Kakeibo: The Japanese Method of Saving Money

“Do not save what is left after spending, but spend what is left after saving.” — Warren Buffett

For as long as money has existed, people have had thoughts and opinions about it. And while not everyone will agree about the best ways to earn, save and spend money, many wise people have weighed in with their thoughts on money over the years.

When the fourth wealthiest person in the world talks about money, it makes sense to listen. Known for living simply despite his means, we couldn’t agree more with this bit of advice from Warren Buffett. If you don’t make putting money away for the future a priority, you’ll never get around to doing it. And when you need it, it won’t be there. Starting and sticking to a savings plan is something you’ll never regret.

Modern payment technologies like debit cards, Apple Pay and one-click checkout have made the physical act of spending money effortless. We no longer have to pay such close attention to our spending, as in the days of cash transactions and balancing check-books. But while modern technology is convenient, it can also lead to mindless spending, making saving difficult.

What Is Kakeibo?

The kakeibo was invented back in 1904 by Hani Motoko, Japan’s first female journalist, and was designed to help busy women keep on top of their finances. Kakeibo gets its name from a Japanese term meaning “household financial ledger.”

Kakeibo is a financial philosophy centered on mindful, deliberate spending and saving. It combines tracking purchases with the habit of mindfulness in order to reign in unnecessary spending and help you achieve savings goals. This budgeting method is designed to help you think about your relationship to money and understand why you’re making each purchase.

Photo by Annie Spratt on Unsplash

How To Incorporate Kakeibo Into Your Life?

The idea behind kakeibo is straight-forward. It helps to bring mindful awareness to the process of budgeting in a similar way that food journaling brings awareness to eating behaviors. Kakeibo is journaling or documenting your income and spending habits. It relies on old fashioned pen and paper technology.

The first step in kakeibo is to become aware of what’s actually happening to your finances. This means keeping detailed track of your spending for a set period. Similar to journaling, the idea is to incorporate the process into your daily routine. Most financial experts recommend tracking expenses and income for at least a month before setting a budget.

Tracking your spending and income gets at the heart of the kakeibo practice. There are four key questions to ask yourself:

Graphic created by: Benjamin Mumme

The last question “How can you improve?” is open-ended on purpose. You are encouraged to reflect and personalize the answer. Improvement doesn’t just mean finding ways to cut costs. It also means deciding to spend more on what you really enjoy and spend less on purchases you didn’t value that much. Again, the ultimate goal is to increase your savings.

The Four Category System of Spending Habits

Although a kakeibo is a simple ledger, it’s a fairly ingenious method to many. Especially millennials who are accustomed to keeping up with their finances on their computers and smart phones.

Once you have tracked your expenditures for a month, you can break spending into categories. Research has repeatedly shown that physically writing things down changes the way we behave.

Kakeibo requires you to write down everything you buy and streamline your budget by grouping purchases into four categories:

Graphic created by: Benjamin Mumme

1 — Needs: Things you can’t live without, like food, toilet paper and shampoo.

2 — Wants: Purchases you enjoy but don’t need, like a takeout meal or pair of new shoes.

3 — Culture: Things like books and museum visits.

4 — Unexpected: Expenses you weren’t anticipating, like a doctor’s visit or car repair.

The four category system helps you become more mindful of your spending habits and avoid wasting money on things that don’t align with your goals.

Photo by Joana Godinho on Unsplash

Why Should You Consider Using Kakeibo?

Its special attention to mindfulness separates it from other budgeting systems, making it a good match for those who want to ensure their money goes toward the things that bring joy to their lives.

This budgeting system:

• Simplifies finances by grouping spending into four distinct categories
• Encourages realistic monthly savings goals.
• Pays attention to present, past and future.
• Tracks saving small amounts daily rather than occasional big sums.
• Celebrates small achievements.

Photo by Eduardo Iraheta on Unsplash

It is important to understand that you can still treat yourself to non-essential purchases. Kakeibo is about using mindfulness to cut out purchases that might only give you a temporary boost of happiness.

The acts of mindful spending and saving are very much interlinked, and the small changes will help the money in your bank account grow over time.

It doesn’t matter if your goal is to become debt free, increase your savings, or become millionaires; all of them require you have good financial habits.

Everybody wants to have great financially wellness. To be successful, you need systems in place that outline the process to lead you to successful results.

Photo by David Iskander on Unsplash

It is Now Time To Start

I have shared with you a mindful budgeting system that could possibly change your financial life. The Japanese have had a lot of success integrating this into their lifestyle.

It is time to take action and start NOW. Use the worksheets above, put your pen to paper and use the Kakeibo method.

If this budgeting system works for you, I strongly encourage you to share your experience in the comments!

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This post was previously published on Medium.

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