Kakeibo: The Japanese Art of Budgeting and Saving Money
In a previous article, we talked about the 50/20/30 method, but it's far from the only way to take control of your budget. The Japanese art of Kakeibo can teach you how to be more frugal with your money.
What is Kakeibo?
Pronounced "kah-keh-boh," it translates to "home financial book." The concept was coined in 1904 by Hani Motoko, who is considered Japan's first female journalist. Kakeibo involves keeping a log of all receipts and expenditures so that you can see where you are spending extra money. It's a newer approach to saving money than other methods of budgeting that helps you think about why you make each purchase. The focus is on being more conscientious when spending, which means directing money toward things that fit your goals. The idea is to slow down and take control of your finances, spending less on things you don't need and more on things you enjoy.
How does it work?
At the beginning of each month, you make a budget that reflects your projected income and fixed expenses. You will also need to set a savings goal for yourself. Similar to keeping a diary, this involves keeping a journal of every penny you spend.
Start by dividing your expenses into four different categories:
General: things you can't live without, such as rent, food, and transportation.
Wants: purchases you enjoy but are not essential, including eating out, new clothes and hobbies.
Culture: any spending on cultural activities, including books, visiting museums and concerts.
Unexpected extras: things you don't pay for regularly, such as repairs, unexpected gifts, or emergencies.
This approach will help you get a clearer picture of where your money is going. If saving more is important to you, you'll be able to see the areas of your budget that prevent you from doing so. Then write down every single thing you buy. This can be painstaking work, but it doesn't have to be. For example, there are apps to help you organize this data, right down to exporting the information to an Excel spreadsheet. If you make a habit of doing this once a day and stick to it, you can better understand the reasons for your spending.
At the end of the month, you analyze your progress to see if you have stuck to your original goals. This gives you a chance to reflect on your goals and see how much you have saved. Whether you reached your goals or not, you can give yourself a pat on the back for trying. Take some time to assess where you could make changes by asking yourself the following questions:
- How much money do I have?
- How much money would I like to save?
- How much money am I spending?
- How can I improve the situation?
For example, you may realize that you are spending a lot of money on takeout or spending too much on a night out each week.
Regularly reviewing your progress will help you better understand what you're spending your money on, so you can make changes to your budget and reach your saving goals.
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