by David Bach
Recommended by Natalia Roschina (http://www.health-for-all.com)

I have just finished reading this, and it has changed my life. I have not bought “Smart Couples Finish Rich” yet by the same author, but I guess it is the one for couples to read.

No matter how frugal you are, go and buy it if you want to change your attitude towards money.

I got richer even before I finished reading it. How? I started paying myself (before I pay my staff) instead of constantly investing my salary into the business. Wow! Regardless of my company’s situation, I can now finally afford to redecorate my house without feeling guilty!

Frugal Hive says:

Answer 1

If you have any assets abroad, you might consider using a lawyer who is familiar with international law. There is a list of lawyers who speak English on the American Embassy website. If you’re not American, you might ask your embassy for a referral.

You might consider hiring a lawyer close to your age, so as the years go by, you can continue to get advice from a perspective close to your own — this is true when selecting a financial advisor, too.

Answer 2

If you are talking about a home that you bought here in Japan, you could set up your will through the koushou yakuba. They will ask you about assets abroad, but only to determine how much to charge for their services for writing up the will. The more assets you have, the more they charge you for their services. You may want to think twice about how you handle that.

If you are talking about planning for assets abroad, and want to include both your Japan and US assets in one trust, you may want to go the international attorney route.

It may be easier and cheaper to have one trust for your US assets written by a US attorney (int’l or not) and one trust/will for your Japan assets written here by the local koushou yakuba.

If you have business going on abroad (at least in the US), for example, a rental property, and find you may need legal services from time to time, I would recommend joining PrePaid Legal Services. Their direct marketing agents sell the memberships, but just go through their corporate offices in Oklahoma.

Frugal Hive questions and answers are taken from the Frugal Japan mailing list. If you have a question about living frugally in Japan, subscribe to our list and ask the Frugal Hive!

Practically speaking, it works like this: Sellers of securities like stocks, bonds, forex savings schemes, and other investments are now required to provide (at least once a year) clear explanations *on paper* of how their products work and the risks involved. Sellers must also ask clients what the purpose of their investments are (growth, savings for retirement etc), and are also obligated to be forthright in advertising these products as to the possible risks investors face (i.e. they might lose money!) in purchasing them.

This all emerged out of both the 2006 Livedoor scandal and a string of fraud cases involving elderly and/or other unsuitable investors being sold questionable products that clearly didn’t meet their needs, resulting in many billions of yen in losses. I personally heard the sad story of an older ‘friend of a friend’ who lost close to 10 million yen in foreign exchange options trading, which someone told her was ‘guaranteed’ to make money. Options trading, a rather complicated investment vehicle, is certainly not where a beginner should start.

So, where should a beginner investor look to put their money? What is safe? What has the best long-term performance? One of my favorite websites, Get Rich Slowly offered some excellent advice on the subject which can be boiled down to one word: indexing.

What is indexing? Essentially, this means placing your money in funds (or a portfolio) that track a particular target index, which is called a benchmark. The fund simply aims to achieve the same performance as the benchmark it tracks. Suppose, for example, that you want to invest in US stocks. You have a few choices:

(1) you can research one of the thousands of companies listed on the New York Stock Exchange and other markets,

(2) you can choose one of the tens of thousands of actively -managed mutual funds (i.e . you pay a fund manager to actively invest the money for you),

or

(3) you can buy an index fund which tracks a typical US stock index (such as the Standard & Poor’s 500). If you chose the latter, you would not only save money in fees (on average, you pay 3.1% *more* for actively managed funds), but may also enjoy better returns over the long-term.

For some extended reading on why, take a trip to this 53-page PDF file.

(Yes, I’m asking you to read [or at least skim] a 50+ page document on investing. Why? If you are serious about making money investing in a simple manner, you’ll have to do a little research. Most people, interestingly, spend far much more time investigating their next PC or car purchase than their investments.)

After reading up on indexing, doing some financial planning, and determining your desired asset allocation, it’s time to start shopping for funds. If you have a US address or bank account, you can most likely set up an online brokerage account and purchase one of the funds recommended in Transparent Investing file. I recommend this approach, from a tax perspective, for US citizens. If you do not have this access, then you can ask your local broker to find you an index fund that tracks either a Japanese index (there are many Nikkei 225 or TOPIX ‘rendogata’ funds) or one for an overseas market. The term ‘index fund’ is known in Japanese in its katakana version (indekkusu faando), or is sometimes mistranslated as ‘toshi shintaku’ (which is the general name for an investment trust). Be sure and specify what you want!

If you are interested in the Vangaurd Funds listed in the PDF, check out Monex Securities. It is, apparently, the sole distributor of Vanguard Funds outside of the US, and offers a small cap index and total stock market index fund. It is a Japanese low-cost online stock brokerage that also offers a full range of other investments. Regrettably, there appears to be no English language support.

Those using this information for investment purposes do so at their own risk.

© 2007 Wendy J. Imura.

by Mary Hunt (obviously)

Mary Hunt is a reformed credit card shopping addict that has discovered a simple and effective way to both pay off debts, and live life debt-free. Her books (the “Debt-Proof” series) and magazine, The Cheapskate Gazette, have been life-changing to millions of people. Her Rapid Debt Repayment Plan (RDRP) is especially recommended for those in Japan hoping to pay off a lot of credit card debt or school loans.

by David Bach
Also available in Japanese: Kashikoi Kappuru wa Saigo ni Warau

A simple, though US-focused, book devoted to helping couples determine their financial personalities and plan for their future. For Americans, the book will provide practical advice and great ideas for planning for a rich financial future. For multi-cultural couples, we also recommend the Japanese translation of this book. Reading the same book with your partner in different translations is a great way to bridge communication gaps and get “on the same page!” (Literally!)

by Robert Kiyosaki, Sharon T. Lechter
Also available in Japanese: Kanemochi Otosan, Binbo Otosan

A classic, must-read book for everyone interested in achieving financial freedom. Robert Kiyosaki’s book is not so much a frugal information resource as a way of thinking about the most basic things in our lives: employment, the definition of assets and liabilities, and our financial futures. We have read most of the books in the series, and can recommend them wholeheartedly. We also recommend the Japanese translation of this book for those with Japanese partners or friends interested in the same topics. Robert Kiyosaki (a third-generation Japanese American from Hawaii) is extremely popular in Japan, and most of his other books have been translated as well.

Living a frugal lifestyle, like dieting, requires some willpower. Once your will to pinch pennies diminishes, it’s hard to continue. Face it: a spendthrift lifestyle is just plain EASIER. Unfortunately, a lack of certain set frugal habits can create “yo-yo” frugality – much like yo-yo dieting, where the same 10 kilograms are lost, and gained, and lost, and gained. Except in this case, it’s the same 100,000 yen that is saved, and spent, saved, and spent.

So, how can you prevent yo-yo frugality? Well, here are three basic tips, or frugal habits, to get you on a sustainable, healthy financial track. Even a very busy person can (theoretically) implement them.

1) Start an automatic withdrawal savings plan at your Japanese bank, called a “jido tsumitate teiki yokin.”

Basically, the bank withdraws a specified amount of money from your main account every month on a day you choose, and saves it in a separate savings account with its own bank passbook. You can, in most cases, withdraw funds from this account if absolutely necessary at the window (you’ll need your passbook and inkan) or at the ATM (passbook, ATM card, and friendly staff member to help figure it out). I’ve said it before, but I’ll say it again: this is an idiot-proof way to save money. Set the withdrawal date to the day after payday (or the day after your bills are subtracted), and you’ll never miss the money.

2) Are you on a fixed budget for your household expenses?

Would you like to be? Why not try the envelope method for cash management! Essentially, this involves parrying out a set amount of money each month for a certain expense category (say 40,000 yen for food expenses) in an envelope. During that month, you only buy expenses from that category with cash from the “food expense” envelope. If you are, for example, trying to limit Starbucks purchases to 3,000 yen a month you could have a Starbucks envelope, or a “work lunch” envelope. Some people run their entire household accounts this way, but I find it works well for busy folk with a limited number of envelopes (maximum three for me).

3) Are you still using your credit card for routine purchases?

Do you pay it off, in full, every month? If the answer to these questions is yes, then no, then you’ve got some thinking to do. Credit card debt, and consumer debt in general, is unsecured. For those using US credit cards, high interest rates and minimum payment requirements mean you could be paying for that impulse T-shirt purchase from Uniqlo for years after its gone to the great dumpster in the sky. The typical Japanese credit card (with non-revolving debt) is slightly better, but having large purchases show up two months later can make a dent in your bank account. My best advice? Leave the credit cards at home (in the freezer is my favorite place), or if you must use a card, use a debit card.

If even these small steps help you rejoin the frugal bandwagon, then I’ll be happy. I (literally) have a stack five months of good intentions receipts piling up in my cabinets, and no time to sort or track them. Starting with simple, sustainable habits is looking pretty good now.

© 2006 Wendy J. Imura.

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.

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!

© 2006 Wendy J. Imura.