Ben Tanaka can still vividly remember the catalyst that caused him to launch his RetireJapan website in 2013.
“The specific incident that caused me to register the domain and write the first blog post was a conversation with a friend of mine,” he recalls. “He had entrusted his retirement savings to a company in Tokyo and, after talking to him about the details, I was furious. I went home and set up the site that very evening.”
RetireJapan is an English-language portal that he runs offering information on personal finance for foreign residents — an important but daunting issue. Even before having the conversation with his friend, the topic of finances had already been weighing on Tanaka’s mind. Originally from the United Kingdom, he has been living in Japan since 2000 and works as an English teacher in Sendai. Three incidents in particular got him thinking seriously about his own situation.
“I received an inheritance and blew most of it without thinking about it very deeply,” he recalls as the first incident. “I lost my job at short notice and was forced to scramble to keep food on the table and pay the rent, and then our family ended up evacuating temporarily after the 3/11 earthquake, tsunami and meltdown.”
The Great East Japan Earthquake of March 11, 2011, hit Sendai hard as it was close to the epicenter of the coast of Japan’s eastern Tohoku region.
“Each of these (incidents) made me feel that our finances were not where I wanted them to be, and that I would have to learn more and do better in the future,” Tanaka says. “After I lost my job, I promised myself that I wouldn’t allow my family’s security and happiness to be determined by someone else.”
In the six years since he started the site, Tanaka has been learning about retirement issues alongside his readers, adding that the relationship he has with them is very much a two-way street.
“At first I just wrote about the things I was learning about as they came up, but recently most of my posts come from questions I get from readers or from coaching clients,” he says. “I usually do some quick research online or occasionally read a book to find accurate information — which takes me about 10 times as long to do in Japanese as it does in English.
“Often our readers will correct me when I make a mistake or misunderstand something. We have an incredibly knowledgeable and supportive community at RetireJapan.”
While most of us know deep down that we should take action on our financial situations, knowing and doing are two different things. So what does Tanaka think holds us back?
“For most people it is a combination of the perceived complexity, the language barrier and a tendency to put it off until they ‘have more time,'” he says. “Of course, they will never have more time!”
Tanaka’s best advice? He says to “pick one thing to take action on and just do it.”
“Allow yourself to succeed (at one thing). Once you are comfortable with that, pick something else and do that. Take things slowly,” he says. “If you are new to investing, start off by investing a small amount. Personal finance is really similar to fitness in that regard. Small, sustainable changes to your everyday habits are much more likely to lead to success than big ambitious plans that don’t get adhered to.”
Outsourcing management of personal finances to a professional is one option, and it may seem particularly attractive when living in a foreign culture. Based on his reaction to the aforementioned incident with his friend in 2013, it probably isn’t surprising that Tanaka advises caution before entrusting your money to another party.
“Generally speaking, you should be aware of how the person you are talking to is paid,” he says. “The best situation is when you are paying them directly for advice, such as with an independent financial planner. There are few conflicts of interest in this situation, so you mainly have to be concerned with whether the person is giving you effective advice.
“If you are talking to someone who works for a bank or insurance company, then they are likely to prioritize their employer over you, recommending products that are profitable for the company but perhaps too expensive or inappropriate for you.
“One of the riskiest situations is when you are dealing with someone who promises you free advice, who is in fact working on commission. Then, their incentive is to recommend the products that pay the highest commissions, which tend to have the highest fees and hence the poorest performance.”
According to Tanaka, the only viable solution is to educate yourself a little before making any decisions, and he says anyone is welcome to come to the RetireJapan forum for advice.
“We have a very friendly crowd there that know what they are talking about — and as random strangers on the internet, there are no conflicts of interest,” he says.
Tanaka points out that the core audience for RetireJapan are probably those in their 30s, 40s and 50s.
“The key things for them are to be aware that personal finance is something they might need to learn about and work on, and to get started saving and investing at least 10 percent to 30 percent of their income,” he says. “In a way, being competent at personal finance is like a superpower; one with the potential to improve all other aspects of your life.
“Funnily enough, personal finance done right is deathly boring — it makes watching paint dry look interesting,” he quips, adding that this aspect of it is exactly the point. “Once you have sorted your finances out, you should go and do more interesting things with your life instead of thinking about money all the time.”
Ben Tanaka’s 10 steps to financial security
Many people can benefit from implementing some or all of the steps below, preferably in order (visit RetireJapan.com for a more detailed version of this checklist):
• Understand your financial situation: Do you know how much money you earn, spend, save, pay in taxes or spend on coffee? This seems simple but many people don’t have this information at hand — and you might be surprised after you track your spending for a couple of months.
• Live within your means: Spend less than you earn. It sounds simple but many people don’t. This is non-negotiable if you’re hoping for financial security.
• Pay off debt: If you have debt, particularly high-interest debt, pay it off. This is an emergency and should be treated as such.
• Create an emergency fund: You need cash set aside for emergencies. This should be enough to pay for unexpected expenses like flights home for family emergencies, car problems, illness or unemployment.
• Pay your nenkin (pension): Paying into the pension system is a legal obligation in Japan as well as a good idea as it comes with several benefits.
• Get the right insurance: Don’t pay for insurance you don’t need. Make sure you have enough coverage that you do need. Don’t buy products that mix insurance and investments.
• Invest for the future: Start putting money into investments that produce money, either through capital gains or cash flow. Don’t keep all your savings in the post office.
• Choose the right accounts: Japan has some great investment options like iDeCo, NISA, and tax-withholding accounts. Learn about them and pay less in taxes.
• Stay the course: Once you establish good financial habits, continue investing and increase your contributions over time.
• Plan for the future: Ensure you make arrangements so that your family is OK if something happens to you. Make a will and make sure people have the information they will need.
For more information on retiring in Japan, visit www.retirejapan.com.