Kakeibo - An Underrated Japanese Budgeting Method

Do you often find yourself stressed when trying to manage your finances? Is budgeting becoming a pain for you? Over the last few years, I found myself often exceeding my budget at the end of the month or realising that my budgets were too unrealistic.

With the multitude of budgeting apps out there, budgeting should be easier than ever right? Yet, like a calorie-tracker, some people still find it difficult to key in every purchase they've made or even sync their debit/credit cards to the app.

Last time, I found myself busting my monthly budget easily - eating out with friends ("I have to meet my friends!") or buying something on a whim. While it's easy to blame budget breaing on poor financial habits, as grandiose as it sounds, it could be due to a lack of personal mindfulness. As a disclaimer, "breaking the budget" in this context assumes that you've covered all your essentials and you're spending money on 'extra' goods. If you're breaking the budget just trying to cover daily necessities, it wouldn't be fair to put the focus on the lack of mindfulness.

What exactly is Kakeibo?

Kakeibo, pronounced as "kah-keh-boh", is a Japanese household budgeting method that was created in the early 1900s. Growing up, my mother also used a notebook to track household expenses such as groceries, school fees and more. In Japanese department and stationery store, it's actually a pretty common sight to see kakeibo books on sale!

Kakeibo books sold in Japanese department stores (Shibuya246.com)

Kakeibo literally translates to "household finance note/ledger", and the main intention is to make sure that at the beginning and end of the month, you "think mindfully about how much you would like to save and what you will need to do in order to reach your goal", stated in Kakeibo: The Japanese Art of Saving Money by Fumiko Chiba.

The Four Pillars of Kakeibo

1. Needs: Refers to spending on necessities. For instance, mortgage, school fees and groceries are non-negotiables for more people.

2. Wants: All saving and zero spending makes life rather dull, so the Kakeibo budgeting method sets aside room for personal desires.

3. Culture: Refers to spending on leisure or very loosely, cultural, activities. These can include movie tickets, Netflix subscriptions, museum visits and more.

4. Unexpected: Some spending simply can't be avoided, such as hospital bills and other surprise expenses.

How do I start to spend mindfully?

Ask yourself if you'd buy something, even if it wasn't on sale

During sales like 11.11 and the upcoming 12.12 sale, it's easy to be drawn in by the crazy discounts and promotions. However, before adding something to cart, it's important to ask yourself if you wanted that product before it went on sale. If you've needed a hair dryer for a few weeks and was anticipating the sale to make that purchase, Congrats! You've found yourself a deal. However, if you're only adding something because it's on sale and you "suddenly need it", you've been suckered into the I-have-to-buy-it-now-or-else-I'm-missing-out mindset.

Be conscious of what triggers your spending

In daily life, marketing materials often nudge us as consumers to make a purchase. On social media and e-commerce sites, algorithms tailor advertisements to retarget us based on our prior browsing patterns. In fact, when Instagram recently introduced the e-commerce feature where you can browse stores directly from the app, it made impulse shopping so easy, I knew I was in danger (a bit of an exaggeration, but you get the gist).

What I learned from Kakeibo

Re-thinking my relationship with money

This sounds like a vague and somewhat fluffy concept, but I believe that one's relationship with money does greatly affect how they spend and what they spend on. With Kakeibo method, now I find myself being more aware of what I'm using money on and asking myself why I want something. According to the Kakeibo method, at the end of each month, you should ask yourself:

• How much money do you have?

• How much money would you like to save?

• How much money are you spending?

• How can you improve?

By reflecting on my spending habits and how I could manage my budget better, I realised that at times, I'm guilty of spending just to treat myself. For instance, if I feel like I worked hard that week, I "treat myself" by splurging on nice food. However, after reflecting, I realised that spending money shouldn't be the only way to reward or incentivise oneself. Instead, I could "treat myself" by doing other things that I enjoy.

Getting creative

When you're conscious of how, why and what you're spending on, you get creative. By having a clearer idea of your goals, you're able to find ways to achieve them rather than flounder about trying to save whenever you can.

Final thoughts

Though Kakeibo is a relatively more tedious budgeting method, I do believe that it helps a lot in making you more aware of your spending, and by extension, lifestyle habits.