No upper limit
We talked about the three elements a while back, and about saving/spending last week.
Basically the three elements of personal finance are earning, saving/spending, and investing.
Saving/spending is the base skill, because if you don’t have control of your spending/if you can’t save money then it doesn’t matter how much you earn -you’ll spend it all.
Likewise if you don’t have any savings to invest that’s a dead end too.
But once they have gotten spending under control the best thing most people can do is to increase their earning ability. This is because there is only so much you can cut from your budget, but there is no limit to how much you can earn.
There are basically three main ways increase your earning:
- Develop your career
- Work on the side
- Grow passive income
For most people, working on their career will be most effective. Getting promoted, getting a raise, changing to a better-paid job will all yield long-term benefits. Unfortunately it can be difficult to negotiate salary in Japan -many employers work off a scale and don’t make exceptions. In that situation a job change may be necessary in order to level up.
My career in Japan has been in English teaching. I started as a JET ALT, then after three years became a private ALT working for the city (same pay and conditions as JET), then after a year because a JET supervisor working for the prefecture (four days a week with a higher salary), then lost my job at the end of the fourth year and ended up doing part-time university teaching for a year before getting my current full-time university job. I’ve been here eight years now.
There were a few things I did to develop my career. Volunteering for extra work, leading workshops, writing things, applying for jobs, networking by joining professional groups (ETJ and JALT), getting a second MA in TEFL, getting Japanese language qualifications (really important in my experience if you want to stand out).
Working on the side can provide you with not only money but also experience and connections which can feed back into your career.
Since my second year in Japan I have always had a second (sometimes a third/fourth) job. Some of the things I have done include teaching privately and at English schools, writing lesson plans for a dispatch company, running an English school with my wife, interview exam testing, exam marking, conducting weddings as a celebrant, writing textbooks for an international publisher, writing graded readers for a Japanese publisher, presenting for various publishers, teacher training in Japan and abroad, teaching part-time at university, writing for newspapers, and now running RetireJapan. Without these jobs (particularly the weddings while my stepkids were in high school and the part-time uni when I lost my job) my family wouldn’t have been able to make ends meet some years.
However, many employers forbid working outside. If you’re in that situation then creating passive income streams might be a better fit.
Investing is the most obvious passive income stream, but we’re going to look at that next week. Other forms of passive income include publishing things such as writing, music, or art. The internet has made it really easy to find customers/fans and sell your creations. Creating and monetizing a website is not easy but if you are successful you can create not only passive income but also an asset you could sell.
I have written a couple of ebooks and self-published them on Amazon. It was surprisingly easy to do, although they haven’t really done very well (I make a couple of hundred yen a month off them). The RetireJapan Guides are doing a bit better. The RetireJapan site is growing and becoming a bit of a hub for personal finance in Japan.
Growing your income can be incredibly powerful, particularly if you manage to avoid growing your spending.
Diversifying your income is also important as it gives you a safety margin. If all you have is your main job, what happens if you lose it? As long as you have other sources of income, even losing your job is not as serious as it would be otherwise.
Right now I have a salary from my main job, passive and active income from RetireJapan, and passive income from investments. My goal is to be able to live off any of the three.
I’ve got a long way to go 😉
It’s very easy to be cynical about earning, writing it off as impossible for someone in your situation or coming up with reasons why it wouldn’t work. Growing your income is hard and requires commitment and work, but I think it’s worth it in the end. If nothing else, going out there and hustling is a great way to increase your knowledge and skills.
How about you? How have you developed your career, side work, and passive income?
My side gig has taught me the “true” value of my work. I built it from the ground up, and, unlike my day job salary, I really feel the connection between my efforts and the reward, which I feel was key to my understanding of the value of money
It does not generate much, but has taken lots of effort. But it was also lots of fun. I estimate it has contributed to a total of 10% to 20% of my current wealth, and very often when I’m thinking of spending some money, I ask myself: “imagine if that side gig was your only source of income, would you really buy that thing?”
Conversely, my career has developed itself, despite few efforts on my end to grow it. I feel my promotion/salary raises are not directly related to my efforts or my results, which makes it difficult to “value” the money’s worth. But it has contributed to most of my wealth.
Passive income is slowly taking over. In recent years, passive income from my investments + my side gig has been bringing money comparable to my salary, which is incredible.
That’s a really good point. Trying something entrepreneurial is an incredible way to learn about value creation and service. It can be extremely tough but also extremely rewarding.
I think people who are only employees can have a big gap in this area.
I thought teaching pay was really bad these days. Even at Univ. Hard to make a descent living teaching at univ and there are many looking for work like that – what is it at now 400-500,000/month?
The pay is a standard scale. At forty, a lecturer, and with eight years of inching up the scale, my yearly gross salary is just over 6 million.
I could choose to teach some part-time classes and easily add another million or so to that.
I think it’s a pretty good deal if you can find a good position 🙂
Wow. Japan wages have really gone down. 6m gross is around Y400,000/month after paying all the ku taxes the sheety pension and health insurance etc – I had 20 years of NET months of Y1,200,000 – thankful for that as I don’t see it anymore. That was teaching, interpreting and privates. The golden days are really over in Japan.
15m net a year? I’d only need two or three years like that to be set for life!
I think the good old days were over by the time I got to Japan in 2000 -guess I missed them completely 😉
Pay has actually gone down while I’ve been here: 250,000 a month used to be the floor, but there are plenty of jobs that pay less than that.
On the other hand, it’s not (just) what you make, it’s what you hold onto 🙂
Mattej — I think it’s more accurate to say that wages haven’t gone up after decades of deflation. I was paid 250,000 a month for my first teaching job in ’88. It was easy to find extra work in the bubble era. I got hired over the phone a couple of times!
Ben, As always a good read. Please enlarge on your work as a Celebrant. Are Gaijin Celebrants in demand?
Hi Mark
I think the golden age of celebrants is probably over. I stopped doing this once we could get by without it (plus I don’t think my current employer would like it). However, I think this would make a good ‘only in Japan’ blog post 🙂
Thanks for the suggestion, look out for it in January or so.
Yes. I agree that wages are stagnant but those high paying freelance gigs are gone.
Glad I saved a few m usd as I don’t see Japan being a money maker these past few years. I have friends at Amazon and Apple working their butts off for 12m gross and after taxes and apt not worth the stress.
Japan is just great healthcare for me now and will keep PR but lack of great paying positions makes me want to leave and enjoy a really fun city and make money from investing. Late 40s is too old despite being N1 and great degree and experience. Same with Qatar and other past big slot machines. Our time and health rank first and with bad job prospects I simply don’t see a reason to stay in Japan. It was 90% about the money for me. Not married etc.
Thankful for the payoff days but I don’t think they will return. One life and so many places to live and experience still.
Great quarter of a century but I know too many people married here trying to get 400-500k a month if they’re lucky. The rest were shipped off to HKG and SIN with 20m pocket salaries annually.
Holy cow, I must have been born a couple of decades late!
Imagine being able to pocket a cool 15m or so annually before taxes, and then investing as much as possible into a low cost indexed fund.
Just one decade and it will be time to go into early retirement.
You and me both, Desmond 🙂
No sense in dreaming of what might have been though. Back to the grindstone.
Now comes the time to invest. For the past 25 years it’s been more enjoying travel and fixing up house overseas and playing Forex. Now, I am learning investing and this blog has been a great asset regarding passive income – started late in the game but at least it’s a start. Need to learn more about funds as I am a single stock man right now.
Right, Japanese job market has been dead for years. If I would not be in pharmaceutical industry and do not own my business, I would have been long gone to Singapore too.
J-tax laws are very favorable to a business owner though, because LDP is full of business owners. You can start a business in Japan, then you get a lot of perks.
Completely agree about being self-employed/business owner. The things you can do with deductions and pre-tax income seem really unfair compared to salaried workers.
My wife runs a small business, and I am planning to be self-employed once I leave my job.