Kakeibo: the Japanese art of Saving Money
By Tilly Money
First Marie Kondo took over our homes, in order to declutter and help find our joy. Then the Japanese term ‘kawaii’ took over our wardrobes. Now the new Japanese trend set to transform our lives and our finances is ‘Kakeibo.’
Kakeibo is a Japanese budgeting system based on a simple household ledger, developed in Japan in 1905 by a woman named Hani Motoko. Like almost everything Japanese, kakeibo is a refined process holding emphasis on simplicity, mindfulness and slowing down. Kakeibo offers a simple way to manage and track expenses, while keeping ‘mindfulness’ at the forefront of its practices. If you’re preparing for or have just had a baby, it’s probably a good idea to get familiar with your spending habits through kakeibo, as life has most definitely changed from those single girl budget days.
The main principles of kakeibo are to separate your finances into 4 categories:
- Need: items like food and bills that are necessary for your day-to-day life (by necessary I mean electricity and phone costs, not the four take-away coffees you think you require to get through those afternoon meetings!).
- Want: purchases that aren’t a necessity like take-away food that could potentially be counteracted with a bit more mindful thinking.
- Culture: items like museums and books, underlining the importance for those aspects that provide a certain quality of life
- Unexpected: expenses that weren’t anticipated like a doctor’s appointment or a mechanic
At the start of every month or every pay cycle, you need to write down all your expected incomings and outgoings into the appropriate category. You can include not only your food and bill costs but any foreseeable lunch dates, catch ups or birthdays that you’ll be contributing to. Take into account any shared costs with partners, extra income from investments or if you need to follow up on any refunds. From this, you should have a vision of your realistic savings goal for that cycle.
Now to the ledger! Kakeibo enthusiasts say all daily records of spending should be taken down by hand in a notebook, as an almost meditative practice. To create a Google Doc or Excel sheet on your phone is supposedly ruining the mindful element of reflecting on your spending, as you can just enter your expenses on the run, completely defeating the purpose.
As you keep track of daily expenses in the ledger, the kakeibo method suggests asking yourself the following questions before going through with any purchase:
- Can I live without this item?
- Based on my financial situation, can I afford it?
- Will I actually use it?
- Do I have the space for it?
- What is my emotional/mental state today? (anxious, bored, relaxed, hungry?)
- How do I feel about buying it? (Happy? Excited? Doubtful? Indifferent?)
- How long will this feeling last?
At the end of the month, you need to add up all your expenses and deduct that from your original budget at the beginning of the month. This will really give you insight into the realities at hand around your spending.
If the difference in what you saved, or especially if you went into the negative by diving into your already established savings – you’ve got some serious mindfulness to achieve. Some people spend all their lives wondering where all their money goes but are unwilling to face the facts of their true spending habits. If you’re about to welcome a new addition to your family, it will benefit your entire family to increase your financial understanding and your personal money management.
But kakeibo delivers this message in a softer and digestible tone. The system is about developing incremental changes to your spending in order to improve your wellbeing & reach those big goals. So, what are you waiting for? Get kakeibo-ing!
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.