And it is a choice
Choose a job.
Choose a career.
Choose a lifestyle,
Choose a really big emergency fund.
Choose whether to spend money on washing machines, cars,
Compact disc players, and electrical tin openers.
Choose good health, low cholesterol, health insurance
And pension payments.
Choose fixed-interest mortgage repayments (or floating ones).
Choose to rent.
Choose to open an iDeCo account.
Choose a NISA
Normal or tsumitate.
Choose an asset allocation
And adjust it as your circumstances change.
Choose what you want to do with your life
Regardless of whether it pays you much money (or any at all).
Choose a dignified retirement
With enough resources to sustain yourself.
Choose your future. Choose wealth.*
Recently I've been doing a bit of coaching and find that many people just need a hand getting started. And by getting started, I really mean taking one step in the right direction.
Almost all procrastination can be overcome by just deciding to work on the task for two minutes. Those two minutes get you started, and blockages can be overcome once you experience some success and get momentum going.
It's the same with financial habits. Do one small thing, stick at it, then feel good enough to try another small thing. And so on until your entire financial life is transformed. It worked for me, and I'm pretty sure it can work for you too.
Choose one thing from the list below (you can start at one and work your way through, or just pick something that looks fun) and do it. Then choose another one. And another.
If you finish the entire list (or have done them all already), you are doing better than I am ;)
1. Figure out how much money you spend/what you spend it on
This is important to know. People are often surprised when they see the real numbers, and it's the only way to understand what your spending needs are/will be in the future. You can do this by writing spending down in a notebook, by using a spreadsheet, or an app like Moneytree.
2. Save up a cash reserve for emergencies
Do you have enough cash to pay to repair your car or your home? To take time off work? To fly to another country at short notice? If not, you might want to put more cash aside. A rule of thumb for emergency funds is 3-6 months of living expenses (not income!), and you will need more if your job is unstable or if you have dependents, and less if you are single and have an iron rice bowl.
3. Open an iDeCo account
If you pay into the national pension (you have to if you live here!), pay income tax, and plan to be in Japan for the long term, this is a no brainer. Open an iDeCo account, pay in the maximum allowed every month, and thank me when you cash out at 60+.
4. Invest extra money in a NISA account
Once you have your cash stash and are saving on taxes with iDeCo, start throwing extra money into a NISA account. If you will only be able to invest up to 400,000 yen a year, use the new long-term tsumitate NISA. If you can invest more, use the regular NISA. Bonus points if you open one for each family member (kids can have junior NISA accounts).
5. Optimize your insurance
People in Japan often pay too much for insurance, and to make things worse buy the wrong kind. Investment substitutes like variable annuities or combination insurance/investments tend to be terrible deals compared to just buying straight insurance and investing the difference. You might need accident insurance or disability cover. Keep in mind the purpose of insurance is to cover catastrophic events you couldn't otherwise recover from. For everything else it might make more sense to self-insure.
6. Learn how to do your taxes
If you do your own tax returns you will learn how the system works and be able to take advantage of deductions, etc. Staff at tax offices in Japan tend to be friendly and helpful, so this is not the painful experience it can be in other countries.
7. Increase your income
Get promoted, get a new job, work on the side, start your own business. If you make more money, save and invest it.
So how are you doing? I have five of those down, and need to get better at the remaining two ;)
At the end of the day though, anything you do from that list will make your life better later on, and if you do one at a time it should be fairly easy to create some new money habits.
Pick something you're not doing and write your goal in a comment below. Mine is to learn more about insurance so I can write about it here :)
* This is, of course, the exact opposite message of the original Trainspotting...