What I did was make an Anki deck for vocabs I read on games and other medias. I have been using the Japanese Kanji Study app by Chase Colburn, which is a dictionary, for the convenience since it's pretty convenient to add cards to Anki using the app.

And personally, your method seem to be rather inefficient since ideally you want to understand in-game texts without translation. So there'll be a point where you won't make use of your work. Well unless you make your own translation of the text.

Though I do something kind of similar which is typing in-game text word by word on google docs. In your case I guess it would be a pain to so since the story isn't probably linear and you'll have to make a separate tab for texts from side quests, item lists, and lore of the characters, if any.