I think learning to live on a single income, or at least strategizing for it, is a vital skill for anyone (male or female) to learn. For whatever reason, many families have a season where they go from being DINKs (double-income, no kids) to SINKs (single income, no kids), SIKS (single income, kids), or even NINKs/NIKs (no income, no kids/kids). Even if you are single now, learning how to live below your means is a valuable lesson.
So, what's the single most important thing you can do to prepare for living on a single income?
PLAN, PLAN, and PLAN some more. If you are a married couple living on two (or one and a half) incomes now, are you aware of how much income and expenditures you have every month? Do you know how much savings you have? What about debt (both in your home country and in Japan)? Until you have an accurate idea of all of these factors, don't even think about attempting to scale back your income. My past writings have covered how to do this, but I recommend keeping a daily accounts book (kakeibo) to get a grasp of how much you spend, earn, save, and invest.
So, let's suppose you've got a good idea of your family's present financial situation, and you're planning to shift to a single income for a period of time. What's the next step in the plan? Break out the spreadsheet software, or even just a piece of notebook paper, but your next task is to budget. Make two columns: Column A for the two-income budget, and Column B for the one-income. Write your two-income status total POST TAX earnings at the top of column A, and your one-income status (be realistic now!) at the top of column B.
Then start subtracting, beginning with your fixed costs. For most families, the means: rent (housing loan), car loan, any additional debt repayments (student loans, etc.), parking fees, health care/pension/ and resident taxes (if not automatically deducted by the employer), newspaper, Internet connection fees, education costs, and any other fixed expenses. Unless you make some dramatic lifestyle changes, your fixed costs are unlikely to alter radically. Then start subtracting variable costs such as utilities, food expenses (including meals eaten out, drinks, carry out), clothing, transportation, daily goods, and leisure. Your variable costs usually have some "wiggle room" for cutting. After making all the subtractions, look at the difference in the amount left over in Columns A and B. If your column B "leftover" is in the red, then you probably need to start making some cuts.
First, however, it is important to realize a few vital points.
Japan's public welfare and taxation systems are still modeled to favor single-income families. When you shift to a single income, it is important for the non-wage earning adult to become registered as a "fuyo kazoku" (dependent family member) of the wage-earning adult. In practice, this means making a declaration of the fact (i.e. you have quit your job and have no income) to the relevant authorities: the wage-earning adult's employer and/or the local city government.
There is a gray area in terms of income, however: in order to be considered a dependent for tax purposes, you must meet the four following conditions:
1) you must be a legal dependent (spouse or child) of the wage-earning taxpayer (no common law spouses)
2) you must be living with the taxpayer in question
3) you must earn LESS THAN Y380,000 annually
4) you may not be independently employed filing either a blue (aoiro shinkoku sha) or white tax return.
For terms of health insurance and pension purposes, the income of the non-wage earning adult must be less than 1.3 million per year AND be less than 1/2 of the wage earning adult's to be considered a dependent. (See http://next.rikunabi.com/qa/04/04/5025.html)
If you are making the shift to one income, it is vitally important that you make the necessary arrangements to have the non-earning family members (children included) listed as the wage-earner's dependents. This not only consolidates and reduces the family's health insurance, pension, and tax obligations, but it also qualifies the family for a number of benefits from the company and/ or city (such as reduced health care costs for children, "kodomo teate" welfare payments for children, housing benefits, and others). Sadly, the non-wage "full-time" wage earning adult should be equally careful to limit their income to under the limits listed above - straying over them can mean a start to independent health care, pension, and tax payments again, which effectively negate or even exceed the benefits of working above. Note, however, that these systems are rapidly changing in Japan, so try to stay abreast of current developments.
Finally, what are some other helpful hints? Before you make the actual shift to single income status, I recommend living as if you've already done so for a few months before you actually do. For example, if one of you is pregnant and will be quitting their job after the baby is born, spend the time before the birth being frugal as a family. Live on the income of the post-baby wage earner, and BANK THE REST. Regardless of the circumstances, you will need a cushion of cash for unexpected events when you make the shift.
Second, start learning to do without and be content.
Certain costs, like meals eaten out, dressy clothes, taxis, and leisure expenditures, will naturally decline if one does not have to leave the house to work. Still, it's hard to resist the urge to indulge once in awhile, particularly if things get trying at home. In this case, it's important to look at your budget and find out which expenditures give you the most "bang for your buck," or joy for your money. For me, high-speed Internet access and a good haircut are worthy luxuries. However, we have done without dinners eaten out, new clothing, babysitters, vacations, health clubs, or cable television in the last eight months. It all depends on our individual priorities, but fund these "joyful expenses" first and cut the stuff you care less about. It makes "doing without" easier.
While it can be a challenge, living on a single income in Japan, and thriving on it, is indeed possible. You simply need to know the system, plan ahead, and maintain a good attitude! Good luck!
Frugally yours,
By Wendy J. Imura. Copyright 2006.