A post from our sister site
I wrote about priorities today on my teaching blog sendaiben. Check it out!
A post from our sister site
I wrote about priorities today on my teaching blog sendaiben. Check it out!
It has begun
Just got the email notifying me that my account is fully operational. It looks good!
We'll see how it goes over the next few months.
And I can't take it back
As I wrote about in the post about my THEO account, I broke down and submitted my My Number to them.
The reason I did this is that without it they would not have opened the account.
I am still reluctant to use My Number if it can be avoided (you can read about my concerns here, here, here, and here).
So I guess this will be my policy going forward. Give out the number in situations where I am the weaker party and need to get something done, and refuse within existing relationships (like with my employer or current bank).
I'm sure I'll be writing about this again :)
My account at THEO is now open and operating. The last few steps to open the account were:
Once you are in the account you can change your desired risk/return. The setting is very simple, just a scale from 1 (extremely safe) to 7 (100% equities).
I thought of going with 7, but if I am going to be paying them a (relatively) large fee to manage the account, I want them to do some more work, so I ended up going with 6:
The proportions are:
The interface is very simple, with the portfolio current value only being shown. It seems like a great way to get started investing without really having to think about it. As the fees are levied on total assets, you could transfer in small amounts regularly to gradually increase the portfolio -in contrast to buying shares through an online broker, where it's better to save up and buy larger amounts to reduce fees.
So far I'm liking THEO very much. This could end up being a good option for non-US residents of Japan.
I'm going to try the service for a couple of months, then write a more detailed review/guide.
An interesting PR strategy
A bit of a diversion today :D
As you know, I am very suspicious of complicated investment products with complex rules that pay large commissions to 'advisors' who recommend them to unsuspecting people.
A reader (who also has a personal finance blog) was recently contacted by lawyers representing a company called RL360 who target expats. They demanded he take down a post describing his bad experience with the company.
Apparently this is the aggressive side of 'reputation management', an alternative strategy to actually serving your customers.
This Telegraph article explains how RL360 operates.
RL360 are also mad at Mr Money Mustache for a forum post on his site and are attempting to intimidate him into taking it down.
I think they chose the wrong guy to mess with, personally.
My take on this? The best way to avoid unfavorable customer reviews is to provide your customers with good service and value.
I guess that's hard to do when you're trying to take as much of their money as you can get away with though ;)
Be careful out there!
Keep it Simple
Making an investment plan is one of the less important things you have to do.
Figuring out your values (or what motivates you), living within your means, earning and saving as much as possible, and automating your finances are all more important than what you do with your savings.
Once you have some money saved up for an emergency fund (2-6 months of living expenses is a good buffer) you can start thinking about investing.
There are a lot of options, but to avoid paralysis through choice I would start with something like a balanced portfolio of stock index funds (for growth over time) and bonds (for stability).
Andrew Hallam goes into the details of this strategy in his book Millionaire Teacher, or JCollins has a great series of posts about the stock market here.
If you are eligible for a J401k account I would definitely look into that. If you are not eligible or have extra money to invest check out NISA accounts.
The key is to keep things simple and not overthink your strategy. Once you have a plan, keep to it and over the next several decades your finances will get steadily more robust.
What do you do to invest?
Two counter-intuitive elements
Investing IS different. A lot of the rules of thumb we normally use to guide us through life don't apply, so unless we are aware of the differences it's easy to lose our way.
Two of the most important differences are action and cost.
Normally it is better to take action. Action leads to results. People tend to regret the things they didn't do, not the things they did.
But in investing, action is often harmful. If you buy and sell shares you end up paying more in transaction costs, bid spreads, and you risk selling at the wrong time.
On the other hand if you sit tight and let your investments grow over time they will have a chance to compound and you won't end up trying to time the market.
The only action necessary is setting up your portfolio and saving system.
Normally, things that cost more are higher quality. If you buy decent shoes, they will last many times longer than the cheaper ones. Buying good quality can save you money over time.
But in investing, higher costs come out of your returns. Paying more for a fund doesn't get you higher quality, it just gets you less profit.
The best example of this are hedge funds. They typically charge 2 and 20: 2% a year and 20% of any profits. Heads they win, tails you lose. I lost a lot of money investing in a hedge fund when I was young and stupid.
The best way to help yourself with both of these behaviors is to invest in cheap index funds. In Japan the Maxis Global Equity ETF (with the code 1550) only costs 0.25% a year and includes thousands of stocks from around the world. It's probably a good place to start your research.
Any other good Japanese ETFs?
The important things you have control over
We have some degree of control over all the things that can greatly affect our lives: relationships, health, success, and of course money.
All of them benefit from mindfulness, from investing time and effort in them. In all of them, prevention is better than cure.
I had a really stressful experience this week. The admin at work sent me an email implying that I would not be able to continue with an important side project.
Faced with the choice between stable, comfortable employment and interesting and potentially much more rewarding work, I felt sick.
I would have to resign in order to continue with my project. Or shut down the project in order to keep getting my regular paychecks. Neither of these was a pleasant option.
I didn't want to give up either of them. It was too early.
My eventual goal is financial independence. For me that means that I can live comfortably entirely from passive income from investments. I want this because I think it will give me freedom. The freedom to do what I want with my time without needing to worry about paying for rent, food, or nice notebooks.
The thing is, we're not there yet. The choice I was suddenly faced with would put us back 5-10 years in our journey to FI, and drastically reduce my quality of life.
The situation is not fully resolved yet, but it's looking hopeful.
This experience, while unpleasant, has been a useful one. Recently I've been getting complacent as my financial plan seemed to be coming together.
This was a nice reminder that we aren't there yet, and perhaps there are some things we can do to get there quicker. I don't want to be as stressed as I was on Monday night again for any preventable reason.
How about you? Can you cope with a drastic change in your employment situation? Would you want to?
Pretty easy, but no US citizens allowed
I just finished my application to open an account with the THEO robo-advisor service I wrote about last week.
It was very easy and smooth, by far the easiest of any account I have opened in Japan.
Starting at the website, you first fill in a questionnaire that generates your recommended portfolio, then click on the link to continue.
There are six steps, starting with checking several boxes including one that says 'I am not a US citizen, green card holder, or dependent of a US citizen'. I guess they don't want to deal with the IRS or FATCA.
You then fill in your personal information, upload a copy of your driving license, and confirm that you have read all the terms and conditions.
It only took me about fifteen minutes to complete the whole process. Apparently they will send some stuff to my address (to confirm it) and email me with the results.
It also seems they have a promotional campaign that runs until the 15th of May giving you a reduced admin fee of 500 yen for the first year (instead of the normal 1%) on the first one million yen.
I'll write another post once I start using the account.
It mainly comes down to doing it
Today's post is not about money per se, but it is about getting more from your day to day.
Recently I've found myself becoming more productive. Or at least, I feel like I am more productive.
This has come from some specific habits I have implemented.
The most important of these are annual planning, using a notebook, and a gamified to-do list.
Annual planning is probably familiar to most people that work in large companies. You make a plan at the beginning of the year, and review it at the end of the year. At work, it's probably just work projects, but I make a personal one including health, relationships, work, creative projects, exercise, habits, travel, bucket list, money, and basically anything else I can think of.
The magic comes from two big effects: thinking about what you want to do and where you need to change your life while planning, and looking back at what worked, what didn't, what made a big difference, and what was disappointing during the review.
I normally write my plan in January and review in December. This is arbitrary but fits in well with the end of year holidays in Japan.
I also write these for my blogs. For sendaiben, you can see an example of a review here, and an annual plan here.
I also write them for this blog, and you can see an annual plan here.
My personal annual plans run to about four pages of A4. I write them in Google Drive, and tend to glance at them every few months as I go through the year.
Using a Notebook
This has been a big one for me. Since I started seriously using a notebook (which basically means carrying it around everywhere and writing in it constantly) I have found ideas come easier and I am much more organized.
I do three things with my notebook. The first is daily planning. I'll write the date, then a list of tasks I want to focus on. Note (ha ha) the extremely important nice pen, coffee, and computer.
Check out Sebastian Marshall's fantastic post to see why this notebook lives next to the computer.
Another is thinking and writing about something. I find putting words on paper really helps me get my ideas straight.
Finally, taking notes in meetings or lectures. I don't tend to review them much, but writing key points down helps me remember them.
When I finish a notebook I read through it to look for missed ideas or unfinished projects, then throw it away.
I prefer plain notebooks with nice paper (buying notebooks is my secret vice) but in a pinch anything will do.
One interesting thing is that since starting to use a notebook I have begun noticing other people with notebooks, and if someone pulls out a notebook and pen my estimation of them will tick up a couple of notches ;)
Gamified To-do List
I have struggled with to-do lists, both paper and electronic versions. The main problem I have is that they get too long and I didn't use them enough. Once they get too clogged it gets discouraging to look at them.
I may have found my solution though. Recently I've been using a site/app called Habitica to keep track of my habits, daily tasks, and to-do list.
Basically Habitica is a role-play video game built around to-do lists. It is surprisingly effective (at least if you have a history of role-playing or playing video games, and I have both).
Habits are things I want to do more of or less of. In Habitica, good habits give you rewards in the game and bad habits do damage.
Personally I found that bad habit tracking didn't really do much for me, so I only use positive reinforcement.
Daily tasks are things I want to do every day. I only have three but they are all very important to me (especially the third, as one of my major goals this year is to get enough sleep consistently).
In the game, doing your dailies gives you rewards, and not doing them does damage.
To-do list is just things I want to get done. The great thing about Habitica is that it is really easy to add things to this list using the smartphone app, then you can curate them later when you get back to your computer.
These strategies are all about being more deliberate, thinking about what to do, and tracking whether it gets done. They have made a huge difference to my life, and I am looking forward to improving them going forward.
I guess it's a bit like personal finance: the key is to become aware and make a start. Spending a bit of time figuring out how to improve your processes could have a large effect on your life.
Are you happy with your planning and tracking system?
Ben Tanaka is a teacher living in Sendai, Japan.