FW-93 -- The Frugal Challenge: Living on a Single Income in Japan

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J@pan Inc Magazine Presents:

* * * * * * * * F R U G A L W A T C H * * * * * * * *
A weekly roundup of how to be frugal in the world's most
expensive country to live (unless you read this!), written
and compiled by Wendy J. Imura.

Regular edition, May 8th, 2006 Issue No. 93
+++ INDEX

- The Frugal Challenge: Living on a Single Income in Japan
- Credits

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***** The Frugal Challenge: Living on a Single Income in Japan *****

Dear Frugal Readers,

Today I thought I would address a topic near and dear to my
heart: how to survive on a single income in Japan. Those of
you that know me, or have visited my company website, might be
scratching your heads. Indeed, we are single income family
now - and that single income is mine! My husband, while assisting
with our translation business and investing activities, has taken
over the majority of childcare duties and is a self-proclaimed
"sengyo shufu" (or househusband). He's even blogging about it!
(http://stayhomedad-dream.seesaa.net/) Check it out - where
else can you read in Japanese about the dearth of diaper-changing
stations in men's bathrooms?

All personal details aside, I think learning to live on a single
income, or at least strategizing for it, is a vital skill for any
one (male or female) to learn. For whatever reason, many families
have a season where they go from being DINKs (double-income, no kids)
to SINKs (single income, no kids), SIKS (single income, kids), or
even NINKs/NIKs (no income, no kids/kids). Even if you are single now,
learning how to live below your means is a valuable lesson.

So, what's the single most important thing you can do to prepare
for living on a single income? PLAN, PLAN, and PLAN some more. If
you are a married couple living on two (or one and a half) incomes
now, are you aware of how much income and expenditures you have
every month? Do you know how much savings you have? What about debt
(both in your home country and in Japan)? Until you have an accurate
idea of all of these factors, don't even think about attempting to
scale back your income. My past writings have covered how to do
this, but I recommend keeping a daily accounts book (kakeibo) to
get a grasp of how much you spend, earn, save, and invest.

So, let's suppose you've got a good idea of your family's present
financial situation, and you're planning to shift to a single income
for a period of time. What's the next step in the plan? Break out
the spreadsheet software, or even just a piece of notebook paper,
but your next task is to budget. Make two columns: Column A for the
two-income budget, and Column B for the one-income. Write your
two-income status total POST TAX earnings at the top of column A,
and your one-income status (be realistic now!) at the top of
column B.

Then start subtracting, beginning with your fixed costs. For most
families, the means: rent (housing loan), car loan, any additional
debt repayments (student loans, etc.), parking fees, health care/pension/
and resident taxes (if not automatically deducted by the employer),
newspaper, Internet connection fees, education costs, and any other
fixed expenses. Unless you make some dramatic lifestyle changes,
your fixed costs are unlikely to alter radically. Then start
subtracting variable costs such as utilities, food expenses
(including meals eaten out, drinks, carry out), clothing,
transportation, daily goods, and leisure. Your variable costs
usually have some "wiggle room" for cutting. After making all
the subtractions, look at the difference in the amount left over
in Columns A and B. If your column B "leftover" is in the red,
then you probably need to start making some cuts.

First, however, it is important to realize a few vital points.
Japan's public welfare and taxation systems are still modeled to
favor single-income families. When you shift to a single income,
it is important for the non-wage earning adult to become registered
as a "fuyo kazoku" (dependent family member) of the wage-earning
adult. In practice, this means making a declaration of the fact
(i.e. you have quit your job and have no income) to the relevant
authorities: the wage-earning adult's employer and/or the local city
government.

There is a gray area in terms of income, however: in order to be
considered a dependent for tax purposes, you must meet the four
following conditions:
1) you must be a legal dependent (spouse or child) of the
wage-earning taxpayer (no common law spouses)
2) you must be living with the taxpayer in question
3) you must earn LESS THAN Y380,000 annually
4) you may not be independently employed filing either a blue
(aoiro shinkoku sha) or white tax return.
For terms of health insurance and pension purposes, the income of
the non-wage earning adult must be less than 1.3 million per year
AND be less than 1/2 of the wage earning adult's to be considered a
dependent. (See http://next.rikunabi.com/qa/04/04/5025.html)

If you are making the shift to one income, it is vitally important
that you make the necessary arrangements to have the non-earning
family members (children included) listed as the wage-earner's
dependents. This not only consolidates and reduces the family's
health insurance, pension, and tax obligations, but it also
qualifies the family for a number of benefits from the company and/
or city (such as reduced health care costs for children, "kodomo
teate" welfare payments for children, housing benefits, and others).
Sadly, the non-wage "full-time" wage earning adult should be
equally careful to limit their income to under the limits listed
above - straying over them can mean a start to independent health
care, pension, and tax payments again, which effectively negate or
even exceed the benefits of working above. Note, however, that
these systems are rapidly changing in Japan, so try to stay
abreast of current developments.

Finally, what are some other helpful hints? Before you make the
actual shift to single income status, I recommend living as if
you've already made the shift for a few months before you actually
do. For example, if one of you is pregnant and will be quitting
their job after the baby is born, spend the time before the
birth being frugal as a family. Live on the income of the post-
baby wage earner, and BANK THE REST. Regardless of the circumstances,
you will need a cushion of cash for unexpected events when you
make the shift.

Second, start learning to do without and be content.
Certain costs, like meals eaten out, dressy clothes, taxis, and
leisure expenditures, will naturally decline if one does not have
to leave the house to work. Still, it's hard to resist the urge to
indulge once in awhile, particularly if things get trying at home.
In this case, it's important to look at your budget and find out
which expenditures give you the most "bang for your buck," or
joy for your money. For me, high-speed Internet access and a good
haircut are worthy luxuries. However, we have done without
dinners eaten out, new clothing, babysitters, vacations, health
clubs, or cable television in the last eight months. It all depends
on our individual priorities, but fund these "joyful expenses" first
and cut the stuff you care less about. It makes "doing without"
easier.

While it can be a challenge, living on a single income in Japan,
and thriving on it, is indeed possible. You simply need to know
the system, plan ahead, and maintain a good attitude! Good luck!

Frugally yours,
Wendy J. Imura

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Written by: Wendy J. Imura (frugalwatch@japaninc.com)
Edited by: JI

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