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I’ve heard multiple authors talk about the “scarcety mindset” and the “wealthy mindset”, advocating that we should all think like rich people – as if becoming wealthy is something we can just will into reality.

At some level this makes sense. Clearly, some people who struggle financially do so because of poor choices. Likewise, many who have achieved financial freedom have gotten so far because they made the right choices.

If you think “I’m never going to be free… I may as well go play pachinko some more…”, then yes, you probably never will be finacially free.

If you think “I am going to save 30% of my pay check for the next 10 years, even if it means giving up some things”, and you stick to it, then you will probably be well on your way to having a nice nest egg.

The problem is that life is much more complicated than that. Some people are poor, or in debt because of circumstances beyond their control. Other people are born into wealthy families and have everything that money can buy from a young age.

At the very least, I think that “normal” people should look to the wealthy people who weren’t always that way for direction.

Example: Warren Buffet serves as a better example than the Cornelius Vanderbilt, and Ronald Read and Robert Morin serve as a better examples still.

We also need to look for people who have maintained and grown their wealth, and who have reproducible strategies for doing so.

Bill Gates and Larry Page may not have always been as wealthy as they are today, but they both hit upon successful strategies in the technology market when the timing was perfect. Luck also played a big part in their success. This isn’t something the rest of us can easily reproduce.

Likewise, most can’t copy the success of professional sports players, famous actors, or lottery winners. Many people in those categories end up poor (or worse, in debt!) once their income dried up.

In particular, I think the people we shouldn’t copy are the upper middle class. In both Japan and overseas, this group of people has the potential to become truely wealthy – but it often goes untapped. People who have a moderate amount of money often want to look rich – so they spend money on cars, fancy hand bags, designer clothes, and more.

In the book “The Millionaire Next Door“, the authors find that people living in “affluent or white-collar communities” are less likely to be millionaires than those living in blue collor or lower middle class communities.

The main reason attributed to this is purchases of luxury goods by the affluent communities. In other words, they were trying to “keep up with the Joneses” instead of living below their means.

I’ve seen the same thing in Japan in the 1980s. Everyone could suddenly afford more or everything back then, and so a lot of people did. They mistakenly assumed the magic stream of wealth would continue forever, and spent money like it was water.

People who could take the subway bought fancy cars just to keep in their driveways, you saw everything from Gucci sandals to young teenagers with Lois Vuitton handbags. Once it started, everyone around would try to keep up. It was oppulant, decedant, and ultimately grotesque. This kind of extreme “Conspicuous Consumption” has died down for the most part in Japan, but I see it in China now.

Of course, economies can’t grow at that rate forever, and when reality caught up, there were a lot of people who were caught off guard.

Getting back to the point, most of us can only earn so much money, so the real question is how we can make that money work for us. To do that we need to invest it, and to invest it we simply need to not spend it.

Warren Buffet, Ronald Read, and Robert Morin understood this, but their examples might be a bit extreme. Saving every penny you make forever might make you very rich – but it may not make you happy if you end up with money and nothing else.

On the other hand, it’s clear that spending money on luxury goods can quickly make one poor. This doesn’t just relate to the obvious suspects like overpriced handbags and watches, but also things like exspensive appliances, new cars, clothes, and more.

If you buy more stuff in general, and more expensive stuff, then you are just “investing” in things that rapidly lose value.

At the end of the day, most people you see who look wealthy, aren’t. If you have limited income, you can either spend it on looking wealthy, or invest it in being wealthy. The vast majority of people simply can’t afford to do both.

So should you think like a wealthy person? Sure. Think like the Millionaire next door.

I have read many books on personal finance, and some advocate thinking about your hourly rate.

For example, if you earn 300,000 JPY per month and work an average of 160 hours, then that comes to 1,875 per hour.

Further, it is sometimes suggested that if you work unpaid overtime, then that should be factored in. For example, if you worked 180 hours, then the new number would be 1,666 yen per hour.

Some authors even advocate that you should count only take home pay, so if you only actually receive 240,000, then you should divide that by 160 or 180 to arrive at 1,500 or 1,333 yen per hour.

Although I haven’t seen it mentioned, I suppose you should add in your bonus payments?

The point of all of this is to see what your time is worth. I think that’s a fine goal. It reminds me of the “per unit” pricing on supermarket labels.

• If someone you know makes a lot more than you, but works more nights and weekends, then this will help you feel a bit better about getting paid less.
• If you are the one working all of those nights and weekends, this will let you see if all of that extra work is really worth while.

This can also be a good thing to keep track of over time to make sure you are moving in the right direction – up.

Then I see it taken too far.

For example, one popular blogger says that if you make decent money, then you shouldn’t clean your house. After all, paying a maid to come and clean your house once per week might cost only 5,000 yen, and it would take you 2 hours to do it.

The idea is that if you make more than 2,500 per hour, then those two hours would cost more 5,000 yen of your time. You’re better off “saving money” by paying someone else 5,000 yen.

A similar argument is made for labor savig devices such as robot vacuum cleaners and diswashing machines.

After all, if you spend 30,000 on a robot vacuum cleaner and it saves you from an hour of vacuuming every two weeks, then it saves you 26 hours per year. Theoretically, that’s 65,000 yen of time you got back – for the low, low price of 30,000 yen!

There is a problem here, though. If you are a freelance web designer, lawyer, or some other time of professional who can actually use those extra hours to earn more money then the argument might hold. Most people aren’t, though.

For example, the average salaryman in Japan works with flex time, or fixed hours, and either way has deemed overtime. They would have to work 30 or 60 hours of overtime per month before they actually start getting paid for it – and that’s assuming you were that busy, and the company would approve the overtime.

Likewise, managers and executives don’t typically receive overtime at all in Japan. They are the ones likely to have the highest hourly rate, but they don’t actually get paid by the hour.

Sure, indirectly, putting in more effort may mean that you do a better job, receive a better rating, and get a larger bonus or a raise – but this is a very indirect connection.

Likewise, I have often heard it said that the time you save could be spent on self improvment. That’s not wrong – but again, taking a course in English or getting your project management certificate doesn’t guarantee a higher salary any time soon.

Chances are, if you don’t have time to do these things, you can make the time by watching less youtube, spending less time on social media, or giving up some other low value activities.

So sure, I advocate for buying a washing machine and some other things to alleviate household labor – but the idea that it’s always okay to pay for someone else to do something just because they get paid less than you do simply doesn’t make sense to me.

Unless you can actually bill the hours you spend cleaning your house, cooking, hanging up your laundry, or vacuuming your room, then at the end of the day you are just convincing yourself that it’s okay to spend more money.

Spending money means saving and investing less money, which means lower wealth.

This seems to me to be a trap that middle income peopel fall into.

1. Low income people don’t even consider paying someone else to do their work, and know they can’t afford fancy toys.
2. Actually wealthy people with more money in the bank than most people make in 10 years – well they can pay others to do things for them and buy all the toys they want without it affecting their wealth in any material way.

It’s the people in the middle who start to think they are “worth more” than others, and should start outsourcing their life to the lowest bidder.

Don’t get me wrong, I can see the appeal. I don’t love vacuuming or scrubbing the floor either. I also think that maybe it isn’t a sin to call in someone to help you clean every once in a while – just recognize it for what it is. It’s an extravagance, not a sound financial decision.

It’s been said that humans are not “rational”, but “rationalizing” – which is to say we will often decide what we want and then come up with a reason why it makes sense.

At the end of the day, money spent is money gone. If you paid 5,000 someone to clean your house every week for 1 year, that would be 260,000 yen per year.

If you realistically could have earned more than that by using the time saved, then great! If not, you just lost 260,000 that you could have used to get out of debt, pay down some of your mortgage, fortify your emergency fund, invest, or spend on other luxuries.

So should you calculate your hourly rate and keep it in mind? Absolutely. Should you use it to justify spending yet more money? In many cases, probably not.

How can it be useful? Well, say you are looking at buying a new toy – say a smart phone. For example, as of today, the iPhone 17 Pro will set you back 179,800. If you make 300,000 per month, it’s tempting to think “Oh that’s less than a month’s pay”, but if you look at your effective hourly pay after taxes and social insurance, you may see that you actually need to work over 119 extra hours to afford the phone. Besides that, it’s that much less you can save or invest. It you look at this number and decide it’s worth working for three solid weeks and giving up the investment opportunities, then that’s up to you – but at least you’ll be making an informed decision.

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