Greetings
all!
I
recently learned about Kakeibo, a Japanese pen-and-paper “household financial
ledger.” It was created in 1904 by Hani Motoko, Japan's first female
journalist, for an article in a women's magazine. The idea is that when
you know where your money goes, you can hopefully improve your spending habits.
I couldn’t agree more!
Kakeibo
definitely sparked joy for me because:
- It
has a minimalist approach with 4 questions and 4 spending categories.
- It
is incremental and customizable.
- It
emphasizes mindfulness and intention, both of which I try to incorporate more
into my life.
- It
combines making lists with reflecting and journaling. My personal preference has
always been making lists on paper rather than using computer/phone. I also feel
a pen-and-paper approach helps me slow down.
- I liked the name – Ka-kei-bo!
- Finally,
Kakeibo aligns with this quote I like - “If you can’t measure it, you can’t
improve it.”
quote attributed to Peter Drucker - image from
So
why might Kakeibo work for you?
- Saving
money is always good and particularly relevant in these days of rising prices.
So Kakeibo is very practical!
- You
have to use pen and paper, no phone apps or computers. This makes the exercise
a bit more tangible and reflective but if you prefer, you can probably go the electronic
route.
- Not
only you will have a clearer picture of what you buy, you might also discover
why and when you buy.
- You
might also learn to separate better between ‘needs’ and ‘wants’.
OK,
here are my thoughts on how to use Kakeibo. First, it is important to start
with your current financial situation and your financial goals because ideally
your spending should align with your goals.
If
you are struggling to make your ends meet and/or are not in a positive to save
a lot, you might still find Kakeibo valuable because it might help you to see more
clearly where your money is spent. Are you buying a $5 coffee every morning?
When you tally it up, a $5 coffee 5 days a week adds up to $1,300 a year! Are
you eating out a lot? If you forego one $25 meal a week, again you save $1,300
a year!
If
you are in a position to save money, do you have clear financial goals? These
can be big or small: Is there something for your home you really need or want?
A vacation you are dreaming about? Do you want to retire early? Do you want to
switch careers and a new class/certificate will help you in your new job?
However,
before you think about saving money, I would prioritize setting some funds aside
for an emergency cushion, which some financial advisors say should be at least
3 months of your living expenses, with others recommending 1-2 years. And, of
course, you can combine savings and emergency funds, as long as these funds are
easy to access.
Then
you work on these 4 questions:
1. How
much money do you have available?
+
Start with money coming in
-
Subtract your fixed expenses that have to be paid (e.g., housing, insurance, car,
etc.).
=
Available funds
2. How
much would you like to save?
+
Available funds
-
Put aside funds for savings
=
Funds available for spending
3. How
much are you actually spending?
a. Needs/Survival
– non-fixed expenses that you cannot live without: groceries, soap, clothing
and medicine. I actually allocate some of the grocery budget into my fixed expenses
category.
b. Wants/Optional
– variable expenses that you can live without: extra clothes, dining out, gym
membership, cable TV, etc.
c. Culture:
Concerts, theatre, museums (and cable TV can also be in this category!)
d. Extra
/ Unexpected: Car/home repairs, unexpected medical bills, Christmas gifts.
As
you record each expense, reflect on why you bought this and how you felt. The explore-your-feeling
part is an interesting exercise to do both before and after the
purchase. Why are you shopping? Do you go shopping because you are sad or bored
or stressed? Did you buy an item because it was on sale and you cannot resist a
good deal? Are you an impulse shopper? Do you have space for it? Can you afford
it? Will you use it? How did you feel after you bought it? And of course, my favorite
question, “Does it spark joy?”
4. How
can you improve?
Are
you on track with your savings goals? If yes, write it down and strive to do
the same or better in the following month. If not, try – without judgment - to
identify the reasons and how you can do better in the future. Reflecting on
this question can also help you see if you are “all work, no play” – are there
areas when you actually can spend more? Are there small things that you can
look forward to?
Give
this century-old budgeting method a try – it just might help you save money for
things that really matter to you!
SOURCES:
What
did you think? Drop me a line!
