One of the most effective savings methods is the Japanese technique called Kakebo. It allows you to keep track of all your expenses and income, and identify the expenses you can cut back on.
What is the Kakebo method?
The Kakebo method literally means “account book” and was created by a Japanese woman named Motoko Hani in the early 20th century. Motoko wanted to provide Japanese women with a tool that would allow them to manage their household finances more efficiently. To this end, she devised the Kakebo method, which allows them to organize household accounts with just paper, pencil, and a little perseverance.
So, the Kakebo method consists of keeping a daily written record of income and expenses, whether fixed or variable and dividing them into different categories. This way, you can accurately see your household expenses, and observe them visually to eliminate those that are not necessary. This will also allow you to set realistic savings goals.
On the other hand, to start carrying out this Japanese method to save money, you can opt for a simple blank notebook or specialized notebooks for the Kakebo technique, in which you already have the templates available to start.
How does the Kakebo method work?
At the beginning of the month
The first thing you need to write down at the beginning of each month is the income you are going to have. If your salary is fixed, this point will be very easy. If, on the other hand, your income varies each month, it is advisable to make a lower estimate to adjust your expectations, regardless of your savings goals.
Next, write down the fixed expenses you will have that month, that is, the expenses that cover your basic needs and that remain more or less unchanged over time: mortgage or rent, insurance, food, etc. Subtract the income and expenses, and with the result decide how much you will allocate to monthly savings according to the Kakebo method.
Day by day
Deduct the amount you want to use for your savings goals, and you will have your monthly budget for variable expenses. These should also be recorded on a daily basis, or at least regularly. Then, classify them according to their nature:
- Survival expenses: food, electricity, water, medicine, transportation.
- Leisure expenses: eating out, travel, tobacco, etc.
- Cultural expenses: expenditure on books, films, theatre, concerts and any type of cultural activity.
- Unforeseen or extra expenses: these cannot be predicted or avoided. For example, home repairs, and car or appliance breakdowns, among others. On the other hand, it is advisable to have an emergency fund for these unexpected events.
Weekly balance
As we mentioned, these variable expenses are noted down and at the end of the week, a balance sheet should be made. In this way, by subtracting the weekly variable expenses from the monthly budget, you will be able to see the budget available for the rest of the month.
With this weekly balance, you will be able to know if you are on the right track to achieve your savings goals, or if you need to adjust your budget.
Monthly balance
Following the Kakebo technique, at the end of each month, you will have to do your monthly balance sheet. In this balance sheet, you will check if you have achieved your savings goals and you will be able to see in perspective all the expenses you have had throughout the month.
All that remains is to think about the nature of your expenses and cut them if you haven’t reached your savings goals. Of course, as the months go by, you’ll be able to refine the system and calculate your data more accurately, both for variable expenses and for the amount you can save.
Advantages and disadvantages of the Kakebo method
The main advantage of this Japanese savings method is that you don’t need to have any knowledge of economics: you just have to add and subtract. This technique is adaptable to any type of family and condition, so it is completely scalable and can be used both for people who live alone and for large families.
In addition, the Kakebo method helps you to be more consistent and disciplined with your finances, something that will allow you to achieve other life goals.
However, this leads to one of the disadvantages of this Japanese method of saving money. Although it is simple to understand, it requires a certain amount of time and dedication, as each expense must be recorded.
Tips for applying the Kakebo method
The Kakebo technique is very practical and effective for visualizing your household finances and deciding what steps to take to save more money. However, it is advisable to follow some tips to make it even more effective.
The first tip is to write down your expenses by hand. This way, you will be aware of them and their nature. This will also make it easier for you to differentiate between unnecessary and necessary expenses, one of the keys to the Kakebo method.
Next, set a realistic goal. Try to be honest about how much you want to save, especially at the beginning. Otherwise, this goal may seem unattainable before you start. To avoid this, set a smaller goal.
Finally, follow techniques to reduce expenses. Once you have visualized your variable expenses, use strategies to reduce them and further increase your savings capacity with the Kakebo method:
- Saving at home: follow some tips to save at home, such as reducing electricity or water consumption through simple changes in your habits. It is also important to choose the cheapest supermarkets, recycle, reuse and repair, and be careful with online purchases and discounts that are not really discounts.
- Small expenses: These are the small expenses that you make daily, unconsciously and automatically. With the Kakebo technique, you can detect them clearly and solve the problem at its root. Some of them are impulsive online purchases, eating out or subscriptions that you don’t use.
In short, the Kakebo method will make you be careful with your expenses and will allow you to reduce them as much as possible.
