Yen & You: Create spending barriers and start saving today
Yen & You is a new recurring feature written by Austin Morgan, a JET in Fukui Prefecture. Austin enjoys tossin’ a frisbee, playing his guitar, and blogging about personal finance. Check out his blog, Foreigner’s Finances, for more personal finance insight for young adults.
For many JETs, teaching English in Japan is our first job out of college. We’re young adventurers who are starting our journey into adulthood in a faraway land. Let’s be honest: the options are limitless and can be pretty fun. There are shrines to visit, drinks to be had, and other Asian countries to fill our vacation days visiting.
Japan’s a blast, but after a couple of months we tend to settle down and notice that our bank books have taken a hit with all of the extra-curricular activities filling up our lives. Spending in a new country can get out of control and all of a sudden that good-sized paycheck is quickly disappearing every month.
We all want to save a little of our paycheck every month. No one wants to move back in with Mom and Dad when this Japanese journey is over. Learning to properly save can be easy once the right pieces are in place. But until a system is created, you may continue to be disappointed in how much money you have left over at the end of each month.
I learned about creating savings barriers from Ramit Sethi over at I Will Teach You to Be Rich, where he has an informative write-up about the psychology behind savings. It’s not about will-power and trying harder, but about creating a barrier to spending that allows yourself to save. This barrier is a way of inconveniencing yourself and your schedule with the goal of saving more money every month. By making it a little more difficult for you to access your money marked for savings, you will leave it alone and allow your money to grow.
Until this barrier is set up, your paychecks will continue to disappear and you’ll continue to scratch your head wondering where your money went.
Place a Wall Between Yourself and Your Money
Ok, so create a barrier. Got it. But how do you go about doing that in Japan?
Here are the steps I took to create a barrier for myself. I have found this to be exactly what I need to help me save money every month.
- Open a savings account at your local post office.
Go to the post office and open a generic savings account. It doesn’t need to be fancy or even pay interest, but it needs to be an account separate from your checking account where your paycheck is distributed every month. If you don’t speak Japanese, take along a friend, supervisor or co-worker to guide you through the start-up process. It should take less than 15 minutes, and this will be your barrier to separate your fun money from your savings. The post office will ask for an initial deposit and then supply you with an ATM card and a bank book and you’ll be on your way.
- Figure out how much you want to save every month.
If you want to get fancy, you can track all of your expenses for an entire month. This will give you the most accurate picture of your cash flow and will allow you to find a savings amount that works for you.
If you’re not interested in spending the time to track your expenses, take a guess. Get a rough estimate of your monthly bills, spending, and loans and add a category for savings. At first, start with 25,000 or 50,000 yen to make it easy and get the savings started. Any money put aside is a step in the right direction. Make sure you account for all your bills so that you don’t shortchange yourself and have to dive into your new savings account for groceries.
- Transfer money once a month.
Visit your checking account ATM after your paycheck has cleared for the month and transfer your allotted savings amount from your checking account to your savings. Do this one time a month and then forget about it and get on with your life. If you can’t transfer money directly from the ATM, you’ll need to make an extra step and withdraw the savings amount and deposit it into your savings account at the post office.
What works for me is creating an event and putting a reminder into my Google Calendar. On the 22nd of the month (the day after my paycheck is deposited) I receive an e-mail that tells me to transfer money from my checking to my savings account. I don’t have to remember every month to do this, Google reminds me and I can spend my time on more important things like finding the best sushi in Fukui Prefecture.
Welcome to Savings
Your checking account will now be used for bills and free spending money, and your savings account will be where you keep your long-term savings. This is the money that will allow you to travel to Thailand, buy a condo, or start a family someday.
What’s great about the post office savings account is that you still have access to your money in case of emergencies or other unexpected expenses. The money isn’t locked up in someone’s safe, but it’s still enough of a barrier to prevent yourself from dipping into your savings.
My post office is only a five minute walk from my normal checking ATM, but this is enough of an inconvenience that I never reach into my savings.
The logistics may not work for you. If your post office is a twenty minute drive, you probably won’t do this. If your post office ATM is closer than your checking account ATM, you definitely won’t do this because the money is too easy to access.
But if this does fit your situation, the separate accounts will allow you to see your savings grow. You will receive a bank book from the post office that will list your initial deposit and monthly savings deposits thereafter. With this, you can track your progress and see how far you’ve come. After a couple of months of saving, you will gain confidence and pride in your new money habits. At this point you can start increasing your savings amounts and look into other savings vehicles.
Being able to separate spending cash from savings cash is a step in the right direction for your money and will make saving easy and tangible. With great cities, scenery, culture, food, and people around, you have much better things to do with your time, so don’t waste it worrying about your saving percentage. Set it and forget about it!