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?