No, not the book by Napoleon Hill
My family’s net worth hit a new high this month, despite some large expenses last year. We haven’t done anything different, just stuck to the plan and continued saving and investing every month.
I told my wife, and she said ‘that’s good, but I don’t really think about that money as we never spend it. It’s just nice for peace of mind’.
And we both agreed that peace of mind was priceless, and we were both extremely glad we had it.
Sowing the Seeds
So why are we doing okay financially? It’s actually very simple. We earn a decent amount, don’t spend all of it, and invest the difference (hat tip to ESI Money).
If you’re just starting out, spending is probably the easiest factor to deal with. You can start today, and make a noticeable difference by the end of the month. But there are limits. Cut too much, too quickly, and you can make yourself unhappy.
Earning is worth thinking about. In Japan we might not be able to negotiate our salaries or raises, but we can try to find a better job, or work part-time on the side.
Once you end up with extra cash, pay off any non-mortgage debts (take a look at your mortgage too and see if you can’t get a better deal from your current bank or a different one), save up an emergency stash in a separate bank account, and then think about investing.
Watering the Seeds
Start slowly when you first go to invest. The worst thing you could do is to put too much money in too quickly, get spooked, pull your money out at a loss and never invest again.
Instead pick something sensible (low-fee mutual funds are good) and put a small amount of money into it. Automate it if possible (most online brokers allow you to set up regular automatic investing), and use a tax-advantaged account (iDeCo or NISA are good in Japan) if you can.
Once you are comfortable increase the amount you are investing. Maybe choose something else to invest in. Track your progress, but not too often.
I look at my investments once a month, but a couple of times a year works well too.
Our Garden
We’ve been investing for more than fifteen years, and have tried all kinds of things (and made all kinds of mistakes).
The worst errors involved choosing investments without really understanding them properly and changing our mind later on. The hedge fund was a bad idea, as were cheap Japanese stocks, and cryptocurrencies.
Now we’ve settled on the following investments. We’ll be running progress blog posts for many of these in December, so you can see a bit more of the detail. You can see previous years here.
- iDeCo: low-cost mutual funds (world stocks)
- NISA: low-cost mutual funds and ETFs (stocks, bonds, real estate) and dividend paying single stocks
- taxable account: low cost mutual funds (world stocks)
- cash: we have a fair amount of cash in bank accounts, in my wife’s school, and in the small business association retirement fund
- small business: my wife’s language school may be worth something if we decided to sell
- we both pay into the Japanese national pension (this is compulsory for residents of Japan, but some people seem to have fallen through the cracks) and I pay into the UK state pension on a voluntary basis
The best thing about this collection of investments (that took many years to learn about, get started with, and optimize) is that they take very little time to deal with.
Most of them are automated, and the others probably could be. I would say all of this takes a couple of hours a month, if that.
Harvesting
As my wife says, we haven’t really spent any of our investments yet. If we carry on as we are for another decade or two, we’ll be in a position to live quite well just spending the interest or dividends from our portfolio (and maybe selling off a small % each year).
The main thing though is that this has become routine (it’s almost boring), largely automatic, and (looking at the numbers at least) surprisingly effective.
How about you?
If you need some help with any of this, the RetireJapan forum is one of the best places to get impartial friendly advice. Due to the wisdom of crowds you’ll get a pretty decent answer and, even more importantly, one with no strings attached.
We also have coaching if you need more help or want someone to walk you through things.
If you’re doing okay, what kind of things are you doing? Share in the comments below to encourage others, or if you have questions post them there or in the forum.
That was a great article. I am financially sound even after two stock market crashes, as I designed my own investment strategy. Of course I lost a lot of money. I then got divorced and being human and not a scammer, I paid my heavy child support for years as I made a good salary, so the costs of child support were heavy. I did keep my mansion with its wonderful large roof garden, and managed to scrimp and pay off the mortgage 13 years before the end of the contract date laying out almost $200,000 in cash or so.
So now I just go surfing at Shonan since I decided work was not fun anymore.
Life is good. Time for sushi this evening. Keep your chin up. Life is fun.
Seems like things worked out for you in the end. Surfing sounds good!
Yeah, I am happy with my situation. Easy and fun retiring here. Do not need to be rich at all as long as no mortgage. ¥200,000 a month for two people is enough. ¥300,000 a month lets you get in some overseas travel as well. Cheaper to travel overseas than to travel around Japan at least to Asian destinations.
I’m pretty much in the same situation as you. One thing I did that has improved my quality of life is knock a day off my working schedule. Now, it has meant a slight reduction in income but not in the amount we invest and hence our net worth is pretty much growing as it did. I certainly don’t notice the slightest difference in my financial situation. This site was of huge importance in getting me on the investing tack and now I really don’t worry about financial issues any more. I have that peace of mind you mention. So thanks!
I almost didn’t write this because I know there are many, many people who just can’t see how they will ever get to a stage where they are free of financial worries, and I always worry that writing about money from a position of having some will look smug and insensitive. But, at the same time, there are also many people who can get here and just don’t know it yet. Hopefully you / the forum can help a few of them get their financial affairs on track or motivate some to make the changes they need to make to get rid of paycheck-to-paycheck stress.
Funnily enough my wife suggested that yesterday. We ran the numbers, and it looks like it might work. The plan is now to phase out Fridays, so we’ll teach Tuesday, Wednesday, Thursday as normal, then have no classes on Friday (we can do lesson prep, have meetings, or clock off early), and then classes on Saturday. Reckon it will make the school much more efficient and sustainable (and give us a better work-life balance).
The teachers seemed pretty psyched when we told them about it 🙂
I really agree with knocking a day of work. I negotiated 3.5 day work week for 70,000 less a month. My co workers thought I was crazy as our 3rd kid was on the way. But with the time I finally got money sorted out, learned that investing wasn’t as scary as I thought, moved 1 million yen from my wife’s bank account that had literally been sitting there for 10 years doing nothing, and got it invested in VTI through Rakuten. Started learning programing and BONUS I get significantly more time to spend with wife, baby and two older kids. We have little day to day cash, but with the peace of mind our investment gives us, we are enjoying life more.
Been here 10 years and it wasn’t until I started working LESS that my life progressed more.
That is fantastic. You’ll probably find things get even easier as your investments (both money and skill) build up 🙂
(actually, your story would make a really interesting guest post/reader profile!)
That’s the first I’ve heard of the Small Business Association Retirement Fund. Something to look into. It’s obviously something you’ve found to be more worthwhile (since it’s voluntary) than the (mandatory) pension system. I’d love to see a post detailing your experience with it sometime.
Your wish is my command: https://www.retirejapan.com/blog/the-medium-small-business-association-saving-plan/
Loving the new-found level of power I have, then!
Although I knew you about 10 years ago when I used to live in Sendai and we had some meetings for FRANCA (not sure of the spelling though :)), I only discovered your Retirejapan page earlier this year. After doing my readings and studying, I started my iDeCo, NISA, and put a little money into the Rakurap adviser. I was already having my small side business, have been paying for the National pension system for long time, and follows a strict but not too strict spending policy. So, I want to take this chance to say THANK YOU!
For now, iDeCo is doing very well (almost 15% rise), followed by the Rakurap adviser (about 10% rise). My NISA was mostly in the negative for several months, probably due to my bad choices of funds, currencies, markets and stocks due to inexperience, then add to that the stupid trade war between the Trump and China. Luckily, in the past couple of weeks, almost all items in my NISA wallet turned red as stocks around the world are rallying :). Let us see how things will go over the coming months and years.
If I may ask for an advice from you and your readers, is there any short list or suggestions of stocks or trusts that give nice dividends? I might want to put some extra cash to widen and improve my portfolio, specially for my up coming NISA.
Hey, nice to see you again! Recommend asking in the forum, you’ll get more and better answers 🙂