Foreigner's Finances

I’ve been talking a lot lately about the importance of educating yourself about money before you start investing and saving for retirement.

Money education shouldn’t follow investing so if you have any interest start today. The benefits of even a little money education will pay-off huge in the long run.

I started learning about money after stumbling upon some personal finance blogs via Lifehacker. I decided to try out some books those sites suggested and I became enamored with the topic.

It sounds ridiculous, but those books opened my eyes to a whole new side of money that I never knew existed.

Here are 5 short reviews of those personal finance books that I read when I first started. I would recommend these books to any one and will always hold them close to my heart for everything they did for my wallet.

I would love to do full reviews, but with a lack of libraries in Japan I’m out of luck.

In the meantime enjoy the 5 micro-reviews!

The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich

The one that started it all. I was a naive 21 year-old and attracted to the “Millionaire” in the title, but the book was surprisingly simple and flipped on a hundred light switches in my head.

Author David Bach introduced me to the paying yourself first – taking a certain percentage of your paycheck – maybe 20-35% – and automatically saving that every time. No excuses, if you do this consistently your money will grow over time and you’ll be thankful you never skipped a paycheck.

This book prompted me to start tracking my money and introduced the idea that people knew how much was going in and out of their accounts – I literally had no idea and never once tracked a penny before this book.

Verdict: A great starter to make you excited about money and the future.

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On Thursday we took a look at why Americans working abroad can’t invest in a Roth IRA and how to avoid double taxation on foreign income.

We learned you don’t have to pay taxes on your income while working abroad. Great! But how do you save for retirement without access to tax-deferred accounts like 401ks and IRAs?

Unfortunately, you’re hands are tied as a foreigner working abroad – at least compared to our friends in America with access to 401ks and IRAs.

You still have the option of investing your money in taxed accounts in America through a broker like Vanguard, Schwab, E*trade, or Zecco but you don’t receive any tax benefits and have to pay taxes on your gains and dividends.

These accounts don’t require you to be in America so you’re more than willing to set one up to start your retirement savings.

Retirement seems far away, but the sooner you start, the easier it is to properly save. Don’t let the absence of tax-efficient accounts scare you away from starting your retirement savings.

A taxable account can be a great start for your money and then when you eventually return home, you can take your progress and continue on with a IRA or 401k.

Here’s what you should know before you invest, and some options if you choose to take the plunge into investing for retirement.

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There are a lot of big purchases in our lives – TVs, laptops, phones, iPods, Kindles. A lot of the time we think we can’t live without these items for more than a couple of days – maybe a week at most. Often if they break or wear down, we immediately go out and buy a replacement without thinking.

But for people who still receive some presents on Christmas or birthdays, having a little patience and the calendar on your side can lead to big savings with these big-ticket items.

Here’s how Corinne and I saved $750 on a laptop using this savings tip.

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“[Chinese women] under 32 have an effective savings rate of zero.”

This quote comes from an article from Financial Times (via Jezebel) highlighting the 21st century yue guang zu or “spend-all-your-salary clan” women of China.

These twenty-something, working-class women are spending the bulk of their monthly paychecks on glamorous items like clothes, jewelry, expensive restaurants, and clubs with no care in the world. Their false confidence is solely based on the belief that their lives are better than their parents, and that their paychecks will continue to rise as time goes on.

The article highlighted one woman’s spending habits, “she spends at least 70-80 per cent of her salary every month – but towards the end of the year, it creeps up to 100 per cent or more”.

Unfortunately, the excessive spending habits of the yue guang zu are all to similar to many people in America. It’s important to spend your hard earned money on the things you love, but spending like these girls do as a therapeutic act will only lead to disaster.

Here’s 6 reasons why you shouldn’t save money like a young Chinese woman.

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2010 is here along with new resolutions and hope that better times are ahead. Unfortunately, history shows we’re not too good at sticking with our new year’s resolutions.

According to the Fox affiliate, Fox50.com: “By the end of the year, [ ] nearly 97 percent of New Year’s resolutions won’t be kept.”

It’s also shown that what Americans really want is to do better with their money in 2010. According to US News & World Report only reducing stress (65%) was a more preferred resolution to saving money (63%) this year.

So 63% of us want to improve our money situation, but only 3% of our resolutions will succeed. Pretty grim numbers.

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The envelope system is a popular budgeting tool that allows you to easily keep track of monthly expenses and limit spending in certain categories. I was initially attracted to the envelope system for its ease of use and suggested it to my girlfriend for our monthly food expenses.

When she arrived in Japan in September we agreed to split the food budget 50/50 and I thought if we each paid in advance to a monthly envelope we could avoid any arguments about money. Our first month is in the books and it was a great success. Here’s how to organize the process and what we’ll do to tweak it in the upcoming months.

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Last week we explored the numbers behind credit card debt. This week we’re going to take a look at how compound interest works in your favor by giving you more money for free.

With the ups and downs of the economy over the last twelve months, it’s difficult for anyone to know what to do with your money. Invest in the market and ride the roller coaster, or keep it at home where you can see it and no company will steal it?

The historical returns of the market, mixed with inflation, shows that keeping your money under your pillow isn’t worth it and sometimes you need to take some risk. Inflation has averaged around 3% a year so your money is losing value everyday it sits in your wallet or in a safe at your house.

The power of compounding interest is something that cannot be ignored. At first, it sounds like another boring financial term like dividend or exchange-traded fund, but compounding interesting is your best friend, and when you see it in action it really changes your mind about keeping your money in a safe at home. Picture your money giving you free baby money as a thanks for putting it in a savings vehicle.

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I have a good amount of friends who are headed back to universities across America this month so I came up with my three  money-saving tips for college students. The savings I managed to come up with blew me away. I actually looked at the total and thought no one is going to believe that number, but it shows how much money can be easily wasted if you don’t pay attention to where it goes.

These are tips that can easily be implemented in your life and the savings that follow will allow you to stop worrying about buying the new Madden or a dinner at a nice restaurant.  Hopefully you can take these tips and plug the money holes before it’s too late.

Here is my money saving list:

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Japan is a closed culture. The people tend to stick to themselves and rarely speak out or do anything that would shed light on an individual. I once read a quote about the way Japanese people view the rights of an individual, “In America they say you have the right to free speech. In Japan, they say they have the right to silence.”

Being conservative has had its disadvantages for the Japanese society as of late. The birth rate is declining and a lack of family time due to excessive work hours has plagued the economy. Japanese workers are also not using their paid work holidays and have too much money saved. A large percentage of the countries GDP is made up of spending, and with the Japanese not using their cash, the country struggles to progress.

Too much savings? How is this possible?

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I wasn’t expecting to write a post about this topic tonight, but money stories tend to pop up out of nowhere.

My girlfriend is arriving in Japan next Saturday. We’ve decided to make a long weekend out of her arrival in Tokyo since September 19-23 is a national holiday.

We looked into different accommodations for our time in Tokyo. Hotels were out of the question due to high prices. We looked into CouchSurfing, but we didn’t want to burden anyone with two pieces of luggage and didn’t want to constrict ourselves to a stranger’s schedule.

We settled on staying at a hostel. There are hundreds of hostels in Tokyo, and like any city, they vary in price and quality. I did my research through some third-party websites that specialize in finding hostels in big cities. These sites are really helpful as they organize all of the information and create a simple template for finding a hostel in a city.

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