Last year, I decided to save money by working at a resort job for two years, starting with 100,000 yen on hand.
I wanted to see if I can save money without having a special skill and the results have been better than I intended.
If I make sure I have money on a surplus at the end of the month, I'm on the right path.
When I started to have some spare money, I started to invest the money. In this post, I will talk about what I learned about long term investing, the main benefit, and the results so far.
We already know from the best seller book, "The Richest Man in Babylon," taking 10% of your income to invest to become wealthy long term.
This basically forces you to have a surplus every month.
I went on to read more finance books, but I still think that's the best answer. Investing 10% to 25% of your take-home pay brings good results over the long run.
How much do I need?
I didn't really want to stress too much to get fast results.
I started by trying to have enough money by retirement age that covers my basic living costs.
So, I used the compound interest calculation from the Financial Service Agency of Japan to figure out how much.
It gave me that investing 30,000 Japanese Yen(JPY) every month for 30 years, which is my retirement at age 65 would give me 25 millionJPY.
I'm generally happy with a lower cost of living than a lot of people in Japan, so I found out 25 millionJPY is more than enough for me.
30,000JPY was generally about 10% of my take-home pay.
Working in the resort, I could've invested more for faster results, but I concluded on 30,000 which is stress free and easily doable in that situation.
Next, I want to share how long term investing is like magic using compound interest.
How much will my asset grow in time?
Many people in Japan like to put their investments in the S&P 500 Index. This has a 10.2% annual average return, so I calculated the annual return at a little more conservative 5% per year.
I calculated how much money I would have if I were to save, and if I were to invest.
I have the results for 3 years, 5 years, 10 years, and 30 years.
3 years
If saved：1 million 80,000 JPY
If invested：1 million 160,000 JPY
In three years, there will be an 80,000 JPY difference.
Free money without doing much but it doesn't make a whole lot of difference.
5 Years
If saved：1.8 million JPY
If invested：2 million 40,182JPY
About 160,000JPY difference.
10 Years
If saved：3.6 million JPY
If invested：4.65 million 8,468JPY
I will have 30％ more if I were to put it on investment than on my savings account.
But next comes 30 years which is pretty amazing.
30 Years
If saved：10 million 800,000 JPY
If invested：24.96 million 7,759 JPY
I would have more than doubled if I were to put it on investment rather than to have it sit on my savings account.
Investing is about long term
Continuing for a long time, the power of compound interest will come into play.
I spent my 20's without paying much attention to money, prioritizing what I wanted to do, (which I don't regret.)
But I also feel that if I had just taken aside 30,000 JPY/month in my 20's, I would've had a big head start than now.
But better late than never.
Even if I'm penniless at 30, the above tells me that I'm still very okay.
What to invest in
Of course, you can't just put your money on whatever Wall Street tells you. The important thing is what to invest in.
After a lot of reading, experimenting, and many mistakes, I learned that a simple portfolio is best.
Here are the 3 ETFs and the ratio I buy from the 30,000JPY every month.
- Gold 40%
- All Country 30%
- US Treasury Bonds 30%
As of now, I'm up 4.9%
As of August 22, 2024 my portfolio is 313,733JPY and up 4.9%. It was doing tremendously well because the Japanese Yen kept dropping in 2024.
I buy in JPY to be converted into USD, and if the Yen keeps weakening the USD rises in value.
In 6 months my portfolio was up 15%.
Now that it is reversing I'm up only 4.9%.
The Japanese Yen has a trend of strengthening. If that occurs, my portfolio will go down.
So, it's better to buy every month at the same price of 30,000JPY.
I googled which date of the month has a chance of being undervalued, and it said 10th-15th.
So I set the automatic buy date on the 14th of every month.
If the Yen is strong on the 14th, it allows me to buy more. If it is weak, it allows me to buy a smaller amount.
Same goes for the ETFs. If the ETFs are in value on the 14th, it allows me to buy more. If it's overbought, then it allows me to buy less.
But it continues to accumulate the assets over time.
Lastly, there's not much I can do with just saving 300,000 JPY for growing wealth, but I'm happy it grew over the last 8 months.
It's just the beginning. This is to be continued for 30 years, and I'll keep updating the results especially when it goes down.
Summary
- Invest 30,000 yen a month and you'll have saved up 25 million yen in 30 years.
- It's okay to be conservative with your investments.
- Forget about getting rich quickly through investments. Instead, improve your own skills.
- Spend money now on your own growth and enjoyment.
- Regularly review your investments and deposit amounts. Don't overdo it.
While investing 10% of your income allows you to give you like a basic income in the long run, the compound interest works very slowly over decades.
So, how do you speed that process up?
I learned that there are 2 important things to do.
- have an emergency fund that doesn't force you to sell your investment
- invest in yourself to earn more
I want to talk about this in the next post!
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Hi, thanks for reading, my name is Ryu Aomi!!
My grandfather worked in the tax office, and my father works as a financial advisor, so I've grown up in a family talking about finance.
Covid led me to pay more attention to my finance and to fund what I love to do, and I want to take note and share what I experienced and learned about finance in this blog.
Follow me, comment, or send me a DM even and I'd love to connect with people that read my posts:)
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