisation.
This is a really inspiring post, Ben.
As someone who’s on that path, but still a fair way off, it’s good to see what you’ve accomplished in the 10-15 years since you started (at least, based on what I’ve cobbled together from various posts). It’s surprising what that intentionality x time can do to really change your situation.
Yes, I started thinking about this stuff in 2008, so it’s been about 16 years. Cannot take all of the credit as my wife has contributed a huge amount through her work -it’s very much a team effort, which is why I emphasise getting on the same page as your partner.
The stock market has also been kind.
But yes, I am amazed at the progress we’ve made. Way beyond my wildest dreams.
Well, since you were the person that introduced me to the UK voluntary pension contributions and through that, we discovered that my wife was also eligible, that one response from you on FB will likely (assuming it stays somewhat in its current guise) lead to 100,000s extra in income between us depending on how far beyond 68 we can go. Not to mention that you helped us to navigate setting up our iDeCos and we’re now a few years into that, just crossing the 10,000,000 mark collectively and getting started with NISAs.. You/Your work has had a huge impact on us, so we can’t thank you enough. It’s great to get a glimpse of what our future could look like a further 10 years or so down the road.
That is so good to hear. Congratulations!
My experience is that most people don’t end up taking action, even after learning about things. So you and your wife are doing really well.
Hi Ben, can you share what’s in your portfolio and how much your investments are worth now? We are a couple in our mid 40s living in Tokyo with about 80 million yen in net worth and wondering whether it’s possible to hit 100 million in the next 5 years. The yen is quite weak now which boosted our U.S. dollars portfolio. Thanks.
My portfolio is all in 2 mutual funds: an all-world stock fund and a developed country bond fund. My wife has some individual Japanese dividend paying stocks too. We have a lot of cash.
If your portfolio is 80m yen now and you are adding to it, I would say you’ve got a very good chance of reaching 100m in the next five years (obviously depending on what it is invested in).
Maybe it is already written here but what is the best online broker for foreigners here for NISA and easy to use?
The big online brokers (Rakuten, SBI, Monex) are most often recommended and are all similar. Japanese interfaces only but not too difficult to navigate with Google translate or similar.