One of my favorite leisure activities is planning my finances on spreadsheets. This started after I graduated from college, when I began to receive a paycheck for work instead of an allowance from my family. I had spent my parents’ money without much thought, but when it came to handling my own hard-earned cash, I felt as greedy as Scrooge himself!
In those early days, I would go home, fire up my old and slow PC, and start plugging numbers into an Excel sheet. I tracked every single purchase I made and set aggressive goals for saving. In two years, I saved up 40% of my income, despite having to also finance the university education of my younger brother. It was enough for me to buy a plane ticket to go to the United States and pay for my first semester of graduate school.
I was fortunate enough to have a generous aunt, who provided me with food and shelter while I was a student. She also loaned me money to cover part of my tuition costs for my next three semesters. After I graduated with my Masters degree, I got a good job in Manhattan. I moved to New York City and started my new exciting career in the financial sector. Ironically, that’s when I began to lose track of my own personal finances.
The price of success
First came the ballooning monthly expenses. I paid $800 per month to share a small apartment with another young woman, who was a graduate student. I never learned how to cook a decent meal, so despite the apartment having a fully functional kitchen, I only used it when I wanted to eat instant noodles. I would mostly dine out or get take out, which ate up to a significant chunk of my monthly income. Home-cooked meals were treats I got when visiting my aunt or my boyfriend (Nomnomhead, now my husband), both really good cooks.
The second thing that took a huge bite out of my income was my additional responsibility of taking care of my parents. My father was dying of cancer and my mother was staying home to take care of him, together with my grandparents. A portion of my income was allocated to cover their medical and living expenses.
Finally, there was the seemingly inevitable lifestyle inflation. My peers were mostly young, single men and women. They would go out and party on weekends. They purchased Starbucks coffee during their breaks. They went on expensive vacations. I spent most of my weekends with my boyfriend, playing World of Warcraft, which at $15 per month was a very cheap form of entertainment. I would splurge on Starbucks maybe a few times, preferring the cheaper Dunkin Donuts flavored coffee. I traveled once to meet my boyfriend’s family. My discretionary spending was mostly on clothes, due to the continuous weight gain from eating too much fast food! Comparing my lifestyle to my peers, I felt like I was living the frugal life and didn’t feel the need to curb my spending any further, despite having a dismal savings rate of only around 10%.
So what happened to my expense tracking? My job was intense and stressful. At the end of the day, I was tired and was often not in the mood to look at numbers anymore. There was also my income – my paycheck in my new job was astronomical compared to what I previously earned in my home country! I wasn’t saving for anything big anymore and there was always something left at the end of the month, so there was nothing to motivate me.
The new normal
Not long after, my father passed away. My company relocated me to Japan and my boyfriend joined me, marking a new chapter in our lives.
We found the cost of living in Tokyo to be even greater than Manhattan. We were shocked at the size of the apartments and the cost of rent. We finally found an apartment but it was half the size of my boyfriend’s place in Brooklyn and the rent was a few hundred dollars more. We also found the food to be much more expensive and it was initially tough for my boyfriend to get accustomed to non-Western food.
My boyfriend and I got married and life fell into a steady pattern of cash outflow. I continued to support my mother and my grandparents. I bought the land next to my parent’s house. We accrued plenty of air mileage when visiting our families. We traveled to some beautiful locations in Japan. We purchased a large flat-screen TV and a piano. We bought some new furniture. We accumulated plenty of digital media, which led to purchase of a 10-terabyte network accessible storage. Computers broke or could no longer keep up with our processing needs so we bought new ones (our study looks like a data center). We were still living below our means since my growth in income outpaced our expenses so we didn’t give it too much thought.
When the March 2011 earthquake hit, there was a corresponding seismic shift in our view of our finances. We flew out of Japan with one suitcase of our belongings during the height of the nuclear crisis, not knowing if we would ever be able to go back. We had accumulated so much material possessions but we had failed to accumulate net worth. Although I still had my job, the disasters were making us consider the worst-case scenarios. When we looked at the amount of money we had in the bank, it could cover only a few months of our regular living expenses. We finally realized we did not have enough.
Fortunately, the worst-case scenario didn’t unfold. We were able to return to Japan after about six weeks. That’s when we got serious about our finances. My Excel spreadsheets came back to life! I had a new goal that was pushing me to spend time once again in front of the computer, happily typing in various amounts as I tried to plan our cash flow for the rest of the year.
My husband opened a brokerage account in the U.S. and began to learn about investing. By the end of 2011, we were able to transfer $50,000 into the investment account. My husband had good early picks like GE and BAC.
In 2012, I found out that my company had a matching plan in an international retirement plan that was available for non-residents like me. When I relocated, I had elected not to pay into the local Japanese pension plan because I knew I wouldn’t be retiring in Japan. I was so angry with myself for not having read the full benefits package. I had missed out on over $40,000 through the years because of my ignorance! My husband was also aghast when he found out but there was nothing to be done except ensure that we got the full employer match that year. At the end of the year, we were able to put in $50,000 into our US investments and we had $30,000 (including employer contributions) in the retirement plan.
The path forward
One of the reasons we were able to save so much in 2011 and 2012 was because the Japanese yen was extremely strong compared to the US dollar. The year 2013 presents us with a new challenge: the yen’s value is falling, erasing our previous advantage. To match our dollar savings in 2012, we have to set aside a greater portion of our income for the year. This has made my spreadsheets invaluable in my cash flow analysis and planning. I look for strategies to meet our dollar targets as well as to get that money into our investment account sooner rather than later in the year, so we get a few extra months of compounding.
We started this blog to help keep us motivated on our path to financial freedom. There is still so much to learn and many ways for us to grow. We don’t know what will come next, but having come to grips with our finances and finally moving forward in the right direction, I’m feeling more positive about the future.