STEP 2

Save a Beginner Emergency Fund

 

What’s A Beginner Emergency Fund?
Save and set aside 100,000 yen for a “rainy day”.
In case something goes wrong, instead of going into debt you can use this emergency fund.
Put it somewhere you can’t access easily so you won’t be tempted to spend it on that holiday or latest iPhone.

What do wise people do with their money in a good season?

Do You Need “Plastic Surgery”?
If you have trouble spending money that you don’t have on credit cards, perhaps you should cut them up!
You can also switch to a “debit card” where the money comes directly from your bank account.
This also helps with budgeting, with a credit card it is like looking in the rear vision mirror.

Credit Card Points
Often times stores or companies offer a “point system”.
Many times it is just a system to get you to use the credit card more.
Be wise and live on the money that you have in the bank, not on what you can repay in the future.

Plastic or Cash?
One of the most often cited studies is one conducted by Dun & Bradstreet, where they found that people spend 12-18% more when using credit cards instead of cash.
McDonald’s reports its average ticket is $7 when people use credit cards versus $4.50 for cash.

Life Insurance
It is a wise thing to take out life insurance to support anyone that replies on your income (eg. spouse, kids) in the case of your death.
A recommended amount is to take out insurance equal to 12 times the income needed each year.
This means the insurance payout can be invested and 8% each year can be drawn to live on, leaving a buffer for the investment to grow and account for inflation.
In most cases the government pension will not cover a families needs (about 150,000 yen / month), so you will need other insurance.

Term Life Insurance vs Whole Life Insurance
Term life insurance is the most simple and inexpensive type of life insurance and is easily available online.
The cost is approximately 1000 yen / month per 10M yen of insurance, and the rate stays the same throughout the whole term.
It may be more expensive depending on your age.
You can decide how long the term should be, but in most cases it is recommended to set the term until your kids are out of college (eg. 20 years)
Whole life insurance is a package of term life insurance, insurance and savings.
It is usually sold in person, has large commissions, and is much more expensive.
In most cases it is best to get your insurance with an insurance company, savings with a bank and investing with a securities company.

Medical Insurance
This is insurance to cover any gap between government health insurance and hospital fees.
Often times for a longer stay in hospital this can be about 5,000-10,000 yen per day or 300,000 per month!
The cost is approximately 2000 yen / month for 10,000 yen of coverage per day and may be more expensive depending on your age.
Most plans also include payments for new or advanced treatments.

Long Term Disability Insurance
This is insurance to cover your loss of income from accidents that prevent you working.
It is more expensive than the other insurances as it is much more likely to occur.
The approximate cost is 5,000 yen/month for a 300,000 yen / month salary, and may be more expensive depending on your age.