J. L. Pritchard of All Financial Matters invited me to answer ten questions regarding my new book, Financially Stupid People Are Everywhere: Don’t Be One of Them. I granted him exclusive rights, but offer the following excerpt here with a link to the complete interview:
Q: The bio on your website mentions that you have been living in Japan since 2002. How do the financial habits of the Japanese compare to those of Americans? Any plans to move back to the States?
A: Japan’s government is as troubled as America’s, so we can’t learn any lessons there. Where we can find useful habits are among the citizens, ordinary people managing household budgets.
The big difference is that Japan’s economy is cash based. People save, then buy. In America, too many people buy with debt, then spend the rest of their lives paying interest on that debt as it grows even bigger with more purchases. I’ve come to enjoy very much the handing over of real cash to buy even big-ticket items like a new car, a new computer, and an international plane ticket.
The joy of consuming that way is that it enhances the best part of consumption, which is anticipation. When people buy everything they want right now on credit, they don’t get to enjoy what they bought as much as they would if they thought about the object of their desire for months, saved steadily, and then walked in one fine day and slapped cash on the counter for it. That anticipation part of the process is free, and so much fun.
The use of debt for instant gratification is certainly not free, not fun, and robs people of the joy of looking forward to their purchases.
As for moving back to the states, I’ve always felt that I would one day but I just haven’t wanted to yet. I get back to see my family and friends in California and Colorado a few times per year, so I don’t feel far away. Emailing and phone calling is easy and inexpensive, so living abroad has never been simpler.
Which, by the way, is a great reason to achieve financial freedom. People in debt can’t as easily pick up and move overseas. People sitting on a pile of cash are unencumbered, and can throw a dart anywhere on the world map and take themselves to a place they never imagined. Trust me, life is very different when lived that way, and absolutely wonderful.
I’d like to thank J. L. for this opportunity, and suggest that you read the entire Q&A.
Look insideThe Kelly Letter
In 1977 I went broke. One day in 1984 my wife, Claudia, told me, “The government gets a third and we can spend a third, but we need to save a third.” That’s the smartest advice anyone ever gave me. We’re rich now.
Lee Trevino, professional golfer
Question about Japan. It’s been long understood that Japan is a debt-based entity. Their debt-to-GDP ratio is the second highest in the world, with only Zimbabwe’s higher. Although their personal debt per capita is lower, as you discussed above, I fail to see how they have a sustainable economy with such a high level of public debt. In many ways one could argue that they are worse off than the USA in this regard. Since you live there perhaps you can explain…
What size home do you have in Japan?
When we lived in Hawaii we had a 1000 sq. foot house. It was great – we could not buy anything (but food) as there was no space for any more junk. This small home also forced more interaction among family members.
Today, on the mainland, we have a 3000 sq. foot house packed with junk (23,000 lbs. as of the last move) and everyone retreats to their own private space.
Appreciate the link. Great interview, btw.
Thank you, everybody! Yes, dividing income into thirds is useful for understanding why it’s hard to get ahead, then maximizing the return on that one third that you control.
On Japan’s economy, it’s a mystery. The personal savings rate is what keeps families afloat even as the nation sinks under the weight of zombie banks and the nationalized debt. It’ll probably go bankrupt and start from scratch, but people have been saying that for 10 years. Life is basically good in Japan, high standard of living, with citizens completely ignoring: (1) politics and (2) the stock market. That might happen in America, too. Japanese are baffled by how much Americans pay attention to politics even though society goes unchanged no matter who’s elected. They have a point. Corporate control of government is taken for granted in Japan, so nobody gets excited about elections. The only way they campaign is by driving trucks around town saying repeatedly over a loudspeaker, “Vote for Tanaka. I’m Tanaka. I’m Tanaka. Vote for Tanaka.” That plus polite waving passes for campaigning. Thoughts on issues? What are those?
My home in Japan is modestly sized, but that’s because I’m single, not because Japan lacks large homes. They’re available for those who want and can afford them. However, even the most grandiose Japanese home comes nowhere near the size of an American mansion.
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