If you’re someone who plans on living in Japan long term, you’re going to have to spend some time thinking about your finances and what your goals are for life. It’s one thing to come here and spend a few years to go sightseeing, traveling, and gaining some new experiences. It’s an entirely different challenge if you want to settle down, get married, raise a family, and eventually retire in Japan.

If Japan is the country you want to permanently call home, there are steps you need to take to secure yourself here financially.

I’ve been spending some time over the past few months lamenting over the fact that despite living in the country I want to be in, I’m still not living the kind of life that I envisioned for myself. I have a nice home with an amazing partner that I get to spend quality time with. Those aspects are great, and I don’t take them for granted.

However, I’m still caught in the cycle of living paycheck to paycheck, and so much of my money goes towards paying off debt that I don’t have anything left over to actually enjoy my time here.

Don’t fall into the same trap.

This is a warning for anyone who recently moved to Japan or is thinking about moving here. You’ll end up really unhappy in the long run unless you have some financial plans in place from the beginning.

I’ll go over some things I wish I had done or thought of before moving to Japan in hopes that it’ll help someone else not make the same mistakes that I did.

Pay off All Credit Card Debt

I only have one credit card, but that one card is a pain in my ass. If you have a credit card, do yourself a favor: pay it off, cut it up, and throw it away. It won’t help you if you plan on living in Japan for the rest of your life. It’ll just end up causing you more problems and costing you more money even if you’re someone who always pays on time and is financially responsible.

Here’s the problem with owning a foreign credit card while living in Japan. You’ll end up spending a lot of money in transfer fees to send money from Japan to your home country, and then you’ll also lose a great chunk of yen to the exchange rate. Let’s face it, the yen is very weak compared to the US Dollar and Euros. If you live in the US or Europe, you’ll lose money while sending it back home.

When I first came to Japan, the yen was very strong and I made about $40,000 a year as an assistant English teacher. Over the course of two years I watched the value of the yen decline to the point where my salary is now only worth $30,700. This is despite the fact that I got a better job, work more hours, and got pay raises.

You’ll lose a lot of money through the exchange rate.

I make pretty decent money for a life in Japan. But, having debt back home in the US means I’m essentially paying for two lifestyles. The amount of yen that could allow you to have a comfortable life in Japan would leave you barely scraping by in the US.

Here’s an example. I have a credit card with a $5000 limit. The only thing I used it for was to buy plane tickets once every two years back home to the US to visit my family. The average roundtrip ticket cost me $1400, because I could only get enough time off work during peak seasons in August and around Christmas.

To pay that off, I send around 80,000 yen per month to my American bank account. For anyone wondering, the service I use is Transferwise (Affiliate link). It’s the cheapest and fastest way I’ve found so far to send money between a Japanese bank account and one in another country.

When I first came to Japan, 80,000 yen would have been worth $800 USD or more. Now, as you can see, it’s barely even $700. I lose $100 to the exchange rate every time I need to send money home to pay off my credit card or some other kind of debt.

This doesn’t just affect people living in Japan though. Anyone who lives abroad but is still paying credit card debt or student loans will have to consider the impact changes in the exchange rate will have on them.

So, even if you’re the type of person who pays their credit card off in full each money, you’ll still lose a lot of money over time. You’re better off just using cash like most people in Japan do, or applying for a Japanese card through Rakuten, Amazon, or some other foreigner-friendly service.

Avoid Student Loans at All Costs

For some people, like myself, this advice is a bit too late. We’ve already taken out student loans to cover our education in order to get a degree. But, for someone who’s young and thinking about moving to Japan, DON’T DO IT. Don’t take out a loan for any reason whatsoever.

Unless you’re going after a degree in the sciences, it won’t be worth it. Taking on student loans is a huge mistake.

Seriously, if you plan on majoring in a humanities or arts degree, do yourself a huge favor and go to a community college. Your future self will thank you, and you won’t be at a disadvantage when coming to Japan. In fact, you’ll be better off than most of your peers.

Accruing student loan debt is one of the worst things you could do to yourself if you know you want to live abroad. It’ll always chain you down to your home country, and will always gnaw at you from the back of your mind.

Money you could spend traveling and exploring your new country will instead be eaten up by trying to pay off your loans back home.

I know some people are already thinking, “But my local community college doesn’t offer any Japanese classes. Wouldn’t it be better attending one that has a Japanese or East Asian Studies degree?”

The answer is, “No!”

Majoring in a Japanese related field will not give you any career advantages when coming to Japan. It sounds counter intuitive, but honestly you’ll just end up as an English teacher like everyone else. Not that English teaching is bad, but if you’re going to take on student loan debt, it might as well be in a field that will compensate you enough to pay it off while still living comfortably.

It doesn’t matter how good your Japanese is. Without another skillset you’ll end up teaching or working at Starbucks. Aside from engineering, computer science is the next best profitable field. If you can learn to program AND speak Japanese, then you’ll be pretty set.

Point is, Japanese alone won’t get you anywhere. Most people will have the same level of Japanese or better after living here for a year or two. Spend those four years in university picking up skills you won’t be able to once you’re here.

Find a Job That Pays 300,000 Yen per Month or More

Even if you’re stuck looking for teaching jobs, there are still ones out there that pay a decent salary. Most eikaiwa (English conversation schools) offer somewhere between 220,000 to 260,000 yen a month. This is perfectly fine when you’re just starting out with your life here in Japan. But, these salaries are a bit on the lower end for what you can get regardless of your degree.

If you have a bachelor of arts, you should aim for at least 320,000 yen per month. This is the most I’ve seen offered from private schools looking for English teachers. Sadly, it’s also more than I’m currently making now. I thought that if I stuck with my current job I’d eventually start making that much money. Wow, was I wrong!

I started out making 280,000 yen per month, and after seven years I still haven’t broken 300,000! That’s even after getting a promotion. Earnings for English teachers have slowly been declining over the years.

To be honest, your hard work won’t really pay off in Japan, because the truth is everyone is working hard. It’s one of the most prominent aspects of the Japanese work ethic.

If you put in more hours and more effort you may get thanks and praises, but you won’t get a raise.

The only way to make more active income in Japan is by quitting your job for one that pays better. Otherwise, the rate you’re making now won’t be much different from what you’ll make five or ten years later.

Engineering and Computer Science Related Jobs in Japan

Engineers, programmers, developers, and designers can expect to make significantly more. At a minimum you should look at jobs that pay 450,000 yen per month. Most of these jobs will also pay for your housing and transportation through allowances.

For example, one of my friends is an engineer for an automotive company. Each month he’s given 100,000 yen as an allowance to pay for his apartment. This is on top of the 450,000 that he regularly makes. If he rents an apartment that costs less than this amount, he can pocket the rest of the money. If he rents one that costs more, then he just has to cover the difference.

Know what he did instead? He decided to rent out two of his spare rooms to other roommates, and makes an additional 110,000 yen per month. Not only is his apartment now free for him, but it’s making him a huge profit.

For some workers living in Tokyo where the cost of living is even higher, the allowances they receive is even more. You won’t get this kind of allowance if you’re an assistant or regular English teacher.

Additionally, some companies will pay for your airfare to leave Japan and return to your home country. Usually this is offered once a year, but it’s a good way to visit home each time you renew your work contract.

Create a Passive Income Stream

There are two kinds of income you can earn: active and passive. Active income is money you earn for time spent working for someone. For example, you go to work, teach for 8 hours a day, 40 hours a week, and then receive compensation for it.

Active income is what most people are familiar with. We’re used to the idea of trading time for money. But what happens when you stop giving up your time to someone else? Well, their payments will also cease if you’re no longer working for them. Companies won’t continue to pay you for doing nothing.

Now, think about living and working here in Japan, a country with a declining population. How many years can you feasibly work until retirement? What kind of work will you be able to do? You won’t want to be dancing and singing songs to kindergartners when you’re in your 60s, 70s, or older. How will you support yourself during your “Golden Years”?

All full-time employees are required to pay into the Japanese pension system. The dilemma the country is facing is figuring out how to continue to support its aging population with its declining workforce. Young people now are paying higher taxes than their parents, grandparents, and even great-grandparents.

When it’s their (and our) time to retire, will there really be sufficient money in the pension system left? Only a matter of time will tell, but there are steps you could and should take to secure your future now.

Active income is nice while you’re young and capable of working, but it’s good to plan ahead and generate passive income streams that will continue to flow well into retirement.

Remember my friend that is making money by renting out the spare bedrooms in his apartment? That is passive income. It is money that he earns each month with little to no time investment.

Sure it takes time to find new roommates, but only a few days or so. Imagine spending a week looking for someone to move in, and then that person stays and lives with you for a year. That’s 12 months of passive income for a week’s worth of effort.

Some forms of income are more passive than others. This site, for example, generates income when someone visits the page and clicks on an ad or uses one of my affiliate links. It’s not a lot of income at the moment, but it’s something.

Start a blog or YouTube channel if you haven’t already. Even if you don’t live in Japan, you can begin documenting your journey, and creating resources that could potentially earn you money in the future. Best of all, it’s free to start them!

Right now I make enough money from this site to cover a few of my bills. At the same time, I help out people around the world by sharing information and advice on what it’s like living in Japan. It’s a win-win situation for both my readers and me. But, the main point is that creating content such as websites, videos, ebooks, etc. are ways to generate passive income.

Once you produce such resources, there’s a possibility you’ll receive income from them for years in the future.

There are many online and offline methods for generating passive income. I’d like to look into and share some of them together on this blog over the course of the year. Prime Minister Abe says that Japan is committed to increasing the number of skilled foreigners in the workforce. This will certainly change the economy and open up opportunities that we cannot yet fully imagine.

For now, don’t be afraid to experiment and see what does or doesn’t work. Invest some of your time and money now in a way that you could continue benefiting from in the future. Renting out a room for a few years might be a good idea. After a while, you may have enough to rent out two apartments or even a house.

The market for digital products is huge, and will only continue to grow. You don’t necessarily have to write a book. You could sell photos that you take during your travels, record videos or even create a documentary.

At the end of the day though, income streams won’t mean anything if you’re careless with how you spend your money. People win millions of dollars through lottery tickets and still end up broke. This bring us to our next point…

Make a Budget and Stick with It

Making a budget sounds simple enough, and it’s something we’ve all heard plenty of times. The problem with budgeting is that it takes effort not only to create one, but also to stick with it. Developing a monthly budget and dedicating yourself to it is one of the best financial decisions you could make regardless of where you live.

I love budgeting. It’s a strange thing to say, but I really do. I enjoy working with numbers, and I enjoy having peace of mind from knowing exactly where my money is going and how much I’ll have left over at the end of the month.

Budgeting helps you to keep track of your spending, and realizing when your money is being wasted on unnecessary things. At one point I was buying over 2000 yen’s worth of food and drinks from convenience stores every day that I went to work. That was around $600 USD per month just for one person!

Since then I try to be more careful and cognizant of where my money goes. I’ve been able to cut back my food costs to less than half of that without feeling hungry or like I’m missing out on anything. Budgeting is the best tool for keeping extravagant spending under control.

I have a few budgeting videos on my YouTube channel to give you an idea of what a monthly budget for an English teacher in Japan looks like:

There are plenty of resources you can find online to learn about budgeting. It’s good to just keep it simple in the beginning. Use your budget to build up savings, pay off debt, and then plan your short-term future for the next year or so.

If you ever find yourself a little short on cash, then I suggest reading about ways that you can earn extra money in Japan. A few of the tips can be used to make money in a matter of only a few hours. They won’t make you rich, but they’ll help you get by if you’re ever in a bind.

Final Thoughts

We’ve only just touched on some of the basic steps you could take to being financially stable here in Japan. I’d love to hear what some other people think and have experienced. Please leave a comment if you don’t mind sharing your financial goals!