Wondering where all your money went last month? Are you looking at your bank account and that long list of expenses in shock? And are you now thinking of how to save money and curb your spending? Well, it’s never too late to start saving money. It’s also never too early, so if you’re in your early 20s, enjoying your first job, and thinking you have enough time to save for retirement, you’re wrong. The earlier you start saving money, the more comfortable your retirement years will be.
Managing your money isn’t easy, but there are ways to make this process easier and a permanent part of your daily routine. Try Kakeibo, the Japanese art which can teach you how to save money in the most effective manner.
What is Kakeibo?
An analog budgeting technique for the digital age, Kakeibo has proven to be one of the most successful ways to save money. Created by Motoko Hani, Japan’s first female journalist, in 1904, the art of Kakeibo encourages you to be more mindful in your spending rather than depending on an app or a device to tell you what to do.
The main point of Kakeibo is to write your daily expenses in a journal which helps you to be more aware of how much you’re spending, on what you’re spending the most, and what you can do without. It forces you to think about your lifestyle while writing and veers you towards improving your finances sub-consciously.
Here’s what Kakeibo wants you to think about while planning your daily expenditure:
- How much money do you have?
- How much money do you want to save?
- How much are you spending?
- How can you improve?
Answer these questions keeping multiple time frames in mind, from a week to a year. If you want to save a certain amount of money for a particular goal this year, write it down. If you want to save money for a gadget by the end of this month, write it down.
The four categories of Kakeibo
While using Kakeibo, you need to first divide your expenses into four categories:
Needs: Things you need for survival on a daily basis – food, personal hygiene items, cleaning supplies
Wants: Things you like or enjoy but don’t really need, like ordering in pizza, buying that dress you really like, or a rug you don’t need but will look great with your furniture
Culture: Books, movies, plays, visits to museums
Unexpected: Sudden expenses like an illness, house or vehicle repairs, emergencies like losing your job
Dividing your expenses into these four categories will help you understand how much you’re spending on non-essential items and how you can cut back. For example, if you end up with a dismal bank account every month, check the expenses in your Wants column. Are you spending too much on things you really don’t need? Check the Needs column as well. Can you use cheaper alternatives for your essential items?
How to use Kakeibo
Make a monthly budget at the beginning of the month and list your fixed income and expenses. Calculate how much you will have left after your fixed expenses.
Figure out how much you want to save in that month. Set a realistic savings goal, and deduct that from the leftover money for the month. The amount you have now will be your money available to spend for the month.
Record all your expenses in a journal and think about them as you write them down. Do this regularly, either every day or at the end of each week.
Calculate the expense in each category at the end of the month. This will help you determine how much you’re spending on unnecessary items.
Calculate your actual savings and compare the figure with the goal you had set for yourself at the beginning of the month. Does it match? If not, are you ahead or have you fallen short of your goal? If you’ve fallen short, figure out why that has happened and what you can do to fix it.
If your accounts have been baffling you lately, try Kakeibo as an individual first. Once you figure out how to save money yourself, get your family or flatmates to join in. It will be a great way to introduce a more mindful, sustainable way of life in your home.
To know more about Kakeibo, check out Fumiko Chiba’s book on the subject.