Amidst the spending habits that have been cemented into our daily lives, many people find it extremely difficult to accumulate any type of sufficient savings. A lot of us are constantly finding any possible methods to help us save a good amount of our earnings. One such prominent method to save our money is a Japanese budgeting method called ‘Kakeibo’.
Invented by Hani Motoko in 1904, ‘Kakeibo’ literally translates to ‘household finance ledger’. Kakeibo is basically a Japanese art of managing our finances. This budgeting journal ‘Kakeibo’ involves some practices and habits so one can make smart financial decisions.
Get a pen and write it down
The fundamental aspect of ‘Kakeibo’ is to record your spendings and put them down on paper. Fumiko Chiba, the writer of the first English Language ‘Kakeibo’ states “Our world is now so fast that everything can be bought and paid for very quickly. A kakeibo helps us slow down and really consider what we buy in a calm, measured way.” Therefore at the start of each month, you are supposed to write down all the money that you have. After that you have to deduct ‘fixed’ expenses such as rent and other bills from the principal amount you have. This process leaves you with the amount of money that can be possibly saved.
Differentiating ‘needs’ and ‘wants’
It is very crucial that you differentiate between what is really essential – your ‘needs’ and what revolve around desires – your ‘wants’. Chiba refers to this : “To realize your musts, write down things that would go wrong if you did not spend money on them; these are usually costs that do not go away from month to month, like food.” So the essential items like food are worth spending money on, but is it justified to spend on designer clothes? A prominent way of determining if you genuinely need something is to leave an item for 24 hours. If you are still thinking about that specific item then it comes in your ‘needs’ list. It is up to an individual to look at his or her spendings from a wider angle, so the unnecessary expenditure could be cut off.
Spend ‘only’ in cash
According to the ‘Kakeibo’ strategy, using physical cash is more advisable as compared to swiping a card. The act of physically handing over cash rather than mindlessly swiping a card makes us more concerned and conscious about what and how much we are spending. Using a card makes us less accountable for our expenditure, whereas physically handing over cash makes us consider and think twice. Chiba advises taking cash out of your respective bank and organizing it into labelled envelopes to control your expenditures. She says “For me the physical placing of cash in envelopes makes you less likely to spend it on other things, like drinks with your friends.”
Record a monthly analysis
At the end of every month, one should analyze how much was spent with defining successes and failures. By this process, an individual realizes all the progress or mistakes that are made throughout a month and then sets new targets for the following month. It is advised to record the monthly analysis in the ‘Kakeibo’ journal and also ask the following questions to yourselves :
1- Did I spend more than what was needed ?
2- Did I reach my saving goal?
3- How can I improve next month ?
Theses questions will surely assist you in making better financial decisions.
The actions of mindful spending and saving are without a doubt connected, and the changes in spending made using the art of ‘Kakeibo’ will surely result in a notable increase in your savings.