I’ll tell you the first tip I leart from “Kakeibo: The Japanese Art of Saving Money”…
…don’t buy the book.
Or at least, don’t buy the book by Fumiko Chiba if you’re expecting a weighty tome of Japanese budget advice.
A huge chunk of the book is actually monthly planning pages. 16 pages a month, 12 months, so 192 pages and that’s most of the book done. Great if you want to fill in a ‘budgeting journal’, not so great otherwise.
Total wisdom imparted is actually 12 (count ’em) pages, plus one inspiring quote a month. So that’s nice. Right now, I’m mainly glad I borrowed a copy from the library.
But if you want to try a Marie Kondo type approach to money, where you spark joy from starting to save rather than folding socks and decluttering, read on for more details about Kakeibo.
What is Kakeibo?
So, after the moaning, Kakeibo is officially a “budgeting journal used to set savings goals and spend wisely”.The word translates into household finance ledger.
(Short pause while I translate ‘budgeting journal’ into ‘spending diary’).
Kaikebo hit the headlines back in 1904, when it was promoted as a way for housewives to manage budgets. The Japanese government encouraged the idea, to help people save, even on a low income.
The helpful part is that rather than just blindly writing down what you’ve spent, after you’ve spent it, a Kakeibo makes you plan how much to spend beforehand.
At the beginning of each month, you’re meant to sit down and think about:
- how much you have to spend
- how much you want to save
- what you need to do to reach your goals
During the month, you track the money coming in and going out. Then at the end of each week and month, you add up what you’ve spent, check if you are meeting your savings goals, and think about how you can improve in future.
Start of the month: set savings goals
So according to Kaikeibo, you start the month by working out:
- Money coming in. If you have a salary, put down the amount that actually hits your account after tax, national insurance etc is taken off. Add on any freelance earnings, savings interest, birthday cash or anything else that bumps up your income.
- Fixed money going out. This is the essential bills, like rent or mortgage, council tax, gas, electricity, water, broadband, phone, mobile and life assurance. Add on any other fixed monthly payments, like loan repayments and subscriptions.
- Money left. Take away the fixed money going out from the money coming in – and hope you have some money over! This is the money you can choose whether to spend or save.
- Savings amount. Decide how much you’d like to save. Sadly, you won’t be able to save all of it, if you still have little things like food to buy.
- How much you can spend. Now, work out what you have left to spend during the month, after taking off your savings. Divide by the number of weeks until you next get paid, to find out how much you can spend each week.
So in practice, if you have £2,000 a month coming in and £800 going out on fixed expenses, that leaves £1,200 (ie £2,000 -£800).
If you want to save £200, that leaves £1,000 to spend over the month (£1,200 – £200). Divide by 4 weeks, and if you keep your spending to £250 a month, you’ll achieve your savings goal.
As well as the numbers, Kakeibo also encourage you to write down what you’re saving for, and add quick notes about how you’re going to do it.
During the month: track weekly spending
Now you have to put your plans into practice. Traditional Kakeibo divide spending into four categories:
- Survival, like food, transport and children’s costs
- Optional, like eating out and shopping
- Culture, like books, music, theatre, cinema and exhibitions
- Extra, for unusual spending like presents and repairs
Chiba actually recommends coming up with your own categories for spending, such as food, travel, clothing, eating out, children’s expenses, entertainment. Whichever you choose, write down any spending in each category every day.
Crucially, the next step is to add up what you spent each day, and at the end of the week, add up how much you spent for each category and how much you spent in total. You can then check how your actual spending compares to the weekly spending limit set at the beginning of the month.
Kakeibo also recommends adding notes to explain your spending. Perhaps you spent more than normal due to a weekend away, or less if you were ill in bed.
It all helps understand your spending patterns and therefore where you can make changes.
End of the month: review spending
At the end of the month, sit down to compare your plans with the reality.
Kakeibo suggests digging out figures from the beginning of the month, for the money available after essentials and the monthly spending target. Then add up how much you actually spent, and work out how much you were actually able to save.
To improve your finances in future, the journal has space to answer four questions at the end of each month:
- Did you meet your savings target?
- What ways did you find to save money?
- What areas did you spend too much on?
- What will you change each month?
Think about the year ahead
The other useful element in Kakeibo is taking the time to think about the year ahead.
If you focus entirely on daily spending, it’s all to easy to forget less frequent bills – like annual payments for car tax and MOT, visits to the dentist, special occasions like Christmas, birthdays and holidays or life events like moving house and getting married.
Extra spending for Christmas is hardly a surprise – it pops up every year. If you consider these unusual expenses beforehand, you can work out how to spend less, save more and try to avoid running out of money.
Tips for trying Kakeibo
- Not spending vs spending well. When it comes to saving, don’t think about what you can’t spend, but instead focus on spending well. Make it a positive step rather than a sacrifice.
- Divide spending ‘needs’ and ‘wants’. A chunk of our monthly spending goes on essentials like council tax, gas, electricity and rent or mortgage, but much of the rest is variable. Tracking the amount that goes on essentials can help identify where it’s possible to make savings.
- Set a manageable savings target. Better to set a small savings target at the start, rather than beating yourself up if you aim to save loads but don’t. As you continue tracking your income and spending, you may find it easier to save a larger amount.
What’s good about Kakeibo
For anyone trying to make the most of their money, I reckon Kakeibo is generally A Good Thing.
If you genuinely want to save money, you’re much more likely to do so if you focus on saving first, and spend what’s left. Otherwise, if you just intend to save anything you don’t spend, it’s easy to reach the end of the month and discover there’s nothing left. Kakeibo encourages us to be much more intentional, working out what we want to save at the start, and reflecting on what went right, what went wrong, and what to do differently in future.
Also, setting concrete goals makes you more likely to reach them. Resolving to ‘save more’ is about as hopeless as resolving to ‘get fit’. Transforming it into: “I want to save £500 for holiday, so I need to save £20 a week for 25 weeks” actually gives you something tangible to aim for.
I’m a big fan of spending diaries anyway. Once you’re aware of where your money is going, you can make changes. Just knowing you’ll be writing down any spending can make you hesitate at the till, and potentially curb unnecessary expense.
Sure, there are apps that will automatically tot up spending in different categories, but they’re easy to ignore. Resorting to pen and paper, Kakeibo-style, makes us face up to our finances. If you’re used to leaving bank statements unopened, or turning away from the balance on a cash machine, Kakeibo stops you burying your head in the sand.
Plus physically adding up the totals each day, week and month is more likely to keep you on track. Those few pounds spent on lunch out each working day, added up over a week and a month, might finally push you into preparing packed lunches, for example.
What’s missing from Kakeibo
However, there are a few missing links for me.
Kakeibo seems to assume your fixed expenses are just that: fixed. I recommend tackling each item in turn rather than paying your bills on autopilot. See if you can cut those supposedly fixed costs, by for example switching to a cheaper deal or supplier, or cancelling that gym subscription you don’t use. (There’s even an app, Bean, which can help: post here)
I also suggest focusing on earning more, not just spending less. If you’re on a low income, and your expenses are already cut to the bone, it’s just not possible to save more without bringing in some extra cash.
Finally, I question the time involved to track spending every day, add up all the totals and reflect on all the changes. Is it sustainable, or a January resolution that soon peters out? I suppose at least if you’re poring over a budgeting total, it’s more difficult to spend money at the same time.
Anyway, I’m willing to give Kakeibo a whirl as part of a New (Tax) Year’s Resolution.
Now – over to you. Ever heard of Kakeibo? Ever tried it? Do you keep your own spending diary, and how do you find it? Do let me know in the comments, I’d love to hear!
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