Kakeibo: The Ancient Japanese Secret to Mastering Your Budget

What is Kakeibo?

Kakeibo is a Japanese financial philosophy that emphasises mindful spending and saving. Japanese for “household financial ledger”, it is a century-old budget planning method that does not require technology to analyse your income and expenditure and create a budget. The votaries of this budgeting technique state that one can save 35% of their monthly expenditure using the Kakeibo technique. 

This budgeting technique, known as Hani Motoko's Slow Budgeting, was invented in 1904. It encourages mindful spending, helping you to reach your financial goals by slowing down the pace of managing your funds. All you need is a journal to record your income and expenses as you make each purchase, allowing you to keep track of where your money is going. With this method, it's possible to gain control of your finances and achieve your financial goals.

What Benefits Can You Reap from Adopting this Ancient Budgeting Technique?

It is essential to recognize that your spending habits are strongly influenced by your daily routine and emotional state. Therefore, to make the most of Kakeibo, it is important to follow the steps below and create a budget which you can stick to. With a well-thought-out budget, you can reach your financial goals and lead a more secure and prosperous life.

• Maintain a Ledger – This technique of budget planning does not require the use of any technology. All you need to do is maintain a ledger usually a bullet journal and physically note down your monthly income and expenses in a meditative manner. When you record your expenses in writing, you become more aware of your current financial position which helps you address the triggers that make you spend impulsively. 

Calculate your monthly earnings and deduct the fixed expenses from them

• Create a Monthly Saving Goal – The amount you set as a goal will be derived from the income that is left after deducting fixed expenses like rent, loans, and utility bills

• Prioritise Your Expenses – You can divide your expenses into four broad categories – 

• General – This contains a list of essential expenses that you cannot be compromised in your budget – this includes utilities, healthcare, grocery, rent, and transportation (if applicable). While these expenses cannot be cut, they can be decreased if possible. 

For instance, you can reduce your rent by moving into a smaller home or reduce your electricity bill by switching off unused appliances.

• Wants – This category envisages the expenses that you enjoy making and could include travelling, shopping, or dining out. However, such expenses are not essential and the money allocated can certainly be reduced. One must understand the difference between needs and wants to effectively save using the Kakeibo method. 

• Culture – This budgeting technique provides a special space to include your cultural expenses as well. The cultural or entertainment expenses could be museum membership, books, admission into a local garden, or purchasing tickets for a concert, play, or dance show. 

• Unexpected Additional Expenses – This category includes expenses that you may not incur every month. Some prime examples of the same are birthday gifts, car repairs or emergency medical expenses.

A better understanding of these categories can help you realise where exactly is your money going. This will help you make wise adjustments to your spending pattern and achieve the monthly saving goal. 

Seek Answers to 4 Reflection Questions towards the End of the Month – Consider writing answers to the following questions – 

• How much money do you possess?
• What amount of money do you want to save?
• How much of your earnings are you spending?
• How can you improve your budget?

Leave the last question open-ended. You should reflect and come up with a solution to cut costs or reduce your expenses on unnecessary items.

Spend Money Mindfully with Kakeibo Strategies 

To see scalable results of saving using the Kakeibo method, you should mindfully spend your earnings on not-so-essential items. The following are some strategies that you can employ to spend mindfully – 

• Leave out the Item for 24 Hours – This technique can help you analyse whether you require this item urgently. If you continue to think about the item the next day and have the budget to afford it, make the purchase. This can give you a greater sense of confidence in your decision. 

• Do Not Get Attracted to Sales – Most people consider shopping for items available at discounted rates a wise decision. However, they end up spending money on items that they usually do not need. If you have such items in your shopping cart or basket, first question whether you would buy the item if it were available at the original price. If the answer is negative, avoid purchasing such an item.

• Keep a Regular Check on Your Bank Balance – Frequently checking your bank balance can give you a sense of control over your funds and also help you decide what portion of your savings you can spend. 

• Make Cash Payments – With the advent of e-wallets and plastic money, most people have resorted to making cashless payments. However, it is always advised to make at least some payments in cash so that you are conscious of your expenses, which also makes it easier to record such expenses. Set a certain portion of cash aside for a week and spend it on items you need. 

• Set Reminders – It is one creative way to analyse whether you need a particular item. You can attach labels on your cards or in your wallets asking if you need a particular item. Such prompts can make you take a step back before making a purchase. 

• Know the Conditions that Make You Spend – Notice how you spend your money. If you are spending after coming across a marketing email or under the influence of social media influencers, it is wise to limit visiting their social media pages. You can invest the time you spend on a shopping spree in becoming physically active or taking up a new hobby instead.

Note – You can occasionally pamper yourself by purchasing non-essential items. However, creating a pattern out of it is not wise.

Who Can Use the Kakeibo Technique?

Anybody can practice the Kakeibo method to manage their budget mindfully. However, some specific individuals should practice this Japanese technique – 

• Inconsistent Budget Planners – Kakeibo is ideal for individuals who find it difficult to stick to a budget because of the rigidity of the whole exercise. Kakeibo is a flexible and simple budget planning technique. 

• Reluctant Budgeters – Kakeibo helps individuals who consider themselves bad at saving to save and spend mindfully. The method makes them in charge of their purchases and gives them much-needed confidence and discipline.

• Beginners – If you are learning to create a budget, Kakeibo is a suitable budget planning method. It helps you carefully analyse your earnings and keep a check on your expenses, thus, helping you achieve even the smallest saving goals. This method encourages you to save more, which ultimately creates a positive cycle of improved savings. 

• Envelope Budgeters – The Kakeibo method of saving works similarly to the envelope budgeting technique, where you plan your monthly expenses and allocate physical envelopes to them. If envelope-style budgeting works for you, you can also try the Kakeibo method.

What Sets Kakeibo Apart from Other Budget Planning Techniques?

Writing your expenses, income and savings gives you an opportunity to evaluate your current financial situation, and with this knowledge, you can plan for future savings and purchases. The Kakeibo ledger also helps you to track and review budgets to ensure you stick to your goals and stay within your budget.

Some major benefits of using Kakeibo for planning are – 

• It promotes mindful spending
• Your fund's allocation is simplified into four different categories 
• It helps you set realistic savings goals
• The saving process is slow but consistent
• You can celebrate even your smallest goals

Key Takeaways

• Kakeibo is a century-old budgeting method that does not require the use of any application to analyse your income and expenditure and create a budget. The promoters of this budgeting method assure that one can save 35% of their monthly expenditure using the Kakeibo technique.

• To use the technique efficiently, you should maintain a regular ledger and write down every expense and source of income in detail. This process makes you more aware of how you spend your money and your current financial condition. 

• To achieve your financial goal, you can classify your expenses in four categories – needs, wants, cultural, and unexpected additional expenses. A better understanding of these categories can help you realise where exactly is your money going and make the required adjustments.

• Your wants are non-essential purchases that you make to feel temporarily elated. They could be travelling, shopping, or dining out. However, since the expenses are not essential, the money allocated to them can be deducted. 

• You must find answers to four reflective questions – how much do you have, what portion of money do you plan on saving, how much of your income goes into expenses, and how can you improve your budget? 

• To see the results of saving using the Kakeibo method, you are expected to follow some mindful spending strategies. For instance, leave the item you want to purchase on your list for 24 hours. If you still think you need it, then you can go ahead and buy it. 

• Another smart way to stick to your Kakeibo budget is by frequently checking your bank balance. This keeps you grounded about your financial condition and you tend to spend less.

• It is recommended to pay in cash so that you are aware of how much you are spending. It becomes easier to record such expenses. Set a certain portion of cash aside for a week and spend it on items you need.