Thursday, September 25, 2008

personal finance

This week Lulu over at Cherry Blossom Adventures wrote a very honest post about her lack of success in financial matters. A lot of people commented and shared their own issues with personal finance, too, which really surprised Lulu. She really thought she was the only one struggling but I have to say that I wasn't surprised at all. I know that everyone struggles in some way with their money.

At least, I know we do. There have been different struggles at different times in our lives. We have regrets that we didn't do more with our money when we were first married. We cannot believe that we survived those first few years after we moved to Japan. We are constantly thankful for our house and Chikara's current job. But the struggle that stands before us now is saving. I mean serious savings. We do really good in most other areas of our finances and we can save for our trips home and pay for them in cash but the trip takes up most of our savings. I know that I could say here that having four kids on one and a quarter incomes is difficult at the best of times so I shouldn't be so hard on myself but I KNOW that we can do better. We have to and we want to.

Over the last two or so years I have been searching the Internet for good information about personal finance. I have found the Money section of MSN to be overflowing with practical advice and recently I discovered The Simple Dollar, the blog of a man who has spent the last two years digging himself out of a huge financial hole. His story is very inspirational while still being relatable.

So for the next six months we are going to try something new. It's called the 60% Solution Budget. The basic idea is that you spend 60% of your monthly income on necessities: mortgage/rent, groceries, gas, utilities, etc. The other 40% is divided up into four categories: retirement, long-term savings, irregular expenses and fun money. I really feel like this plan covers all of our desires for our money. For fun, on top of that, we're also going to throw into a jar any 500yen coin that comes into our hand and use that to help fund our vacations. I'm going to keep track of it all on Microsoft Money (which I purchased online for $40 last year when it was on sale). I decided not to keep track of the 60% part since we work in cash and I know each week when the money is gone and also where it went.

Although I'm excited about saving for retirement and long-term goals, the reason we really decided to go with this is the plan for irregular expenses and fun money. This is the part that usually caused our carefully planned budgets to fall apart. You know, stuff you didn't see coming or forgot about. For example, next month we have to pay the 50,000yen ($500) application fee so Sakura can go to preschool next year and we're also all going to Tokyo for the Passion Conference which will be about 70,000yen. Both of these are expenses we both agreed on so there's no guilt there but stuff like this would usually bust our budget and then I'd get frustrated, give up for a month or two and then try again.

Another thing that frustrates me about trying to do all of this in Japan is the lack of information and services. For example, no one I know has heard of automatic transfers (a designated amount of money is automatically transferred into savings on payday). The interest rates for savings accounts and certified deposits are a joke (the interest for 300,000yen ($30,000) in a 5-year CD is 0.65%) and people are genuinely freaked out about investing. I want to find out more about what type of retirement plans are available but so far everyone says they just save cash in a very low-interest account. We have a life insurance policy and if Chikara were to die, the loan on our house would go to zero but I've never heard of a 401(k) or RSP type of plan to be a part of. Admittedly I'm just starting to look into this and maybe I'm looking in the wrong places but if all of this is possible then it's very well hidden.

I will probably update on our progress every few months and I hope that besides saving money, I'll be able to learn something through this process. I encourage you to click on the links if you're interesting in reading more on personal finance. There's a lot of great information out there!


Tigermama said...

I love the idea of "fun money"!

I know my husband had an amount automatically taken off his salary and routed to a savings account every month but I`m not sure how he did it. It may be because the airforce has its own bank. I also know that my mil does a lot of investing in Japan. She buys stocks from companies like JAL and Disneyland so it is possible. In any case, I wish you well. It`s so smart to get on top of this when you are young.

Oh and saving 500yen coins is a really great way to save. I filled up one of those cans from the 100yen shop once without even noticing and saved about $1000!

Sara said...

Wow... this post really hits home for me especially since Ryohei got his "real job" and we'll be moving and possibly starting a family soon.

When I thought there was a possiblity of us moving back to the states I started researching all this stuff knowing that as the native speaker a lot of it would be my responsibility... I have to say that I was a little relieved to stay here since I'm so bad with keeping track of things! I think your system sounds great... its best to start forming good habits early so I'm taking a lot of your advice to heart!

Nooh said...

Hi Sarah,
I have been lurking for a while. I think your girls are just gorgeous!
I commented on Lulu's post about this same topic.
Automatic transfers can be organized at your bank. It is called jido-furikomi service or literally automatic transfer service. It is often used for rent payments, but I dont see any reason why you cant transfer to another bank account in your own name. You need to fill in some forms at your branch, and you will need a month in advance to set it up, and a month to cancel it, but it is worth it in the end.
I bank online, and so I just transfer my savings every month using my online banking, as all the details are saved online, so it is just a matter of clicking a few buttons.

A few years ago, I opened a Shinsei bank account for savings purposes. With Shinsei, you can have multi currency savings with the one account. I recently transfered a chunk of savings into aussie dollars, and am jsut waiting for it to go up against the yen again.
Also, while I am waiting my savings are earning me 6.4% p/a, or 4.8% after tax is factor in. I dont recommend that you do this with all your savings, but for your retirement plan it could be an option for you.
We dont have kids yet, but for the first five years of each of my nieces birthdays I deposited 365 dollars each year into a high interest earning (6.75% p/a) account for them. By the time they graduate high school, they should have enough to buy a car or pay for a year or two of college. I struggled through my post-grad degree, working three part time jobs and I never want them to have to deal with that. Nor do I want my own kids to have to, so I plan to do something similar for my own kids.
Anyway, back on topic, Shinsei Bank also has full English call center services, and a lot of material on their site in English. The online banking is also available in English too I think.
I have looked into retirement funds and managed funds, but I dont want to have to commit to a set deposit for the first 12-18 months, which is a requirement for most funds. After that time, you are free to change the amount you contribute, but with a family you never know what could happen next week let alone in 18 months time.
Good luck with your research and choices. Sorry for such a long comment.

Lulu said...

I love the idea of "fun money" too! I am glad you decided to write about this on your blog too- your advice helped me a lot and I am definitely going to try and set up a 60/40 savings scheme when we get back to Japan.

I wish you the very best with your saving plan- hopefully it will all run smoothly.

I also adore the 500yen idea- we are going to start something similar here with australian gold coins (1 and 2 dollars!)

Best of luck

Anonymous said...

Yasu is in charge of all our accounts and he manages to save quite a lot of money per year just by budgeting every week for all our expenses for the year. He puts a certain amount aside for every bill that we know comes monthly, or three quarterly etc, and if there is going to be a one off thing that we know about he will put that into the budge too, so it is saved up for well and truly before the time it's due. We have a weekly amount we can spend for groceries, and we have what ever is left is savings. Doing this we are able to save at least $1000/month. Once you get into the hang of it, budgeting is so easy and it's second nature.

We don't miss out on anything, and if someone gets sick or has to go back to japan for family reasons there is money aside in our savings that can be used without consequence.

The way we work is that we each get a weekly allowance, and any outings or extras we want can be purchased with that money or saved up. It's a great way of going about things and it makes sure that our earnings does not get eaten up with things we want to buy on a whim, because we have our own pocket money for that.