The creation of the kakeibo (pronounced kah-keh-boh), which literally translates as ‘household finance ledger’, is credited to Hani Motoko, Japan’s first female journalist. It was her belief that financial stability is essential to happiness, and in 1904 she published her accounting book designed to help Japanese housewives manage their budgets. In Japanese culture women are usually solely responsible for money management, handling all the families financial affairs. Since it’s publication, the Kakeibo has become an essential part of everyday life in Japan and is fast catching on here in the Western world, here’s why….
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The Japanese have long been seen as masters of minimalism and simplicity, ideas which until relatively recently were out of favour in the UK and US. Over here, status is everything, competition is rife and he who has the most wins. But there has been a shift in recent years, and now minimalism and simplicity are the buzzwords of the day, as we yearn to connect with something we have been missing. You only need look at the effect Marie Kondo is having with her book and subsequent TV show on The Life-Changing Magic of Tidying to see evidence of this – her beautiful way of honouring and thanking your belongings before you let them go resonates with many in today’s careless, throw away culture.
Similarly, the kakeibo is an approach to budgeting which combines money management and mindfulness, a sort of zen savings tracker helping you to achieve financial wellbeing.
Unlike many budgeting systems, the kakeibo is not so much about what you cannot spend, which to many feels prohibitive and well, frankly a bit depressing, but about spending well. Think of it as budgeting from a self-care perspective. This little nugget from Melo at Moni Ninja caught my eye:
“Most children in Japan get their first training in personal finance at a young age from their parents. They are taught that the more money they save, the higher the quality of personal items they can buy in the future.”
Note that the emphasis here is on the quality of personal belongings – not on quantity. This is an important distinction and one to remember as you start your budgeting journey.
How does it work?
It’s a pretty simple concept. Write down everything!
Making a note of all your expenses, mindful consideration of what you need VS what you want, setting savings goals and making a promise to yourself to stay on track combine to form your kakeibo.
Every month you will ponder these 4 questions:
- How much do I have available?
- How much do I want to save?
- How much am I spending?
- How can I improve?
Let’s look at these in a little more detail…
How much do I have available?
Write down your total monthly income. Then list all fixed expenditure, (bills, rent or mortgage etc, not items which fluctuate such as food – more on food later!) and subtract the second total from the first to see what you are left with.
How much do I want to save?
It is said that you can save a third of your annual income with regular and detailed use of the kakeibo, but I recommend that when asking yourself how much you’d like to save, you start small.
When you are first starting out it can be hard to see your spending patterns and habits and you’ll only feel disappointed if you set yourself an unobtainable amount for saving. If you usually struggle to save anything each month, then don’t aim to be saving £100’s at this stage. As you progress and get more accomplished in the art of money management you should find you are able to put more aside each month. (If you are interested in how I amended my own kakeibo to help me save, there’s more on that here: Budgeting Journal for Mindful Money Management)
Work out how much you’d like to save and subtract this amount from your previous total. (Top tip…put the savings aside now and try not to touch it again!! )
You now have a figure for the amount of money you have left for the month. Divide it into however many weeks there are until you get paid again for your weekly expenditure amount.
How much am I spending?
Make a list of spending categories.
The traditional kakeibo subdivides expenses into 4 key areas:
- Survival: these are your necessary expenses such as accommodation, food, medical prescriptions, shoes for your kids etc…
- Culture: any spending on cultural activities, such as books, magazines, Netflix, theatre, music concerts…
- Optional: things you don’t need but choose to do, such as restaurants, takeaways, shopping, having drinks with friends…
- Extra: unexpected expenses such as repairs and replacements, buying furniture, and annually recurring ones, like birthdays and festivals (ie – cannot be budgeted for on a monthly basis)
You may wish to create your own key areas, for example, if a sports and fitness category is more relevant to your lifestyle than a cultural one, go ahead and customize…
Write down what you are spending on a daily basis against these categories (everything!), and total it at the end of the day. This keeps you accountable and helps you track where your money is going. Keep checking you are within your given weekly limit. Money envelopes are great for this – you can create an envelope for each category, and when the money is gone, it’s gone!
How can I improve?
Review your spending weekly and monthly to see where you are spending and identify any problem areas to work on and make extra savings.
Related reading: 3 simple ways to help you take control of your spending
Remember your mindfulness!
Think about your ‘musts VS wants’ (ie your optional category.) Before you spend, pause to consider whether or not you need it or want it. This is a quick way to identify areas of wasted spending and help you succeed in meeting your savings goals. BUT also bear in mind the concept of spending well as opposed to going without. If the item is not necessary but will contribute to your happiness, then it may well be worth the investment and therefore not wasted spending.
Another area where you can make a huge saving is food. Most people spend A LOT of money on food, but very often they aren’t aware of it. Those little trips to the corner shop for a loaf of bread where you somehow end up spending £30 because you remembered you also need some milk and some cat food, and oh, what the heck, why not add on a bar of chocolate and a bottle of wine because it’s Friday etc, all add up.
When you regularly record your spending, you’ll soon see where your money goes.
Some Kakeibos categorise food purchases as well, dividing into nutritional areas (fruit & veg, meat, dairy, snacks etc) which can not only be helpful in showing where you are spending but can assist you in making healthier dietary choices too. If that sounds like too much effort (even I am not sure if I want to comb through my receipts calculating what I’ve spent on blueberries vs flour, and I LOVE budgeting! #nerd ) you might consider just breaking it down into regular food vs takeaways or some other larger grouping of your choice.
At the end of each month compare what you had available to spend with what you actually spent. The Kakeibo is traditionally often illustrated depicting the battle between the savings pig and the expenses wolf… Ooh! I wonder if this is where the idea of piggy banks came from?? Hmm…I digress… anyway, we want the pig to win….
Spend a moment journalling your successes and failures – what ways did you find to save money? Were there areas you spent too much on which you could reduce next month? Did you meet your savings target this month? Did the pig win… or did the wolf get the better of you this time around? If so, don’t beat yourself up, each month is a chance to reflect and start afresh.
If you want to get started, you can create your own in a notebook or bullet journal following the principles above. If you like to doodle and embellish, you can really get creative here!
Alternatively, pre-printed kakeibos are available to purchase and fill in. Fukimo Chiba’s ‘Kakeibo – The Japanese Art of Saving Money’ (pictured earlier on in this post…) is a great simple option. It has instructions at the front and pre-printed pages for an entire year, with dates left blank so you can begin at any time. Categories are also left blank so the whole book is fully customisable, and as well as prompts on the monthly review pages, there is also a bit of space for notes and memos throughout.
Although many believe that the physical writing down of your expenses and goals is part of the process and should not be omitted, there are apps and digital versions available.
Some simply prefer to have access to a budgeting tool on the go, rather than waiting until the end of the day to sit down with a notebook. Also, I know plenty of eco-conscious sustainable types who prefer to keep things digital in order to minimise paper waste. So do whichever suits you and your lifestyle best.
(Pssst 2020 update – By popular request, I have created my own digital kakeibo, with over 120 pages of budgeting goodness and bonus sheets – you can find it here in the shop!)
The idea of regularly revisiting and filling out your expenses is to keep your savings goals at the forefront of your mind. So bring little Japanese magic into your life and start your own kakeibo, as the original book’s slogan says:
“Memory can be fuzzy, but the books are accurate”