I am a big fan of the Nobuko Takahashi Kakeibo[1] Clinic, an advice column published in Fukuoka’s Living Magazine, and have been reading it for many years. In the column Ms. Takahashi answers personal finance questions posed by Japanese housewives and gives advice on how to deal with the challenges facing their families. It offers an unusually candid look into the personal finances of the typical Japanese family.

In one of her more recent posts, a 28-year-old housewife and mother of a five-month-old baby girl wonders if it might be better to buy a house sooner rather than later.

The housewife writes:

“My husband and I married two years ago. Wishing to devote myself to raising our child, I quit my job and became a stay-at-home mother. Compared to when my husband and I were both working, our income is now half what it used to be. Although I’m somewhat uneasy about our finances, I enjoy raising our daughter and, because our home is a happy one, it hasn’t been hard for us to cut down on expenditures.

“First off, we reduced our pocket money and took a second look at what we had been spending on our cellphones. We seldom, if ever, eat out, and are able to economize by cooking for ourselves at home. Large expenditures, such as insurance are paid in annual installments and we’re trying reduce costs wherever possible. We also put aside a little every month. My husband’s varies by as much as 100,000 yen a month depending on how much overtime pay he earns. Our expenses, on the other hand, are fairly stable at the amounts I have indicated below.

“Recently, my husband’s parents have suggested that we build a house near theirs and we’re now thinking of buying one in the near future. I’ve heard, among other things that the tax deduction for homeowners will be reduced and the tax on property increased, so I’m wondering if we should make haste in buying a home or wait. Also, how much cash should we put down? We’re taking another look at our insurance premiums to see if we can save money there. We look forward to hearing from you.”

Mr. & Mrs. T of Kitakyūshū City

Husband (31), Wife (28), Daughter (5 months)

Income

Husband’s monthly income                                  240,000 yen

Children’s allowance from government                13,000 yen

                                                                        253,000 yen per month

Rent                                                                  58,000 yen

Food                                                                  26,000 yen

Utilities                                                              18,000 yen

Cellphones (2)                                                    15,500 yen

Misc.                                                                    2,000 yen

Medical Costs                                                       1,000 yen

Gasoline                                                            20,000 yen

Entertainment                                                     5,000 yen

Misc.                                                                  15,000 yen

Child Care Related Costs                                       7,000 yen

Husband’s Allowance                                           30,000 yen

Wife’s Allowance                                                  10,000 yen

Wife’s Life Insurance                                             2,000 yen

Education Insurance                                             5,000 yen

Car Insurance                                                       5,000 yen

Total                                                                  219,500 yen

Surplus                                                               33,500 yen

Annual Bonus                                                    960,000 yen

Annual Costs

Car Insurance (2 cars)                                         85,000 yen

Car Inspection                                                   100,000 yen

Husband’s Life Insurance                                    38,400 yen

Educational Insurance                                       116,000 yen

Savings

Husband’s Savings (1)                                    2,200,000 yen

Husband’s Savings (2)                                    5,300,000 yen

Wife’s Savings                                                2,200,000 yen

Child’s Saving                                                   200,000 yen

Before I go on to Takahashi's advice, I'd like to point out that the husband earns a modest annual salary of 3.8 million yen, or about $38,000 a year. The two of them, however, have ¥9.9 million (or $99,000) in savings. According to CNN/Money's net worth calculator, the average median net worth for an American in Mr. & Mrs. T's age group is only $8,525, and $34,375 for his income level. 

Japan is commonly believed to be an expensive place to live as evidenced by melons selling for a hundred dollars each. But in actuality, it can be an easy place to sock your money away. Medical costs, thanks to an excellent national healthcare system are unbelievably low, rent is reasonable if you’re willing to compromise on location and size, public transportation makes owning a car with all its related costs unnecessary, and taxes are not very high.

Takahashi replies:

“Even though your income has been reduced by half, you still manage to run a monthly surplus and have already saved close to 10 million yen. What’s more, you have the goal of building your own home and are putting effort into saving money to that end. Keep up the good work.

“You asked when the best time to buy a house was. Earlier is not always better. It’s important to keep in mind that there are three periods in a person’s life when they can purchase a home.

“The first is when low interest rates, tax deductions, a fall in house prices, and so on make it advantageous for you to buy a house.

“The second is related to your life cycle. You should determine whether it is a good time to move by looking at the start of your child’s entry into a new school or the needs of your parents and so on.

“And the third, is by looking at your personal finances. Can you safely buy a home—have you got enough money to put up front and is your situation stable enough for you to afford to make payments?

“It is ideal when all three of these come together at the same time, but you should at least prioritize the second and third points. In your case, you need to check whether there is a chance that your husband will be transferred in the future, and you should think about your relationship with his parents. You should also look into how much more you are able to save from now on and how much you’ll be able to spend on a house. Until you do that, you won’t be able to determine how much you of a down payment you should make.

“You also need to be careful about rises in the interest rate, reductions in the deduction for homeowners, supply and demand, and so on. A fall in the supply of building materials and carpenters, for example, can cause the price of building a home to rise considerably, which makes it easy for construction companies to cut corners.

“You might want to also take a second look at purchasing some additional life insurance for your husband. If necessary, you can always work full time, but if you add a life insurance policy to your home loan, you can receive up to 10 million yen in the event that your husband passes away. Otherwise, you might want to take out another policy on your husband.”

Whaddya think?

[1] A kakeibo (家計簿) is a family account book. Any Japanese housewife worth her salt (almost wrote “worth her mustard”) will keep a detailed record of her family’s expenditures and keep a the purse strings tight.