The Japanese Budgeting Method 'Kakeibo' Explained
You want money.
You need money to pay bills. Having extra money equals bliss.
You work and you want to save, but it seems that you rarely have extra to put into savings.
Perhaps you already budget or you downloaded a tracking app to help you determine where you spend money. You just have not yet reduced spending because of it. Maybe you forget to check the app. The notifications became annoying so you turned them off.
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An option exists that really will work. It forces you to face where and how you spend money. It also helps you determine when you spend. You know, what triggers your spending.
What? You thought triggers only belong in westerns or an Alcoholics or Narcotics Anonymous meeting? Nope. You might have a spending addiction. You spend money needlessly when a trigger makes you want to alleviate stress or frustration or sadness, etc.
I know that I hearken back to my mama’s and daddy’s advice rather often. Perhaps you find that Southern homespun wisdom a little over the top or annoying, but hey, factually, I laugh often when reading today’s business articles and books because they give advice from experts that my parents gave me decades ago when I was a little kid.
Here’s my parents’ gem of wisdom:
Write it down.
So, some people do not even own a pen or pencil any longer. I have a color-coded pack of six so I can organize better.
While some folks swear by Google Calendar or reminder services, I tried those. I found out the hard way that nothing worked better than what my parents had taught me. I use a paper planner and a separate journal.
‘Kakeibo’ - Build Your Budget: Japanese Style
My parents knew some stuff I did not give them credit for when I lived at home. Out on my own, the past few decades has made a huge difference. It may be that my folks read about the Japanese form of budgeting and goal-setting called kakeibo (pronounced kah-keh-boh). The word means "budgeting journal" or "household budget."
Developed in 1904 by Japan’s first female journalist, Hani Motoko, for more than a century this journaling method has helped busy people get a handle on their finances and successfully save money.
Although you may not have heard of this method yet, a few books have come out in the English-language about kakeibo. What has helped the Japanese for decades can now help you, too.
Tools To Use Kakeibo
You need a blank journal, a pen, and a template for the kakeibo. If that sounds simple, it is. You just discovered the beauty of this budget form. No Internet? No problem. Pen and paper do not require it. No bank account or credit card to link to an expenses app? No problem. Pen and paper do not require it.
In your kakeibo journal, you plan your monthly spending at the beginning of the month. While making a budget, you set a milestone you achieve when you reach your savings goal.
At month’s end, you review your spending to check it for alignment with your goals and budget plan. This forces accountability.
What do You Get Out of Building a Budget?
Beyond the extra money at the end of the month, you become smarter about spending and saving using this method. This budgeting method teaches you several important tenets that become practices you live:
Learn to save
You shift focus from saving to spending so you spend better to save more money. This outlook lets you find ways to afford what you want now while putting what you need to save into a savings account.
Savings is always a “must.” You must budget for it. You must open a savings account of some type that earns interest. You must deposit your initial amount, the budgeted amount, at the month’s outset. Consider this paying rent on your future.
Stop Forgetting
Writing things down forces you to consider them. It makes you remember them better. Typing things into a spreadsheet or using an app that records data automatically does not do that. That does not mean you stop using your apps, but it does mean you add this form of journaling to their use.
Be Honest
Kakeibo teaches you honesty. It forces you to discern between a “must” like rent and a “want” like a new outfit. You learn prioritizing musts and leaving likes until you meet your goals. You write down what you consider musts. You define what would happen if you did not spend on that category the way you currently do so. Groceries you need. You do not need to order from Schwan’s or Blue Apron every week. You could purchase groceries at Aldi and save a ton of money. Sure, you need to eat lunch, but you do not need to eat lunch out every day. You could make a meal at home for less than a dollar and bring it to work.
Eliminate the Unnecessary
You track both your incoming and your outgoing money. You know every penny coming into your financial life from birthday money to salary. You use extremely specific categories. Rather than food or dining out as a category, you use takeaway or pick up as one category, delivery as another, dining in a restaurant as a third, etc. This forces accountability and lets you see where laziness might cost you lots of money.
Delivery food usually comes with a charge plus, a fee if you did not meet the minimum order. One night, I considered ordering pizza. The place closest to my house delivers, but I only wanted one pizza. That did not meet their minimum and they would charge the equivalent of another pizza to deliver. Even adding to the order did not rectify that, so I combined my track workout with picking up the pizza. It cut the expenses and put three miles (roundtrip) on my track shoes. Kakeibo helps you find those items that would cost you extra and eliminate them. You recognize those things like the extra fees and use the alternate, cost-free method to get the same thing.
Use the envelopes
Kakeibo sees using old-school cash as better than using a bank card or credit card. You do not do this forever. You do this while learning how to budget. No person in their right mind would tell you to give up the many methods of earning cashback that most people use today.
Keep the savings app like Stash that lets you save and invest. Keep the MyPoints account that lets you shop and earn cashback. The same goes for Swagbucks or other options. You use cash for a few months to get a handle on your spending.
You will still end each month with money in savings because of the kakeibo method. To do this, you remove the cash for each budgeted category from your bank account. Divvy it up by category and place it in envelopes. Cash forces accountability. You think twice before plunking down that $20 from the coffee envelope when you realize that splurge leaves you $10 to pay for the rest of the week’s espresso.
Dividing the money into physical envelopes with titles also shows you what you will miss out on if you spend all the funds from one category. If you go drinking with your friends and empty the envelope in one night that was designated for eating out, where the heck are you getting money for lunch with your co-workers on Friday? Kakeibo teaches consistency, forethought, and patience in saving (delayed gratification).
Track progress
The end of the month review forces you to conduct a progress check. Unlike checking your checks against your bank statement, this forces accountability for every dollar, every penny. That includes the cash in your pocket that you spend needlessly. That includes the money you pull out of the ATM that you did not track using a debit card transaction. Once you empty the envelope for the week or the month, that is all. You are done with that category for that time period. You cannot borrow money from your rent or your car payment or groceries. Being homeless or starving is not a viable option. You must get your crap together and kakeibo teaches you how.
You update the following month's goals according to what you learned. This forces immediate change. Perhaps the first month shows you that you hopelessly mismanaged your money, but the second month provides hope where all was lost because you see where you messed up. You also see the broad picture that those savings or tracking apps do not show you. You see by tiny category where you need to change. Since you look at every expense by the day you see the triggers that made you want to spend.
Remember the $20 coffee day? You blew off getting a head start on a work project the night before because you did not want to work late. That laziness meant you needed to buy lunch from the overpriced office cart for a double espresso, sandwich, and chips. Kakeibo lets you realize those choices that could have made all the difference. Knowing that you needed to the research the night before, so you had a reasonable workday the next day, and forcing yourself to work one hour later the day before could have saved you $20 and impressed your boss. Now, you are out $20 and your boss sees that you procrastinate.
Pro tip
Since you tote the envelopes with you in your purse or wallet, once you spend from it, stick the receipt in the envelope. Always get a receipt. Never say you do not need one because, yes, you do! At the end of the month, this makes the accountability review super easy, as my friend Dave says.
Obviously, (I hope), you realize that you do not envelope your rent. Your landlord would probably look at you funny. The same goes for your utilities if you do not have an all-bills-paid home. You do not envelope the must-have fixed expenses.
Your Weekly Or Monthly Review
The kakeibo method traditionally uses a monthly review, but you may not get paid monthly. You need to review according to the frequency you receive your pay. For many people that means a weekly review or every two weeks. Since most rents get paid monthly, you will still have a monthly review, but if you find that you regularly need to take out a payday loan or other short term loan or regularly find yourself short of funds at the end of the week with the weekend still there to make it through, the weekly review can help you turn things around more quickly. You will start recognizing triggers asap and be able to exert better self-control immediately.
At each review, you need to ask yourself the following questions about every expense. I am being quite literal about that. Each time you purchased coffee. Each time you bought a dress or pair of pants or a new video game. You do not consider it as a category, but by the individual expenses so you determine what led you to that purchase that day. That unveils your triggers. Here are your questions:
Could you live without this item?
Can you genuinely afford the item?
Will you genuinely use it?
Do you have room for it in your home or office?
How did you become aware of it? A magazine or online ad? A text from a friend? An impulse buy when you saw it in a store window?
What was your emotional state when you purchased it? Earlier that day? After the purchase? (Determine if you were calm, celebratory, sad, stressed, needed a pick me up, frustrated, ecstatic, etc.)
How do you feel about the purchase now? Do you feel buyer’s remorse? Are you happy or excited? Did you immediately use it? Did you immediately put it up in storage? How long did that feeling last? How long did it take for you to use the item?
Write down your results from these questions as linked to each purchase. Chances are good that you will immediately see a pattern emerge. Perhaps you spend money as soon as you get your paycheck because you get so excited to suddenly “feel rich.” Perhaps you identified that you spend money on things that indicate a huge problem like one with alcohol or drugs or gambling or food.
While kakeibo helps you determine the problem, you have a multitude of options that cost nothing if you realize that budgeting and sticking to a budget really only amounts to a symptom of a much, much larger problem. When you deal with the underlying issue, you improve the rest of your life. You can make and stick to a budget once you no longer spend money on cigarettes or betting on the horses or gambling regularly, etc.
What Do You Do With Leftover Money?
Aww, I am so glad you asked! When you start making it through a month with money left in the coffee envelope, the dining out envelope, the clothes envelope, etc. you place those wondrous dollars into savings.
Aren’t they pretty?
They earn interest, you know. That means you make money on your money. You have just got to love that concept. Money leftover means extra money to put into savings over and above the initial month’s deposit.
This means you have begun to reap the benefits of the kakeibo method of budgeting which is saving more money for your future while still enjoying purchasing the things you love. You began to spend better, more wisely; you learned. You moved closer to that goal you set the first month you started using kakeibo budgeting.
Kakeibo budgeting kind of works like Weight Watchers does for dieting. Rather than forcing you to cut out any item, it teaches you portion control and how to work it into your life in a healthy, reasonable manner. For example, going back to my pizza example, I did not do without my pizza. I still ate out. I still purchased it from the restaurant from which I wanted it. The only difference was that I picked it up rather than getting it delivered and that saved nearly $10.
For Further Reading
Perhaps this whetted your appetite for knowledge or you just do not feel artistic enough to bullet journal. You have options. Remember those books I mentioned? You can pick one of those up online or purchase a pre-printed template on Etsy. You simply write in your own information. Try these options:
“Kakeibo: The Japanese Art of Saving Money” by Fumiko Chiba
“Kakeibo: 12-Month Budget Journal: The Japanese Art of Saving Money” (This is a blank book so it has no author.)
Westfall Lawrence Kakeibo Book (Another blank book designed for this budget technique.)
Kakebo Finance Printables by PeanutSpudge (Templates available on Etsy.)
None of these options costs more than $20. Most cost less than $10. You can also check the Chiba instructional book out of the library and teach yourself budgeting and bullet journaling at the same time. Happy saving!