The best way to make money…

Today I will change a bit from my usual topics on macro economics or trading and instead delve on a seldom discussed topic in Finance, even though it is so central to your capacity to actually build up your wealth.

The best way to make money (check that other post to refresh your understanding on what money is, here I am talking about real money, or Money as Capital, as I call it) is actually not to spend it. I know it is a big secret I am letting out here but as it happens, it is also quite effective.

I stumbled on that blog a few days ago and I strongly recommend it. The blog actually inspired this post and my renewed motivation to post here (even with absolutely no readership so far ^^).

I do not share the author’s view on everything, especially on his reliance on stock market returns to generate a part of the income he considers, at least not on his returns expectations, but most of his advises are really sound and he makes some great point. He is also fun to read and managed to make me chuckle aloud a few times, no easy feat for the internet blasé person I am. That being said, I strongly disagree with his opinion on moustaches, but I would love to share that face to face with him over a few beers.

My opinion on stocks is anyway of little value as being a non-French tax payer, I cannot open a share account in France. Being non-Japanese, it is also difficult to open the same in Japan and in any case due to my current work, it would be a real hassle to make the declarations I would need to make to the Compliance department every time I would be even remotely considering doing anything…

To add a tiny stone to his great work, I will then make a specific topic on the “saving money” aspect where I know the situation well: Japan.

Japan happens to be, in my opinion, the Paradise for money saving:

  • Salaries are quite high, compared to the rest of the world, that leaves a lot of opportunity for saving. Cost of living is high too, but there are a lot of workaround to that. More opportunities to save when you start with a lot than when you start with little!
  • The country is in constant deflation, due to a strongly diminishing population. The central bank and politicians are fighting that, a huge mistake and a huge present to indebted entities in Japan, namely the Banks and the Government, while being a huge disservice to the general population they are supposed to serve. Nothing new here, it is the same almost everywhere. The time of reckoning for those scums will come someday I suppose, but it is not the purpose of the post. The fact is, there will be deflation, at least compared to some other intrinsically valuable constants (oil price, gold price, good companies share) in some aspects, the main one being real estate and land price (at least our of the centre of Tokyo), which can be huge part of saving money.
  • Japanese people simply “hates” second-hand things. On top of that, they also are really conscientious and take great care of their possessions. Finally, they tend to live in small apartments, meaning they have little room to store things and function on a “buy-new-sell-shortly-after-in-excellent-condition” mode, and that for really cheap since other Japanese do not want to buy second hand to start with.
    • Case in point, video games, bought and resold in mind conditions a few days after release, for a 10%-20% discount.
    • Manga and books in general, sold 20 volumes for 500-1000 yen (4-8 USD).
    • Baby equipment: bought a stroller, a car seat, an elevated chair and some baby cloths for less than 5000 yen (40 USD). New, that would have cost well north of 100 000 yen (800 USD+).
    • Sport gear and so forth.
  • Japan has the best public transportation in the world, and unless you have 2 or 3 kids and live country side, you can really live without a car. I have 2 kids now (2nd one born 1 month ago ♥) and, as I may be heading back to Japan soon, I will definitly give the “live with 2 kids and no car” a try.

All of that combined together make for a really high potential saving rate. Which can then be build upon.

I will not mention more that that today, living some for the following posts I consider making on that aspect.