I had an email from a retirejapan reader yesterday asking how I am 'able to set aside 1.2M JPY for NISA on top of my iDeco and THEO investments'. It's a great question.
I realised I have never gone over my finances in detail here on the blog, and that some readers might find it useful to see what they look like.
I'm not the most frugal person, and I am certainly not particularly good at budgeting or finding tax loopholes. I don't have a ridiculous income, and I don't sit at home typing this under candlelight while waiting for my home-made soap to set. People like that don't need this blog post, but maybe people like the person I was ten years ago might find it useful.
I currently work full-time for a national university as a lecturer (講師). I've been there for nine years and have had small regular pay raises each year. I also get biannual 'bonuses' (withheld salary). My take-home pay (after taxes and social insurance contributions) is just under 300,000 yen a month, and about 1.4m a year in bonuses.
So here is my regular saving plan:
1. 12,000 yen a month to iDeCo. This is taken directly out of my paycheck, reducing my income taxes and local taxes at source. The preferential tax treatment on iDeCo accounts means that it is a good idea for most people to max this out.
2. 40,000 yen a month to THEO. I set up the new withdrawal function for this so that they take the money from my account once a month and I don't have to worry about the furikomi fee.
3. 1.2 million yen a year to NISA. I use pretty much all my bonuses for this, so we just live off my monthly salary and invest the bonuses in June and December. I never consider the money as mine so don't miss it. My previous jobs didn't have bonuses so this was an easy habit to start.
4. Random bits of money into my taxable account in Rakuten. Whenever I have extra cash I throw it into my Rakuten account.
So of my take-home pay of about 5 million a year, I invest about 2 million of it, for a 40% saving rate.
My wife runs her own business (a language school I help out with sometimes) and has a higher saving rate (over 60%). Between us we comfortably save well over 50% of our income.
Why can we do this? I think there are several important reasons.
1. We increased our income over time.
I came to Japan on the JET Programme, but since the second year have always had some side work, from teaching English part-time in the evenings to being a wedding celebrant at weekends, writing materials for publishers, consulting and presenting, and running our school. My wife was working for a national chain English school when I met her (the Bing Bang Boom club) but after they closed down she started her own school and has built it up into a business with revenues of 30 million yen a year.
2. We are now DINKS.
My wife has three kids from her previous marriage, so we had some very expensive years as they went through school and university. Our youngest daughter finished university last year and moved out, so we now have much lower expenses than we used to.
3. We don't spend much on the 'big three'.
We live in a 3LDK manshon we bought last year for 9 million yen. We have a 30-year mortgage on it at 0.5% floating rate, this is currently just under 30,000 yen a month (25,612 on the principal, 4,007 in interest). We also pay manshon fees of about 20,000 yen a month, and our utility bills are around 30,000 yen a month. This is less than we'd pay renting the same place.
We have one car that we bought second-hand for 1.5m in cash 13 years ago. It still runs fine so we'll keep it until something goes drastically wrong with it (I hope it lasts at least another couple of years so I can get an electric car to replace it). We pay parking, insurance, shaken, petrol, and maintenance for this.
I cycle the 14km to work some of the time, and drive or take the train the rest of the time.
We don't do anything particularly special with food, just cook at home and go out once or twice a week. We live next to a Kappa Sushi, so we end up there about half the time :)
4. We've been very lucky.
We've been able to find work we enjoyed and were good at, and we haven't had any major setbacks in life. I got into personal finance and dragged my wife along for the ride.
Luckily we have similar values (neither of us is very consumer-y, we both enjoy eating and travelling) and we broadly agree on our goals, although I am definitely more motivated to save and invest.
So that is a snapshot of where we are at. My wife and I have separate accounts (this feels natural to us) and I actually manage her investments even though they are in her name. We share major expenses like holidays and the new air-conditioner we bought last week. I pay most of our bills.
My goal is for us to be financially independent eventually, ie we won't have to work to pay the bills. If all goes to plan and we continue being lucky this could be as soon as five years from now, if not it will take a bit longer. Either way we are enjoying life and don't feel at all deprived money-wise.
How about you? Are you happy with your finances? What's your saving rate and how are you able to save that much?