Have you ever tried to save money and the results were not as you expected?
Well, today we want to present you Kakeibo, the Japanese art of saving money.
At the end of the day, if it would be that simple, everybody would save money, but it seems this is a struggling thing for most of us, because, well, it’s much easier to spend money than saving them.
Just because our brain prioritises instant gratification over long-term goals, according to science, not to us. And we believe in science!
According to some researches, the brain has two areas: one that is associated with our emotions and one with abstract reasoning.
As you might have already thought, the emotional part of our brain responds positively to instant gratification.
When given the choice of something sweet right now or some vegetables later, this part of our brain pushes us to choose the sweet.
The emotion and logic-based parts of our brain are constantly in a fight, trying to show us why we should choose one option and not the other.
So which part of our brain wins in the end?
It depends on the scenario. The researchers concluded that impulsive choices happen when the emotional part of our brains triumphs over the logical one.
When people get really close to obtaining a reward, their emotional brain takes over. So if a chocolate cake is staring right at you, things will get dicey. But enough will all these sweets, otherwise we might end having one while writing this.
Now that we’ve got an idea of why our first choice is to choose the instant gratification which is equal having the sweet instead of something healthy or even spending money now, on things that we really don’t need instead of saving them for later; we should see how we can trick our brain and create long term goals by saving money on a monthly basis.
Here it comes Kakeibo, the Japanese method of saving money.
Dating from 1904, when the journalist Hani Motoko wrote about it in women’s magazine, Kakeibo, which it translates as “household account book”, is a technique which helps you to spend your money mindfully and save more. It doesn’t require any technology. Literally, all you need is a notebook and a pen.
So, what is Kakeibo and how does it work?
Well, it is a manual method of tracking down your expenses and help you to reach your saving goals.
Even though we are fans of technology because sometimes, it makes our life much easier and convenient, when it comes to finance, it seems the old school method works better.
The technology can make us to detach completely from the real world and when it comes to our budget, we don’t want to loose track of it.
So why the old school method works better?
Well, the researches show that the hand writing is a meditative process and make us more aware of what we are writing and why we are writing it. It improves our memory and it works better than just adding some numbers in an App or a software.
Nothing wrong with that, of course! You can adapt this method to you and if it works better writing it on the computer, that’s totally fine but from our experience no app or Excel document is better than the hand writing on a notebook. It makes us more aware and present and helps us to take better decisions about our spendings.
Now, as we mentioned before, in order to start using this method you will need a notebook and a pen. To make it easier for you, you can just download and print this template from here and use it to create your own budget.
As you can see, we will start writing down for each month the fixed incomes that we have and then the fixed expenses that we already know such as rent, mortgage, insurance, transportation, school, gym or other subscriptions.
Once, we have the total of all the known expenses we can set up a goal of how much money we would like to save in the current month writing down from which expense we can cut in order to achieve our goal by the end of the month.
After we do all the calculations, we should get to an amount of money which it’s gonna be our available cash to spend.
So, this is very important, as Warren Buffett says: “Do not save what is left after spending, but spend what is left after saving”.
In order to be able to save some money at the end of the month, we will try to manage the spendings with the budget left as available cash, after paying all the fixed costs plus after we pay ourselves as savings.
This needs to be done every month.
After this, we are going to use this template which will help us to write down by the end of the day, all the spendings we do during each day and categorise it accordingly. (you can download it from here too.)
We will divide our spendings into 4 categories as follow:
Needs: the essentials like housing, groceries, car payments, or student loans.
Wants: enjoyable but not totally necessary purchases like takeout food, hobbies or entertainment.
Culture: any spending on cultural activities — books, museum fees, concert tickets, TV streaming services, etc.
Unexpected: other expenses that crop up, like medical bills, car or home repairs.
As you can see in the template, it helps us to keep a track of the total amount of money we have spent during each day in each separate category and also to calculate the total amount of money we have spent by the end of the week, including the totals for each categories.
Pretty cool, isn't it?
Now you can track literally each cent spent, even though you buy only a candy.
In order to be able to write down everything and everywhere, a small notebook which fits your pocket and a pen should be the best way to do so.
But, again, whatever works better for you that's what you should use. As an alternative, writing down the spendings on the phone during the day, so you don't need to carry a notebook with you everywhere, can work quite good if, when you get back home you go and transcript everything in the template presented previously.
Kakeibo somehow forces you to think well about your purchases and what motivated you to buy them.
In other words, you will become completely honest about your needs and wants and you will be able to categorise them accordingly. In time, this method could help you to get better at making faster, smarter and more logical decisions about whether to spend money on a particular item.
Concluding this method we would like to highlight to you 5 points why you might consider using it:
Kakeibo could lead you to become more organised. It’s a useful tool for organising your expense using a streamlined system that makes them easy to read
It gives you control helping you to keep track of your daily expenses and rank them by how necessary they are.
It will help you save 20–30% more by helping you identify critical items.
It will make you more disciplined by writing down what you’ve spent by hand and it will lead you to stop buying things you don’t need, also helping you developing willpower.
The last but not the least, Kakeibo will make you more confident because keeping track of expenses makes you feel more secure and encourages you to trust your own skills. That reduces stress and helps you feel calm and relaxed.
Thank you for reading! Please find us on our social media channels and help us to build this beautiful community. Until next time, take care of your money!