How Kakeibo (Japanese Budgeting Method) Can Save You More Money
In today’s world, automation is everywhere. From grocery deliveries arriving at your doorstep to smart home devices controlling your heating and cooling, technology is making life more convenient. You can even track your spending with apps that alert you when you’re going over budget. But while automation is convenient, it can also detach you from the world around you, especially when it comes to managing your finances.
If you’re struggling with budgeting or saving, relying solely on automated systems might not be the best approach. Sometimes, going old-school can make all the difference. That’s where Kakeibo comes in—a traditional Japanese method of manually tracking your finances. It may sound a bit old-fashioned, but this hands-on approach can be a game-changer for anyone looking to improve their financial habits.
What is Kakeibo?
Pronounced “kah-keh-boh,” Kakeibo is a Japanese term meaning “household account book.” This method was introduced by Hani Makoto, Japan’s first female journalist, back in 1908. Through her magazine, Fujin No Tomo (“Women’s Friend”), Makoto encouraged housewives to manage their household budgets effectively, emphasizing the importance of savings.
Kakeibo revolves around four key questions that can help you gain control over your finances:
- How much money do you have available?
- How much do you want to save?
- How much are you spending?
- How can you improve?
By addressing these questions, you’ll be able to make mindful decisions about your money and identify areas where you can improve your financial habits.
Why Bother with Budgeting?
You wouldn’t try to lose weight without monitoring your diet, right? The same principle applies to managing money. Without paying attention to your income and expenses, it’s nearly impossible to achieve any financial goals. Just hoping for the best isn’t a strategy.
Budgeting allows you to know exactly where your money is going and ensures that you can set aside funds for future goals. While sitting down each month to review your finances might seem tedious, it’s essential if you want to take control of your financial life.
One of the main advantages of manually tracking your finances with Kakeibo is the mindfulness it encourages. When you’re writing everything down, you become more aware of your spending habits and hold yourself accountable. If you aim to save $100 in a month, you’ll think twice before spending on unnecessary items.
Why Track Your Money Manually?
You might wonder why anyone would choose manual tracking over a budgeting app. While apps are convenient, they can make you passive about your financial decisions. On the other hand, manually recording your finances engages your brain more effectively.
A study published in Psychological Science found that students who took handwritten notes were better at answering conceptual questions compared to those using laptops. The act of writing helps you process information more deeply, and the same concept applies to financial tracking. Writing down your goals can cement them in your mind, making it easier to strategize and act on them.
How to Use Kakeibo
Ready to give Kakeibo a try? You don’t need any special equipment—just a blank notebook or journal will do. Here’s how you can start:
Step 1: Conduct an Annual Review
Begin by reviewing your finances for the entire year. Look at previous spending patterns and list any major expenses you expect, such as vacations or annual bills like insurance. This will give you a broad overview of your financial landscape.
Step 2: Create a Monthly Spending Plan
At the beginning of each month, ask yourself:
- How Much Money Will Be Coming In?
List all income sources for the month, including salaries, freelance gigs, and side hustles. Sum up the total expected income. - How Much Money Will Be Going Out?
List your fixed expenses such as rent, utilities, and insurance. Subtract these from your total income to determine how much money is available.
Now, set your monthly savings goal and the purpose behind it. Subtract the savings amount from your available money, ensuring it’s a feasible target. This leftover amount will be used for variable expenses like groceries and entertainment.
Step 3: Determine Your Weekly Spending
Break down your monthly budget into weekly segments. Divide your available funds by the number of weeks in the month (keeping in mind that some months have five weeks). This is your weekly spending limit.
As you spend throughout the week, categorize your expenses for better tracking. Here’s a simple way to organize:
- Survival: Necessities like food and toiletries.
- Optional/Wants: Non-essentials like dining out or new clothes.
- Extra: Unexpected costs like medical bills or car repairs.
- Cultural: Expenses related to entertainment, like books or streaming services.
Consider using different colors for each category, such as blue for survival expenses and red for optional purchases, to easily visualize where your money is going.
Step 4: Conduct a Monthly Review & Analysis
At the month’s end, review your financial activities:
- Did you meet your savings goal?
- Were you spending too much in certain areas?
- How can you improve next month?
Document your answers and thoughts. This will serve as a guide for future budgeting and help prevent impulse spending.
Drawbacks of Kakeibo
While Kakeibo can be incredibly effective, it’s not without its challenges. The responsibility of tracking your finances falls entirely on you. Unlike apps that automatically record transactions, Kakeibo requires diligence and consistency.
This method might not suit everyone, especially if you’re not inclined to carry a notebook around or remember to note every purchase. However, if you’re looking to be more hands-on with your finances, Kakeibo could be worth the effort.
Final Thoughts
If traditional budgeting methods haven’t worked for you, Kakeibo might be the fresh approach you need. It emphasizes mindfulness and gives you a comprehensive look at your financial habits, helping you make more informed decisions. By manually tracking your income and expenses, you might find the financial clarity and control you’ve been searching for.
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