Life Changing Money

Let’s call it ten million yen

Personal finance can seem overwhelming at first. There are so many moving pieces, details, and jargon. And then there is the language barrier. And your Japanese friends and family are likely to try to discourage you from embarking on such a risky endeavor.

Truly the hardest thing is to get started.

If you do manage to get started though, you gain momentum, you start understanding things a bit better, you see changes in your financial behaviour, and you see results.

So getting to grips with this could literally change your life.

I’ve seen this time and time again here at RetireJapan, either with a reader, a poster on the forum, or a coaching client.

And of course I also have seen my life transformed. Fifteen years ago I was living paycheck to paycheck, spending too much, not saving or investing for the future, and constantly stressed about the next bill.

Now in almost all areas of life, money is not really a factor.

This isn’t because we have more money than god, but rather because we have a much better understanding of what is important to us and what is worth spending money on, as well as more money than we probably need.

A challenge

So I would like to issue a challenge to you. If you have not done so already, consider making your goal to save and invest your way to ten million yen in investments.

Why ten million? Well, in part because it is a nice round number.

But it is also large enough to be a motivating goal for most people. And large enough to make a real difference to people’s lives. Going from zero invested to ten million invested will transform your relationship with money.

Provided it is invested in something sensible, that money will also grow on its own -to twenty million, forty million, etc.

And the process of saving and investing your way to ten million will teach you everything you need to know about your relationship with earning, spending, saving, and investing. It is by far the most effective way to improve your understanding of personal finance.

For many people this will seem impossible. When your existing salary doesn’t seem enough, how could you possibly save and invest a multiple of it?

The path to ten million

The answer is slowly, step by step.

The first step is to open a separate bank account for your savings. Then start putting a small amount of money in there every month. Even a couple of thousand yen is enough. The important thing is to make this a habit, so you never miss that payment. Do it on payday every month.

When you have some money open an investment account at an online broker. Rakuten is a fine choice. Buy something sensible (a low cost diversified index fund like this one would work).

Open a NISA account so you don’t have to pay taxes on your gains. Open an iDeCo account to lower the amount of income tax you pay.

Don’t do this all at once, you’ll get stressed and give up. Just take it step by step.

Each step will take you closer, and your motivation will rise. You’ll find yourself changing how you think about money, and what you spend it on.

And then, you will reach your goal. Ten million yen in investments. Money will no longer be your master. Paradoxically, you’ll find yourself thinking about it less. Money worries and stress will likely decrease or disappear altogether. The future will seem brighter.

It all starts with that goal. The first ten million yen.

Whether it takes you three years or thirty to get there, it is a journey worth embarking on.

And if you have questions, you can always ask in the forum.

16 Responses

  1. All very true. And if the investments can be made to happen automatically each payday or month, it becomes that much easier to stay on the glidepath to success. Not only does the money automatically go into the investment account, it also prompts one to maintain a household budget without even thinking about that money.

  3. Is your one million yen goal including drip investments and money made from your investments or what you put in only?I am close to the ten million yen mark! I am realllly hoping to hit it by the middle of next year!

    With only my NISA (I have a tsumitate account) and my iDeCo, it would probably take over a hundred years to reach it though. So I have been throwing any extra money into my index funds and dividends which has really helped to shorten the time.

    1. Ten million. Total invested 😀

      I would have thought that iDeCo and tsumitate NISA maxed out would get you there in about ten years, even without any other investments…

      1. My iDeCo is maxed at 12000 a month and tsumitate NISA maxed out at 33300 per month so it would def be over 10 years, right? Or is my math totally off here?

        1. You’re right! My ‘off the top of my head’ estimation was a bit off -turns out it would take just over 13 years at a conservative rate of return of 5%.

          You’d have to make just over 8.5% to get to 10m in ten years. But although I wouldn’t count on that I don’t think it is that unlikely…

          1. Oh whew! Thought I was doing something wrong or that my iDeCo contributions were somehow off.

            I tend to calculate on the conservative side as not to disappoint myself when I crunch the numbers. So far so good this year….

          2. Absolutely. I use 4% for my spreadsheet, which means I am usually pleasantly surprised at the end of the year 🙂

    2. (“Long time listener, first time caller!” — LTL/FTC)

      First: To the original poster: Congratulations! That is a very real, tangible accomplishment. Keep up the good work. If you are open to share, let us know some of your emotional and financial ups’n’downs during your journal.

      If anyone is unfamiliar with “drip investments”… usually it means “dividend re-investment programmes”. In short, *most* stocks (and ETFs) will pay a quarterly dividend, about 1-3% annual yield. (Why “most”? Many pension funds are not allowed to investment in equities that do not pay dividends. As a result, nearly all listed companies try to pay a minimum of one penny/yen dividend.) You can “tick a box” with your broker to ask them to immediately re-investment dividend payments into the same asset. Example: If you own an S&P 500 index-tracking ETF (hint: VOO by Vanguard), each quarter a dividend is paid. If DRIP is enabled, your broker will immediately buy more shares of the ETF when the cash dividend is paid. While this is a tax-imperfect, it is still a nice “set and forget” option!

      Maybe Ben or someone else can comment about the impact of DRIP upon historical returns. There is _some_ research that says the re-investment of cash dividends is a significant portion of historical returns.

  4. What about those who haven’t saved and are on the brink of their 70s but have assets they could sell (such as a holiday house abroad)? What would the approach be to generating income for the next 25 years (too optimistic?), high dividend stocks? 5 year bonds? or what?

    1. Hopefully they would have at least one state pension as an income floor. 70s is not a great time to start investing because you don’t havea lot of room to make mistakes and figure things out.

      I would be inclined to be very conservative, try to keep working/earning for as long as possible, and be very stingy with spending cash down.

      But this person would need to figure out what to do based on their own circumstances, personality, and abilities…

      1. Thanks for the reply, Ben. Perhaps it’s better to discuss this in a Forum. This person has both state and private pensions in Japan (pretty modest compared to cohort in Europe). This person is also working part time, though income last year dipped ¥1,000,000 because of covid. Also, roughly ¥25,000,000 sitting in a bank account overseas after the sale of a former marital home.
        The stock or bond selection would be aimed at income from 10 to 15 years ahead. Just get a Rakuten account or similar and choose all funds for growth at the moment but switch to ‘guaranteed’ income from bonds/divident stocks when no longer able to work?

  5. Would you include in the mix money invested in property – ie property that is either appreciating, or (in Japan) getting rental income?

    1. Sure, but I’d probably only include the net -deducting any mortgages/home loans from the value of the property.

      It’s just a mental exercise though, interpret it however you want 😉

      And of course it is fairly unlikely that someone would get to ten million and then stop. At that point they’d be firing on all cylinders and ready to hit the next waypoint!