Negative Wealth Bombs

That title there is a take off from another blogger and fellow mustachian, Mustachian Acolyte.  Check out his blog "Towards Mustachianism" here.  He wrote a few months ago about a "negative wealth shock."  I like that term as I think it engulfs the full feeling and meaning of what it is to suddenly lose money.  Be it a lost wallet, a sudden expense, a broken sink, or an unexpected trip to the hospital.  I also like it because I think you could use the opposite, a positive wealth shock, and still express the meaning fully.  Many people when they suddenly have a positive influx of cash are shocked and have no idea what to do with it.  Unfortunately in many cases I think they probably squander it.

Well if wealth shocks are on a smaller scale, say $500 or less, than I just had a "negative wealth bomb" go off in my face.

You see I have to start paying taxes.  Yeah, taxes.  Here's the story:

In Japan, like the US, you have federal taxes.  You also have ward or city taxes.  These are a bit like State taxes.  The federal tax to my understanding is a 5% tax on just about everything (they are trying to raise it to 10% now).

I came to Japan in 2007 on the JET program.  Not only is the JET program one of the better paying jobs in Japan but there are many side benefits as well.  They pay for your plane ticket to Japan and your return flight when you finish.  JET pays for your stay in a nice luxury hotel when you first arrive in Tokyo.  Then for your bullet train ticket (or plane ticket for those in Hokkaido or Okinawa)!  Another hidden, and I think often over looked, benefit of the JET program is you don't pay ward taxes!  Yep!  No city or ward taxes.  Well, okay, your board of education pays for them.  It's not completely free in the sense that nobody is paying them, but it wasn't coming out of my back pocket.

So there I was for three years on JET no taxes.  I also didn't pay taxes back in the USA as I was a bo-ne fide resident in another country.  I left JET in 2010 and came to Yokohama.  I started a regular job as an English conversation teacher at a language school.  Soon after that I was hired to teach high school at a private university owned school.  The pay was much better and the hours easier.  All this time I was not paying taxes.

In Japan your city or ward taxes are based on your previous years pay.  I was on JET for most of 2010 so that year was out.  I worked in 2011 but because 2010 was JET and the board of education paid my taxes I didn't have to pay anything last year.  Now however I am paying for 2011's wages.  Ugh.

Don't get me wrong!  It's not like I was playing hide and go seek with the ward office.  I actually sent them in my equivalent of W2's twice.  But they never got back to me and never sent me a statement.  I just figured "Well I'll keep investing," knowing that this ticking time bomb is sitting right next to me.  Slowly the timer reached zero and now I have to start paying.

This is a big shock to my investing plans which did not include this extra expense.  It's about 6% of my take home pay which is a big chunk.  I feel this leaves me with a few options now.

1.  I can start to work more.  I have a part time gig at my old English conversation school.  If I worked about 10 lessons a month I would start to make up the difference for the newly minted taxes I'm paying.  (I realize that by working more I'm also going to be paying more taxes but at least I'll catch up).

2.  Reduce my expenses.  This is something I haven't written about very much because I feel that I am pretty frugal as it is.  But looking at my numbers, honestly, I feel that I can do better without much reduction in lifestyle but a huge drop in expenses.  Hopefully more on this in a future post.

3.  Do nothing.  I still make more than enough to live on.  The exchange rate is still on my side.  I could just take the hit and end up investing less.

Of course the Mustachian thing to do is a combination of 1 and 2 and that is the path I will strive for.

To be honest I don't mind paying my taxes.  I think Japan is a great country and Yokohama is an excellent city.  Clean, safe, and beautiful.  Japan shouldn't have to change, and so I will.

P.S.  You might be asking yourself "But what if you leave half way through a year?  What happens to the taxes based on that year so far?"  Well actually you are supposed to go to the tax office and tell them you are leaving.  They will then just give you a big fat bill and you are expected to pay.  If you don't, have fun every trying to get back into Japan again.  I have a co-worker who is dealing with this right now.  

May to June Spending Breakdown

You'll notice a new look to the place.  I was doing a bit of house cleaning and noticed that I'm on my way to crossing about 1,000 views.  For me that's pretty big as I don't think I've ever had anything that was looked at 1,000 times.  Because of that I figured I should change things up a little bit.  Also this format will look a bit better with these spending updates.  The graphs I include should now sit nice and center (I think) and not stick out all Frankenstein like like in the old format.  Without anything further let's break it down!

Income:
Job                   ¥321,411
Part Time Job    ¥16,859
School Expense ¥2,000
TOTAL:              ¥338,270

Not too bad.  This is a typical month for me now.  The ¥2,000 school expense came from a text book I purchased on my CC and they school paid me back super fast.

Now for the expenses.  I'm just going to post the graph.

TOTAL:  ¥124,698

Savings Rate:  63.14%

For the year this brings my yearly savings rate to:  47%

I think this is pretty good for being half way through my first every super frugal year.  I'm still taking the trips that I had planned on but I've still stashed almost 1/2 of every paycheck.  Of course my goal for the year is 65% which I'm not quite so sure is reasonable anymore.  Perhaps 60% is a better goal.  Next year with another raise I think 65% could be attainable.  It doesn't mean that I won't try but I'm also keeping my expectations realistic. 

There are still some great accomplishments to be found here.  Let's look at the day to day spending:

What I like about this was the period from May to June saw almost 10 days of zero spending.  If you include days under ¥2,000 it's more than 20!  Meaning I'm getting better at either delaying or completely opting out of purchases.  I think it's this mentality that will help me to amass the stasch capital I need to build up some real f-u money.  One day at a time right?

Why I Don't Miss US TV (or What I Learned About Investing On Accident)

I think that I have said this before but I really enjoy living in Japan.  My job is challenging but not stressful.  The transportation system is, by itself, reason to build a 'stach here.  Oh, and you know what?  The Japanese themselves are pretty nice people.

I have never once seen a fight, even with tons of alcohol involved, between two Japanese people out on the street, in a club, or at a restaurant.  In fact the only fights I have seen usually involved a lot of alcohol and two foreigners.  In general people tend to mind their own business and do their own thing.  If something does come up like a bump here or a dropped something there a polite 'sumimasen' does the trick.  Interactions with Japanese people are also very pleasant.  If I have to talk to somebody at the stations, get directions, or when I'm ordering at a restaurant I am very often impressed with the energy and level of service I get.  Whether the transaction is consumer to business, business to consumer, or just two people the interaction eschews a level of aggression we have, I feel, just gotten used to back in the US.

This summer with be my fourth trip back to the US in four years.  Every time I always run into this difference in culture, and you know what? I'm not so sure that I am a fan of it anymore.  And, don't get me wrong, it's not like some gas station attendant yelled at me, or some waiter was curt when taking my order.  I just mean the way we treat each other.  I see customers get in fights about places in line, and bank tellers tell off customers.  I'm not the kind of guy to say something is right and another is wrong, but I will say when something is more comfortable than something else.  Japan is more comfortable.

My girl friend likes to watch a lot of American dramas like Glee, Gray's Anatomy, and some others (she has learned to watch them outside of my presence because of my complaining so if those are old examples, my bad).  When I catch a clip of one of these shows I am always surprised how different the feeling is from Japanese TV.  The characters are always "fighting" something.  I find it interesting how on a show about a hospital (in Seattle of all the liberal places to set it) that these doctors can be competing with each other for men, status, and whatever other bullshit.  But I guess it's been on TV a long time so people watch it and find something in it for themselves.  The writers know, apparently, what the audience wants (or perhaps what the audience has been programmed to seek).

 Mad Money's Jim Cramer.  A financial analyst.

I don't usually watch investment news and in Japan there are no finance television shows like Mad Money or Squawk Box.  I put finance television show in that last sentence in italics because I had no idea what kind of show Mad Money and Squawk Box were.  But according to Wikipedia Mad Money is a finance television show, and according to this page (warning:  I just simply googled this page, I can't vouch for it's accuracy or overall truthiness) it is number two right behind number one Squawk Box!  If there were a finance television show here in Japan, guess what?  It would probably be really boring.  Let me explain with a juxtaposition.

Recently I watched two clips on the internet about the recent down turn in the stock market.  Both were discussing if the markets were going to rebound.  I won't link the clips because I don't think anybody should watch them but I will say that one was entitled Market Really Is Brewing, Don't Get Scared Out Of Stocks, and the other Stocks Slide On Renewed Economic Concerns.  Google and watch them at your own risk.  Now I am still a novice investor.  I started about six months ago and my 'stach is less than 10k.  I don't know if the information these guys were talking about was on the mark, or if, like most people on TV, they were just talking to waste air and keep themselves relevant.  However, I wasn't even able to get past their aggressive, annoying, staunch attitudes, to get to the heart of their point.  When the fuck did stocks become a fucking sport?  Since when do financial experts talk like 5 year olds out for recess?  Since when do we need a sports center for investing?  It's not gambling, and your not some cowboy shooting from the hip.  I'm sorry, but if you are on TV and giving advice about what people should do with their hard earned money you should put on your big boy pants and talk like an adult.  Oh and take responsibility.  Yeah, if you were wrong get back on the TV and explain what you screwed up or just admit there is no predicting the future and stop giving half truths wrapped in recommendations.  If you can't do that get outta da kitchen.

The reason, I think, we don't have shows like that in Japan is 1) people don't respond to that pumped up, aggressive attitude like people in the US seem to really be drawn to.  Yelling and calling names is viewed as being confident and assertive.  In Japan well spoken and logically supported ideas are what get listened to.  Especially when it comes to money.  2) The Japanese are incredibility risk averse so to get them to invest you can't just blather some shit and expect them to follow, or watch again the next day.  3)  Nobody in Japan, where giving bad advice will lose you your job (as it should if your job is to give good advice), would want to step into that line of fire.

A focus group for the best financial television program.

I think a good financial investing program would actually be very boring.  It wouldn't be about one guy trying to beat another guy with his voice, it would be about the news and how it could effect the market.  What are the Economic indicators in plain English.  Afterwards the decision would be left up to the individual investor (see!  individual accountability is in there too!) to do his due diligence and come to a decision.

Maybe this is too simplistic and would ruin business models for cable news, and internet based financial television programs but it makes sense to me.  I've learned never to watch these financial television programs ever again.  I'll stick with the jlcollinsnh rules of investing:  Spend less than you earn – invest the surplus – avoid debt.  Wow now that is simple, easy to understand, and not covered in bullshit.