Jagatheesh is a Mechanical Engineer who is practising Kakeibo for almost 18 months
Covid wreaked havoc on people all over the world. During the pandemic, the working class was the hardest hit. The majority of people are affected by job losses and financial difficulties. However, the epidemic gave us a vital lesson about the value of saving.
Kakeibo is a traditional Japanese concept for properly managing our finances. It is an efficient way to achieve financial independence. For about a year and a half, I've been practicing Kakeibo. It had a huge impact on my purchasing patterns. This article is about kakeibo and how to use it to manage our finances.
What is Kakeibo?
Hani Motoko, Japan's first female journalist, invented Kakeibo, a household financial ledger. In 1904, she proposed this notion to promote the financial well-being of women in the home. Kakeibo is all about utilizing a notepad and a pen to keep track of our costs. In Kakeibo, we are unable to use technology.
Our daily behaviors have a significant impact on our spending. It's difficult to change a pattern that has been engraved into your mind for a long time. Kakeibo is a straightforward and efficient method for altering our spending patterns. Keeping track of our costs in a notebook helps us feel more connected to the money we spend. This concept's effectiveness ensures that it will remain relevant for another 100 years.
It was tedious to begin recording my spending. I felt more connected to my costs after only a few days. It aided me in identifying the sources of my revenue and repairing the leaks. It gave me the confidence to achieve financial independence before I turned thirty.
A simple fact that is hard to learn is that the time to save money is when you have some
— Joe Moore
How Kakeibo Works?
Kakeibo is all about keeping our income and expenses under check. The key goal is to keep track of our spending and review them regularly. Kakeibo recommends weekly and monthly assessments. It assists us in comprehending our financial circle. Kakeibo proposes categorizing spending into four categories.
- Needs: These are the necessities of life, such as food, rent, and so on.
- Wants: These are the items we don't require for survival. It includes extra clothing, a lavish dinner, and other amenities.
- Cultural: This covers the books we buy, museum visits, and other activities.
- Unexpected: Expenses that are truly unexpected are included in this category. It covers things like vehicle breakdowns and emergency medical care, among other things.
We should cut our spending on wants and rationalize our spending on the other three areas, according to Kakeibo. The first stage in the rationalization process is to choose an excellent property that falls within our budget. We can reduce our cultural expenditures by joining public libraries. These are some suggestions that helped me improve my spending habits.
It's difficult to avoid the area of unexpected charges. However, with medical insurance and good vehicle maintenance, we can lessen our financial load. We can avoid spending money on things we don't need that are included in the wants category. Once you've learned how to use kakeibo, it'll be easy to avoid buying expensive clothes and dining out to achieve financial independence.
Top Tips for Reviewing Our Spending
Reviewing is the next step after the categorization of expenses. Kakeibo includes few questions to help us to analyze our spending. The questions are,
- How Much I want to save?
- How much money I'm spending on unnecessary goods?
- How much money available after my expenses?
- How can I improve?
With an honest answer, we can get a clear picture of our spending habits. With this, we can make a prudent financial plan. With a sound financial plan, we can attain financial freedom.
An important rule in Kakeibo is to pay for expenses by cash. We need to avoid digital payments or card-based transactions. Paying in cash gives more connection to our money. Whenever we spend cash, we felt bad about losing money. It will push you to rationalize spending.
He who buys what he does not need steals from himself.
— Swedish Proverb
Ideas for Saving Money on Unnecessary Spending
Kakeibo is a system of mindful spending. It advocates few ideas to avoid unnecessary expenses. The ideas are,
- If you like to buy a good, don't spend on it for 24 hours. You can spend money only if your desire remains even after a day. Otherwise, you can redirect money to saving. It will improve the quality of spending.
- Avoid discounts and offer sales. They will lure us in spending money on unnecessary goods. Only spend on goods that are essential for living.
- Check your bank balance frequently. It is always a pleasure to have money in our account.
- Always use cash transactions to buy goods. It will give more connection to your money. So every time we spend cash, it hurts.
- Stick reminders like, do I really need this? in your wallets. It helps to remind the financial plan during our spending.
With the advent of e-commerce and its catchy offers, it is easy for anyone to get distracted. When a product that costs 1000 dollars is on sale for 750 dollars, it won't save 250 dollars. It makes you spend 750 dollars.
How I Improved My Savings With Kakeibo
My personal finances have changed dramatically since I began using Kakeibo. I was having a lot of trouble meeting my financial objectives. Then I started keeping track of every dollar I spent in a day. I also began to eschew digital payments in favor of cash. These minor adjustments help me feel more connected to my money.
The leaks in my financial planning were discovered after a thorough examination of my spending. Clothing, food, and gas have all taken up a significant chunk of my budget. I was brand loyal and always purchased clothing from a specific band. My motorcycle allows me to travel extensively. I eat my lunch and evening snacks in restaurants, which adds up to a significant amount of money spent.
I started buying garments from a tiny tailor business, which helped me save a lot of money. I'm a big fan of public transportation these days. Every day, I pack my lunch and eat it at home. These few adjustments aided me in increasing my savings. With this financial strategy, I was able to pay off a significant portion of my student debt in just fourteen months. Now I'm quite optimistic about accomplishing my financial goal.
What Makes Kakeibo So Effective?
Kakeibo is a method of spending with intention. It aids us in locating sources of income in our finances. We can build a cautious financial plan once the channels have been identified. We can reach financial freedom without putting in a lot of effort if we have a good plan. I've been using kakeibo since 2019, and it's helped me save more money. It also assists me in living a minimalistic lifestyle. According to some research, Kakeibo can increase our savings by 35%.
Savings, remember, is the prerequisite for investing, according to a famous phrase by Campbell R McConnell. Our financial security is the foundation of our freedom in today's society. So, let's start using Kakeibo to achieve financial independence in our lives.
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- How Kakeibo can save your money February 18, 2019, Money Crashers, Accessed June 5, 2019.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2021 Jagatheesh Aruchami