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The Kakeibo method is an ancient Japanese budgeting method that has gained popularity due to a greater focus on incorporating mindfulness into all aspects of our lives. It provides a straightforward, no-nonsense approach to budgeting.
Budgets are like diets for your bank account. They’re never fun, involve a lot of restriction and denial, the results are far in the future, and can make people extremely irritable. If you’ve tried to stick to a budget (or go on a diet), you know how difficult it can be.
Everything generally beneficial to our financial health contradicts what our culture taught us. Budgeting is a way to untangle all the learned behaviors we’ve inherited from society, our friends, and even our families. It is not similar but that doesn’t mean we stop dieting or trying to get ourselves on a budget. Even if you fail, you are still trying. An old Japanese budgeting method has recently been revived in the public eye, and it could be the mindfulness solution to getting your finances in order. Meet the Kakeibo method, a Japanese budgeting method that has the potential to change your financial life.
What is Kakeibo?
Sarah Harvey, author of Kaizen: The Japanese Method for Transforming Habits One Step at a Time, translates Kakeibo, or (alternately spelled) Kakebo, to “household family ledger.”
Hani Motoko, a female journalist, invented the system in 1904. Motoko is regarded as Japan’s first female newspaper reporter, and in the early 1900s, she founded Fujin no tomo, or Woman’s Friend, a magazine for women. Motoko invented the Kakeibo method in 1903 (or 1904, depending on where you look) to simplify household finances for women.
How to use the Kakeibo Method?
The concept of the Kakeibo method is simple. It helps bring mindful awareness to spending (and budgeting) in the same way that food journaling helps bring awareness to eating behaviors.
Everyone experiences various levels of financial anxiety. Life goals and financial goals are linked, and once you connect the two, things make sense.
Journaling or documenting your income and spending is central to Kakeibo. Because the process predates smartphones and computers, it is based on pen and paper technology.
For one month, keep a record of your spending
Like any mindfulness practice, the first step in the Kakeibo method is to become aware of what is happening with your finances. It means keeping detailed records of your spending for a set period. Tracking your spending and income is central to the Kakeibo method, which revolves around four key questions. They are as follows:
- How much money do I earn or have?
- How much money do I want to save?
- How much money am I spending?
- What can I do better?
Many Kakeibo journals are available for purchase, or you can use a blank book you carry with you. The goal, as with journaling, is to incorporate the process into your daily routine.
Split your spending into categories to better understand your finances
After keeping track of your spending for a month, you can divide it into categories. The key to the Kakeibo method is keeping track of everything with a simple pen and paper because writing things down and keeping a budget forces you to see the limit of your spending.
Once you’ve determined your spending habits, you can divide your Kakeibo, or budget, into two categories: essentials and non-essentials. These categories are further subdivided into subgroups, which include:
General: Housing, food, transportation, medical care, internet, phone connections, animal care, and childcare are regular household expenses.
Leisure: These include things like subscription services, shopping, travelling, parties, and gifts.
Culture: Things that make your life better. It could be money spent on a hobby like art & crafts or your regular haircut or nail appointment. These are also considered non-essentials.
Unexpected Costs: It is the kind of unexpected expense we all must pay for. These are necessities in general.
Set your goals
Once you’ve determined where your money goes in a given month, you can set your goals. With your money, what do you aim to accomplish? What is your timetable for reaching your goals? Do you want to purchase a home? Going on a wild vacation? Could you save a little bit more each month?
Multipl helps you to achieve your lifestyle goal be it an emergency fund, insurance or travel or shopping. To do this, you enter the amount and time frame and start saving. Then, based on your risk profile, Multipl’s proprietary investment allocation engine recommends the best mutual funds for you to invest in. You can also automate your savings. As a result, you can maximize your savings by investing through mutual funds.
Review and assess your spending
Whatever your objectives are, assign a number and a time frame to them and write them down. You can then divide that total into smaller chunks to determine how much you might need to save per month or week (depending on your time horizon) to meet your objectives.
Consequently, you’ll keep track of your spending and categorize it into one of the four categories listed above. Then, you compare your balances to your goals at the end of each week. Finally, you evaluate your progress based on your goals in each category and ask yourself where you can improve at the end of the month.
Questions to ask before you Spend
The Kakeibo method is recognized for identifying the emotional nature of spending. We’ve grown accustomed to instant gratification these days. By asking the following questions, the Kakeibo method motivates us to slow down and think so that we do not overspend.
- Is this necessary, and does it excite me?
- Do I have enough room for this? Will it find a place in my life or my home?
- Can I afford this, given my current financial situation?
- What are my thoughts on purchasing this?
- What is my current emotional state? What am I thinking?
The Bottom Line
Budgeting is a significant challenge for nearly everyone. It’s unsettling, forces us to confront many of our preconceived notions, and puts our learned consumer behavior to the test.
Through the Kakeibo method, you may be able to break the debt cycle and gain financial freedom by using a simple pen and paper and incorporating mindfulness into your budgeting work. Visit now : Download App