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Imagine being able to shift your mindset about money so that you are more in control of your spending habits and able to start saving your hard earned money. Kakeibo is an old Japanese budgeting technique that helps people create a new relationship with money and spending by being more mindful of daily expenses. Rather than an app or spreadsheet, it is simply done with pen and paper.
Kakeibo, pronounced “kah-keh-boh,” is a Japanese word that translates to “household financial ledger.” It was created by Japan’s first female journalist, Hani Motoko, in 1904. The concept aims to make you more aware of your spending habits and enable you to better control them in order to start saving more.
How To Do It
All you need is a pen and a notebook. Alternatively you could start out with a special Kakeibo notebook, like this one, but it is not necessary. Like most budgeting techniques, you first need to track your expenses and income for one month before you set your savings goal.
As you record your spending for 1 month you should categorize your expenses into the following categories:
- Needs: essential expenses, like food and household supplies
- Wants: expenses that you can live without, like eating or drinking out and non-essential clothing and shoes
- Unexpected: unforeseen car or house repairs, doctor’s appointment, etc.
- Culture: books, museum visits, etc. (this can instead be grouped into the wants category – it’s up to you)
People categorize expenses differently based on their beliefs and lifestyle. And not only is that okay, but it is necessary for this to work for each person.
These expenses that you will be tracking and categorizing do not include fixed expenses, like rent/mortgage, utilities, insurance and any fixed debt payments. Rather, after the first month you will record these fixed expenses separately when determining your monthly income and spending. The idea is to focus on the costs that you incur outside of necessary fixed expenses to get a better handle on where you are spending your money.
Kakeibo’s 4 Questions
Motoko’s idea of kakeibo centered on 4 questions about budgeting:
- How much money do I have or earn?
- How much money do I want to save?
- How much money do I spend?
- How can I improve?
After a month of recording your spending, you can now answer those questions. Calculate your monthly income and your monthly fixed expenses. Also add up the month of expenses you recorded in your journal in total and by category. This way you can see how much you saved or if you saved at all. Decide how much money you want to save each month and you can also set spending goals for each category.
Consider how you can start saving more money. One way to save more is to be more mindful of each expense and to think about if you really need each thing you buy.
Mindful Questions Before You Spend
Sarah Harvey, author of “Kaizen: The Japanese Secret to Lasting Change,” suggests asking yourself the following questions before buying anything non-essential:
- Do I really need this? Can I live without it?
- Can I really afford this?
- Will I actually use this?
- Do I have space for it in my home and my life?
- How did I come across this?
- What is my emotional state right now?
- How do I feel about buying this?
After asking yourself these questions before each purchase you will find yourself spending less on things that you don’t need and it will become second nature. These questions enable you to become more mindful about your spending so that you can achieve the savings goals that you are reaching for.
Realize though, that this budgeting technique is not aiming to cut all happiness out of your life. It is simply a way to bring mindfulness and budgeting together in a way to help you save more money.
Helpful Spending Tips
24 Hour Rule: If you’re considering purchasing a large ticket item and you’ve asked yourself all of Harvey’s questions and are still unsure, then wait 24 hours. If you’re over it the next day, then you know it was an impulsive buy and you should be proud of yourself for not giving in. On the other hand, if the next day you’re still thinking about the item and you can afford it then by all means, go for it.
Embrace Setbacks: You are going to have setbacks with any budgeting method that you try. The point is that you have committed to taking control of your finances and that’s a big step. Even small steps should be considered progress.
Goal Reminders: Remind yourself of your financial goals. Change your phone and computer background to the car you’re saving for or whatever your goal is. You can even print out pictures and post them around your home. Do whatever you need to do to stick to your budget. For other helpful tips to help keep your spending on track, read 5 Practical Must-Do’s To Help You Stick To Your Budget.
Financial freedom begins with good habits.Rebecca & Tiago, theloadedpig.com