Kakeibo is a Japanese budgeting method that helps you stay in control of your money and out of debt. It translates as 'household financial ledger', and has been around for over 100 years; invented by a woman named Hani Motoko, Japan’s first female journalist. However, it's not just about the numbers - it's a process and system that teaches you to be more mindful about what you're spending and why. By using Kakeibo to face your financial situation on a regular basis, you can confront your spending habits head-on and create healthier habits to manage your money; helping you meet your financial goals.
How does the Kakeibo method work?
The Kakeibo method is all about being aware of your spending, and breaking the cycle of these mindless patterns. It's a budgeting system that can be used to track your spending, set goals and save money. It's not rocket science - and that's why it’s lasted the test of time!
The Kakeibo method requires you to set aside some time at the start of the month and writing out:
- Your income and fixed costs, such as rent, bills, transportation and food.
- What your financial goals are for that month. This can be anything including staying out of your overdraft, paying off your credit card debt, saving for a rainy day fund, a holiday, a property, or anything else that you are working towards.
- What you're spending throughout the month. This can be done using a budgeting template or app, or simply by writing down what you spend in a notebook. As Kakeibo is an old system, it relied on a notebook and pen; and the act of putting pen to paper can be a powerful way to reflect and remember.
- Survival expenses
- Optional expenses
- Cultural expenses
- Extra expenses
Once you have a handle on the finances above, you can then move onto the powerful part:
- Reflect on your finances. Take some time to think about your expenditures. What did you spend money on that was truly required? What could you have spent less on? The Kakeibo technique can help you be more aware of your spending and force you to consider why you're spending the money in the first place.
- Create a plan. Now that you've thought about your spending, it's time to make a plan. This is when you'll figure out what modifications you need to make in order to meet your financial objective. Do you require a budget? Is there anything else you can do to generate more money?
- Take action. The final step is to take action and make the changes that you've decided you need to make. This can be anything from cutting back on your spending, to finding ways to make more money.
This exercise, performed over the course of a month, may be quite enlightening and beneficial in evaluating your financial situation, but it can be life-changing if you're able to develop a habit of monitoring your finances. (FYI - it takes on average 21 days to create a habit).
The Kakeibo technique is a great method to maintain control of your finances and achieve your financial objectives. It offers an easy-to-follow way to create financial goals, track your spending, reflect on your spending, develop a budget plan and take action to achieve your financial goals and stay out of debt.
There are plenty of resources available to help you get started with the Kakeibo method, including Kakeibo budgeting templates, apps and books.
The Kakeibo technique is a popular choice for budgeting when you want to be more conscious of your expenditures and impulse buying, so isn't it worth a shot - considering that it doesn't cost a thing?