Jagatheesh is working in the Financial sector and is interested in various traditional ideas dealing with money.
Kakeibo is a traditional idea from Japanese households to save money effectively. Saving money is an art and it needs immense discipline and practice to master the art. Kakeibo is all about bringing financial discipline. Some studies state that these simple ideas can increase your savings by 35%. Planning the expenses is the best way to save money and this Japanese idea is all about planning the expenses. Remember an old proverb that says that a penny saved is equal to the penny earned. Kakeibo is all about finding the outlets for your money. Let's learn this new art to master our financial well-being.
What is Kakeibo?
Kakeibo can be translated as Household Financial ledger - an account book that tracks the income and expenses. Japan's first female Journalist Hani Motoko introduced this idea in 1904. Hani Motoko advocated the idea to improve the financial well-being of women in the household. It is a straightforward method to save money that involves no technology. All you need is a notebook and a pen to write your expenses. The basic idea is to find the outlets of money and cut the unwanted expenses.
Our spending habits are deeply connected with our daily routine. It is very difficult to change the habits that are carved in our minds. So we need an effective method like Kakeibo to change our mindset about spending. This idea is very powerful, which is why it is relevant even after 100 years.
The main idea is to write down our daily expenses and reviewing them every week, month, and yearly as well. The review will help us to understand and reduce unnecessary spending thereby saving money. Studies point out the effectiveness of writing in our hands rather than using technology.
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?
Now we all know that Kakeibo doesn't include technology, all you need is a notebook and a pen. You have to write all your income, and the expenses for every day, month, and year as well on your Kakeibo journal. By analyzing the expenses, you can split the spending into four categories.
- Needs - It includes the essential items for our survival like Food, House rent, etc.
- Wants - These are the things that you can live without, that includes extra clothing, luxury dinner, and other things.
- Cultural - It includes the books, the museum visit, etc.
- Unexpected - It is a category of expenses that is out of our control like Hospital expenses, car breakdowns, and so on.
Analyzing the spending using Kakeibo
After categorizing the spending you have to review unnecessary expenses. To improve your spending you need to answer few questions advocated by Kakeibo. It is time to test your honesty. The questions are,
- How much Money Available?
- How much do you want to save?
- How much are you spending on unnecessary goods?
- How Can you Improve?
By answering the above questions, you might get a clear picture of your personal finance. After proper analyses, you can make a detailed plan for the upcoming days. With effective planning, you can achieve your monthly as well as annual financial goals.
Kakeibo also advocates spending money in cash rather than using other modes of payment. Paying in cash will improve your relationship with money. Whenever you pay money in cash you will feel the hurt to lose money. It will psychologically improve your spending which is backed by numerous modern-day studies.
Ideas to stay away for Non essential buying
Kakeibo is a system of mindful spending. Here are some ideas from Kakeibo to avoid nonessential spending.
- If you like a nonessential item, don't buy it for the next 24 hours. Even after a day, you still want to buy it, you can spend money on it. Otherwise, the money can be directed to your savings.
- Stay away from discounts and offer sales. They will lure you to buy nonessential things.
- Check your bank balances frequently to stay aware of the money available in your hand
- Pay in cash, when you purchase things and avoid card or digital payment.
- Stick reminders in your wallet (like Do I really need this? and so on).
With the advent of e-commerce and its catchy offers, people are lured to buy things that they don't need. Remember if something costs $1000 and it's on sale for $750, and you decide to buy it, you did not save $250 you spent $750.
Why Kakeibo is so effective?
Kakeibo is all about writing your spending in hand and not using technology. Numerous Studies confirms the effectiveness of writing and its impact on our mind. It helps to increase your saving by up to 35%. It is very simple as it doesn't have any big calculations and anyone can use kakeibo. When Hani Motoko introduced this idea, she targeted to provide financial freedom to the women in the household. On the whole, it brings discipline to our life.
As Campbell R. McConnell famously quoted that, "Savings, remember, is the prerequisite for investment", it is essential to save as much as possible to stay comfortable. In this modern society, your freedom begins with your financial well being. So start saving to gain more financial freedom in your life.
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.
© 2020 Jagatheesh Aruchami