How People in Their 40s and 50s Should Review Their Financial Protection in a 'World with Interest Rates'

“I’ve been seeing more news about interest rates lately.”

“Will my mortgage payments be okay?”

“Is it really enough to just keep my money in the bank as it is?”

Many of you may be feeling such anxieties.

Especially when you reach your 40s and 50s, the number of things to consider, such as mortgages, children’s education expenses, and retirement funds, increases all at once.

However, there is no need to be more afraid than necessary.

What is important is not to be swayed by the news, but to know the current state of your household finances.

In this article, we will think together about “how to protect your money” in an era of rising interest rates and inflation, in a way that even financial beginners can understand.

1. How will our household finances change in a “world with interest rates”?

When interest rates rise, it also affects our daily lives.

One thing to be particularly careful about is mortgages.

If you are using a variable-rate mortgage, your future repayment burden may change depending on interest rate fluctuations.

That is why it is important to have the perspective of,

“What will happen to my repayment amount if interest rates rise?”

It is important to have this perspective.

On the other hand, rising interest rates do not only have negative aspects.

If deposit interest rates rise, the money you have in the bank may earn more interest than before.

In other words,

“Rising interest rates does not mean everything is bad.”

The important thing is to know whether you are on the “borrowing side” or the “depositing side,” and to what extent you are affected by each.

2. First, check your ‘personal financial resilience’

When it comes to asset building,

‘Which stocks should I buy?’

‘What should I choose for my NISA?’

people tend to think.

However, there is something you should do before that.

That is a household health checkup.

First, try writing down the following four items.

Even just doing this will give you a clear picture of your financial situation.

For example, a household with a 50,000 yen surplus each month and one with a 50,000 yen deficit each month require completely different measures, even if their annual income is the same.

Before thinking about investing,

‘How much does our household have left over each month?’

let’s confirm.

This is the starting point for asset building.

3. Three points for those with a mortgage to check

If you have a mortgage, try checking the following three points.

1. Current Interest Rates

Is it a fixed interest rate or a variable interest rate?

First, check this.

2. Remaining Repayment Period

How many years are left on your loan?

If the remaining period is long, the period during which you will be affected by interest rate changes will also be long.

3. Can Your Household Budget Withstand an Interest Rate Hike?

This is the most important point.

You do not need to guess whether interest rates will rise.

Even if interest rates were to rise,

think about the limit of what your household can handle.

You should consider that line.

It is not a game of predicting the future, but rather preparing so that you are not troubled even if the future changes.

This way of thinking is important.

4. Is Savings Alone Insufficient? How to Think About Protecting Assets from Inflation

“If you deposit 1 million yen in the bank, 1 million yen remains 1 million yen.”

If you look only at the numbers, that is correct.

However, there is one more thing to consider.

That is the “amount of things you can buy.”

For example, suppose that something you could previously buy for 1 million yen requires 1.1 million yen in the future due to rising prices.

Even if your bank balance remains at 1 million yen, the amount you can buy is decreasing.

This is the decline in the ‘real value of money’ due to inflation.

That said,

‘Deposits are bad. Let’s invest everything’

is not the point.

Rather, what is important is

protecting the money you plan to use. Thinking about ways to grow the money you won’t use for a long time.

in other words, separating the roles of your money.

5. The basics of not letting the new NISA become a ‘scary investment’

When you hear the word NISA,

‘Since it’s an investment, you’ll lose money, right?’

some people might think.

That feeling is natural.

Investments have the potential to decrease in value.

That is precisely why beginners should first learn

‘Investment does not mean you will definitely make a profit’

is the reality.

With that in mind, there is the concept of long-term, installment, and diversified investment.

Instead of concentrating on just one product, use a long period of time and diversify across multiple assets and regions.

This is a way of thinking that reduces the risk of concentrating assets in any one specific thing.

Of course, even with diversification, there is a possibility that the principal will decrease.

That is precisely why

it is important not to

invest money that is necessary for daily life.

6. Thinking about ‘money to protect’ and ‘money to grow’ from your 40s and 50s

Let’s take a moment here to divide your money into two categories and think about them.

Money to protect

This is money you plan to use in the near future.

Living expenses, education costs, and housing-related expenses fall into this category.

If you put this money into assets with large price fluctuations, there is a possibility that the price will be down when you need it.

Money to think about growing

This is surplus funds that you do not plan to use for the time being and can invest over a long period.

For this, there is the option of considering asset formation using investments.

In other words,

it is not a binary choice between ‘all in savings’ or ‘all in investments’.

You should think about your money by dividing it according to its role.

7. How should you think about stocks, bonds, and cash?

Each asset has its own characteristics.

While stocks are expected to grow,

they are also assets that tend to have large price fluctuations.

While bonds may move differently than stocks, they also carry risks such as price fluctuations and credit risk.

While cash has low price volatility, its purchasing power may decline due to inflation.

There is no single ‘absolute correct answer’.

What is important is to

consider how much of a price drop you can withstand

think about.

There is no need to take risks that keep you up at night.

8. Asset formation rules to avoid being swayed by the news

When watching the news, you see things like:

‘Interest rates have risen!’

‘Stocks have plummeted!’

‘The yen has weakened!’

Major changes happen almost every day.

If you buy and sell investment products every time that happens, you will become mentally exhausted.

Therefore, you should establish your own rules.

For example:

‘Do not touch your emergency fund’

‘Do not buy or sell based solely on short-term price movements’

‘Do not invest in products you do not understand’

and so on.

What is important in investing is not the ability to perfectly predict daily news.

It is creating a system that allows you to follow the rules you have set for yourself.

9. 5 Steps for a ‘Household Budget Check’ You Can Start Today

Finally, here are five things you can start doing today.

STEP 1: Check your savings and deposits

First, let’s confirm how much you currently have.

STEP 2: Check your monthly income and expenditures

Subtract your expenses from your income to see how much you have left each month.

STEP 3: Check your mortgage

Check your interest rate type, remaining balance, and repayment period.

STEP 4: Separate the money you plan to use

Organize the money you will need in the near future, such as for education, housing, and living expenses.

STEP 5: Consider how to use your surplus funds

Only after organizing everything up to this point should you consider whether to ‘keep it all in savings’ or ‘use NISA or other investment vehicles’.

The order is important.

There is no need to start by looking for investment products.

10. Summary | Turn Anxiety into ‘Concrete Action’

Rising interest rates.

Inflation.

A weak yen.

Mortgages.

NISA.

When you watch the news, there is no shortage of things to feel anxious about.

However, there is no need to be more afraid than necessary.

What is important is,

not to perfectly predict ‘what will happen in the world,’ but to think about ‘what to do with your own household finances.’

First, check your own money.

And then,

separate the ‘money to protect’ from the ‘money to consider growing.’

On that basis, think about asset formation within a range you can understand.

Even just doing this is a big step forward.

It is never too late, even starting in your 40s or 50s.

You cannot get back the time that has passed.

But,you can change how you use your money from today onwards.

Instead of standing still while holding onto anxiety, start by checking one figure in your household budget.

Why not start with that small step?

Note: This article is intended for general information purposes only and does not recommend any specific financial products or investment actions. Please make decisions regarding actual asset management based on your own household financial situation and risk tolerance.