According to the survey of flow of funds by Bank of Japan in 2018,
total household financial assets are 1829 trillion yen (1.646 trillion US dollars as of 2019). It also remarks the percentage of cash and deposits occupied in total personal assets in the world. It is 13% in the US, 23% in England, 33% in Eurozone. In contrast, it is 52% in Japan. When I calculate the actual value of cash and deposits occupied in total personal assets, it came to be 951 trillion yen (859.5 billion US dollars as of 2019).

Whole households in Japan hold cash and deposits about 2 times more than Japan’s economic scale. Countries that have assets of cash and deposits which is 2 times more than its domestic economic scale don’t exist except for Japan in this whole wide world.

Japanese people tend to prefer to save money traditionally by inheriting the way of thinking that “make it a principle to practice simplicity and frugality in everyday life and saving is preventing”. However, the tendency of Japanese people’s savings that has been increased acceleratingly has started from the bubble economy in 1980, I think.

Actually, there was a scene that the household’s holding ratio of securities enhanced and cash and deposits ratio went down at the end of 1980. After the experience of the burst of the economic bubble, the stereotype such as “investing is fearful enough not to touch” was spread around among Japanese people and Japanese economy got straight into depression before they were healed of emotional damages. Moreover, the fact that assets such as stocks and real estates kept going down because of deflation ended up making people tighten their purse strings more than ever.

I just want to introduce what Japanese people do for saving money to survive this zombie economy.

Declare how much you want to save until the deadline you decide

First thing first, before directing your consciousness to what you are going to do for saving, you need to set a goal in advance. Decide a big goal as a final destination and set segmentalized goals based on your present daily life and make action agenda from segmentalized goals.

For example, if you want to save 10,000,000 yen (90,000 dollars ) in 10 years, list up the things to be able to save costs from all your payment and decide how much you finally want to reduce each cost for living and deadline that you finally want to achieve. After that, make action plans in accordance with these goals.

But this is a very disciplined way and it is quite difficult for those who have never practiced frugality to estimate concrete values of goals to reduce costs of living. In this case, you need to understand sensuously how much cost reduction is possible within the range of cultural life. For example, the breakdown of public utility charge in Japan is roughly divided into the basic rate and commodity charge.

Most of the people who start saving costs of living think out how to let utility costs get close to the basic rate. This is how you start if you are an amateur about saving. Then, if you get the hang of it, try to set concrete goals you finally want to achieve.

Give incentive to your goals you set

Deciding what you want to do or what you want to buy after saving money makes your decision get a grip on reality and encourage your motivation for a long time. I want to buy a nice car, you want to use saved money as an initial deposit of a house that you want to buy. Anything is OK.

Even if your goals are still airy-fairy such as a dream you want to live a leisurely life after your retirement, you somehow try to change it into concrete goals. Where would you like to live? what do you want to do? What do you want to buy? How much living costs would you basically like to spend on your everyday life after your retirement? Question yourself and build up your dream from airy-fairy fancy to quite realistic future image.

There are some people who say setting concrete incentive to saving goal connects waste of money which has been saved with great pain. However, money exists to buy something or ease your life. It is very hard for anybody to control your motivation to save money that they have no plan to use.

But, exceptionally, so many Japanese people’s goals for saving are just saving itself.

Start handling domestic accounting anyway

It is most important to know your financial circumstance visually with concrete values. If keeping a set of books, it is quite obvious to find what kind of things you spend a lot of money and this habit of keeping values of living costs on your accounts book makes you naturally suppress against spending money to something.

Visualize your household finance

I heard double income-households can’t take time to review domestic finance because of being really busy. But it is important for both husband and wife to grasp the contents of domestic finance and learn how to manage a house in order not to fall into a situation no money is saved in the savings account when needed urgently.

At any rate, I strongly recommend you to keep a set of books for at least 3 months without an excuse. 3 months is a term that you slightly realize what you really put weight on your living from your collecting values of costs.

However, if you think it very hard to keep a set of books every day, it is preferable to install household accounting apps that help raise your motivation by comparing statistics related to domestic household finance with your present circumstance ,and another one that automatically create household accounts from the data which you input individual categorized items and the amount of money you spent on it

Review your individual expenses

Reviewing your household account, it is good to use data disclosed by public institutions as an indicator of your cost reduction and saving goals. If you observe provided income data close to your household income, you can compare data with your household finance. It is not needed to adjust all items of expenses to an average percentage because a sense of value and personality are different from each other.

Let’s see the example household finance data down below

It is important to get the feeling of how much you spend for each item of the category on a regular basis instinctively. As I wrote, casting a spotlight on how you spend money and controlling your instinctive desire with strong purposefulness to realize realistic aim such as buying a house or saving for education can be a shortcut to reaching the target amount.

Here is a link of a site disclosing data → Family Income and Expenditure Survey by the Japanese Government Statistics
Let’s see the example of a family that consists of husband, wife, son, and daughter.

Family structure
Husband
33 years old, hired
Wife
34 years old, hired
Son
8 years old, the second grade of elementary school
Daughter
5 years old, kindergarten
Housetype
Rental appartment
Monthly income
Husband
300,000 yen
Wife
200,000 yen
Child allowance
30,000 yen
Total
530,000 yen
Monthly expenses
House rent
120,000
Rental parking, petrol
20,000
Food
60,000
Utility
15,000
Education
20,000
Nursery
25,000
Communication
20,000
Entertainment
50,000
Insurance
18,000
Grocery
30,000
Spending money
60,000
Unaccounted for expenditure
20,000
Total
458,000 yen
Balance of payment
Monthly balance of payment
72,000 yen
Savings
Savings
6,000,000 yen (from bonus)
Annual balance of payments
Anual earnings (232,000 yen * 12)
2,760,000 yen
Bonus(husband)
1,600,000 yen
Bonus(wife)
500,000 yen

Let’s compare the profit rate with public statistical data. Profit rate is calculated by dividing the monthly balance of payment (72,000) by monthly income (530,000). The example has 14 percent. In contrast, according to public statistical data of profit rate of households in Japan, it indicates that the equivalent income household’s profits rate is 28.6%. The profit rate of 28.6% is the average percentage. If you want to save more money, you put your effort to save costs of living as the percentage value goes up. At any rate, if you want to buy a house, you should aim to raise the percentage down to 20 percent or more.

If the example household can save 20 percent (100,000 yen ) of monthly household income of 530,000 yen, it can earn 1200,000 annually. If this living standard lasts for a decade, at least, it can expect to save 8 to 9 million yen. But it still doesn’t reach the amount of deposit of house purchase so a husband needs to think out the positive prospective plan of how he can get promoted and raise up salary in the present company or by changing job.

Anyway, this household needs to survive somehow with the rest of 430,000 per month for the time being.

In this example, the values of expenditures tell us this household circumstance. You see the expenses of food, entertainment, and spending money stand out of the entire expenditures of this household.
We can objectively see it may prioritize having an enjoyable time with family and friends and it may eat out or buy takeaway foods frequently. In terms of spending money, this household needs to figure out a way to save outgo less than 1 percent of monthly income.

Create To-do list from the data of household accounts

Needless to say, only finding the fact you spend too much money on something from objective data you created is not enough to improve your domestic finance. Most important thing is to think out how you behave from the conclusion you arrive at from the data and practicing actions you decide.

Prior to creating a to-do list for saving, don’t think out too many things to do because it is said that it generally takes 3 months to establish one habit. Having too many things to do on your hand at one go, your will power outstandingly reduce and you may decide not to do. It is also important to think about your will capacity to keep your motivation longer. Here is the example down below

To-do
how much to save
Set temperture of a heater to 20 degree in winter season and set temperture of an airconditioner to 28 degree in summer season 1,870 yen
Don’t leave an airconditioner and an heater on when nobody needes it 1,300 yen
Change lights to enegy-saving fluorescent lamps or old-fasioned light bubl 1900 yen
Diligently turn off electricity of a room that nobody uses 500 yen
Adjust temperature of the inside of fridge depending on the season and try not to cram too many foods into space. 2,300 yen
Place a fridge with appropriate space from the wall 1,000 yen
Don’t open a fridge frequently and shorten the time to leave the door open. 300 yen
Drop a piece of aluminum foil directly on food simmered in the pot 3,500 yen
Boil a kettle only when needed 880 yen
Adjust strength of fire as flame from a stove doesn’t stick out of the size of the post 400 yen
Start heating a pot after perfectly wiping out droplet in a pot 50 yen
Don’t leave water out when brushing teeth 2,700 yen
Don’t save up water in a bathtub and only take a shower 4,000 yen
Pay attention not to leave shower out 2,800 yen
Wash 2 weeks’ amount of laundries at one go 4,000 yen
Pull off the plugs of the electronic stuff that nobody uses. 2,500 yen
Use water saving packing 12,000 yen

Other to-dos for saving money

  • Let a husband take a lunch box and a water bottle not to eat out during lunch time and not to buy drinks at a convenience store.
  • Study complicated contract plan of Japanese communication companies and take advantage of combination of multiple discount plans.
  • Don’t use money without a specific objective and reduce the value of the expense of “unaccounted-for expenditure ” to null

If you success saving the costs of utility and communication, and reveal the amount of money input in the item of “unaccounted-for expenditure”, you can at least earn 50,000 yen per month if your household is equivalent to the example one.

Considering investment to increase savings

This is not directly related to saving money and creating earnings by somehow saving the costs of living. However, it is also good to increase your assets by investing a few percents of your savings within the range you can take risks. Doing both saving costs and investing simultaneously is a shortcut until you reach the goal you set.

Unprecedented ultra-low interest has been continuing as the Bank of Japan strengthened the accommodative monetary policy which has adopted since the Lehman shock.

It is quite difficult to make funds even with fixed term deposit under the environment of ultra-low interest in Japan. If you’re already worried about your child’s university or college education funds, considering investment is much more realistic than just resting your money in the bank.

Whereas the capital is not warranted in“investment”, a high yield can be expected, which can’t be expected in general savings. It is possible to realize a relatively stable investment by accumulating investment products as controlling the range of share prices.

Investors in Japan can obtain the benefits of the tax break by NISA. NISA stands for “Nippon (Japan) Individual Savings Account”. The maximum rate of investment product you can buy one year in NISA account is 800,000 yen. Investment outlet is the investment trust and stocks. The Outline of NISA is that basically, parents purchase investment products on behalf of children for children’s future education costs. Generally, 20 percent tax is imposed on profit made by investment to the investment trust or stocks but you can create funds without taxation in a NISA account for maximum 5 years.

Principally, until a child of the bank account holder becomes 18 years old, you can’t withdraw money from the NISA account so it is good to invest money for a relatively long term to prepare for educational expenses for a university or a college.

Tsumitate NISA started from January 2018, whose maximum annual possible investment rate is 400,000 yen. Whereas other NISA accounts have 5-year tax exemption term, Tsumitate NISA’s tax exemption term is maximum 20 years (maximum 8,000,000 yen).

This account is suitable for people who want to do long term investment with installment investment trust. It is not really easy to find out one investment product from thousands of ones but Tsumitate NISA is subject to investment products satisfying a certain standard, which is suitable for long term periodic investment and diversified investment. Tsumitate NISA prepares delightful products for NISA users such as the one with no sales commissions and asset utilizing charge during the investment term.

To close

Putting your effort on simplicity and frugality is the same thing as making your living enrich in a sense of spiritual. I was taught by my mother that filling the emptiness inside you with unnecessary luxury items is the behavior to let someone around you notice how poor and lonely your heart is in terms of uneasiness, ostentation and jealousy. Regardless of weather being rich or poor, practicing simplicity thoroughly expresses one’s internal confidence. Simplicity and frugality are virtue for Japanese people. Please make good use of our saving knowledge by all means.

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