Â âMoney grows on the Tree of Persistence.â
This Japanese proverb is worth thirty-something characters, but it has a hidden deeper meaning. Since the inception of the concept of money, humans have been hunting for ways to save it and make it grow.
As of now, we have billions of ways to both save money and rack it upâsome online, some offline, some legal and some not-so-legal. With the inception of razor-sharp technology thatâs as good as a shuriken; people have resorted to saving money online with budgeting apps.
But just like every timeless classic getting a remake (which is never better than the original), people have started digging up old ways to save money. One such method is a hundred years old, and itâs worth the antique salt.
We are talking about the Kakeibo Method, AKA the âHousehold Finance Managerâ. This age-old beauty is nothing less than an art. An art of managing money so easy that anyone can practice, all you need is pen and a thick (or thin) notebook.
Kakeibo (pronounced as kah-keh-boh) is a Furui gakkĹ (thatâs what they call old-skool in Japanese) method that involves managing money on pen and paper by recording income and expenses by hand.
We all love to download budgeting apps and filling up big data in it just toâlook at statsâ and see where our money goes. But at most times, we forget the real purpose of budgetingâto manage our income and expenses so that we save more money.
A lady journalist named Motoko Hani wrote about the Kakeibo Method in a womenâs magazine in the year 1905. Backing her findings with psychological reasons that financial stability is crucial for happiness, she believed that it had to be done.
With the Kakeibo Method, you have to record whatever you do with moneyâa cardâs swipe at Happy Hour, monthly grocery splurge or that BOGO sale shopping spree from Walmart.
Thatâs just one step (and itâs not even the first one), and when you know all of them, saving money would be a lot easier. Kakeibo Method is easy to master, and we are going to learn how it works.
As it was highlighted before, the Kakeibo Method is not about punching numbers into a spreadsheet. Rather, this oneâs about keeping track of your cash the old way.
Here are some things youâll need before we get started with the Kakeibo Method:
You can buy two of these, or you can find them in your room. But when it comes to willpower, well, that is something youâd have to work on. Once weâve decided that we need to save money and an olâ journal and few pens can get it done, weâll get it done.
So here it is, Ladies and Gentlemenâa complete guide to follow the Kakeibo Method and save big money. Because when it comes to the battle of savings pig and expenses wolf, you gotta be on the green side!
Youâre all set with the goods, now all you need are numbers to make it real. Hereâs the five-step guide to make Kakeibo Method your money savior:
When it comes to the Kakeibo Method, you first need a reality check. The Japanese culture rates self-introspection very highly. Note down how much you earn and how much you spend every month for the perfect reality check.
The first three numbers in your Kakeibo Journal should be:
For a start, figure out how much money you cop every month. Weâre talking about your monthly income, and it should not include money which wonât come in every month.
PRO TIP: If you pocket a capital gain (from selling your car, old jukebox, or an irregular side-gig), write it down under a different column in your journal. Weâd advise you to save this money for the long run.
Next up, you write down all recurring expenses at the other side (remember the olâ ledger? That way). It should include everythingâfrom your monthly rent to credit card bill, gym membership to NetFlix subscription and your food expenses.
You put water in a vessel and you want to identify the leaks. Kakeibo Method brings those leaks to light and gives a chance to fix âem up. Note down all weekend splurges you made this month, as theyâre the ones which can be trimmed.
Start with what you did on the weekends, including all online and offline splurges too. Then move on to shopping sprees, coffee dates and other plans with mates and family. This is where we are going to slice up.
Once you are done with it, itâs time to calculate your discretionary income. Hereâs how you do it:
Discretionary Income= Monthly Income- (Recurring Expenses + Weekend Splurges)
Now that you know what your discretionary income is, itâs time to move on to the next step. And yeah, we hope youâve been doing this in the Kakeibo Journal!
Now that you have a concrete figure of discretionary income in your hands, you can start working on saving a chunk of it. The Kakeibo Method doesnât advise saving all of 100%, as this budget is very realistic.
If you put all the discretionary income in savings, itâd disturb your budget. A more tangible and attainable figure would be a great place to begin. Saving a specific percentage of your discretionary income would be a good start.
Saving money for no reason would make it another unreal budget plan that would never become a reality. So itâs better if you save for a reason: It can be to procure new furniture, pay off student loans or craft an emergency fund.
Do keep your ultimate goal in mind while you are saving. Do remember that the Savings Pig is only one side of the coin, and it wonât be of any use if the Spending Wolf keeps chomping on your hard-saved cash.
That is why your spending strategy might turn out to be the deal-breaker. As the Kakeibo Method leaves no stone unturned, it has a distinct spending strategy for you which would help you save big money while spending wisely.
As we highlighted before, saving money is just half the battle won. To go all the way, one has to craft a splendid spending strategy that is rock-solid to the core. The Kakeibo Method is the perfect hack for your spending habits.
The Kakeibo Method classifies your spending between needs and wantsâtwo crucial blips of human behavior. Keeping in mind these two salient factors, there are four parameters which can help you in regulating the spending habits:
Some errands cannot be stalled and some bills cannot be delayed. In most occasions, you have no choice but to spend money on these categories. The survival factor includes paying for commute, gas, groceries and other utilities.
HOW TO SAVE ON SURVIVAL: You canât compromise on commodities which are crucial for survival, but what you can do is stall their consumption or look for newer alternatives.
PRO TIP: You should use coupons when youâre shopping, be it online or in-store. Some of the famous coupon-dwellers are:
For instance, there is a lot of scope to save money on groceries as one can try new brands in the market, which are generally available at a lower price. You can also try the frugal month strategy, where you can cut down on fancy foods for a month and stick to basics.
Kakeibo Method believes that culture is the driving factor in shaping oneâs personality. Although spending on culture is technically a want and not need, it is understood that purchases that enrich your lifeâs meaning are needed.
HOW TO SAVE ON CULTURE: Spending money on your hobbies and interests can never go wrong, and good hobbies can always be enjoyed without spending money. If youâre into reading, donât buy the books and issue them from the library.
PRO TIP: You can sell books online and make way for new names on your bookshelf. Some of the best places to sell books online are:
The activities of culture are there to enlighten your senses, inspire you, and give you a better perspective about life. So if you are seeking inspiration, you donât really have to splurge spend on it. Inspiration and lessons are everywhere (including our website).
The optional expenses are âhanging outâ part. Kakeibo Method clearly states that spending money on eating out; weekend binge-drink-fests and shopping sprees are some reasons that screw the whole budget.
HOW TO SAVE ON OPTIONALS: Well, come on now. We are not going to stop you from living a good life. All you have to do is live frugally and youâd be spending less on optional expenses in no time.
PRO TIP: The best way to save money on optional and leisure part is ordering online rather than going to the restaurant all the way. Studies show that ordering in is more economical rather than dining out.
In a literal sense, extra expenses are those which come up without notice. In most cases, it involves emergency expenses like a car-breakdown, birthday bash for your little oneâs 16th, house repairs and replacements.
HOW TO SAVE ON EXTRAS:Â Normally, the extra expenses dwell up for causes that just canât be taken care of while saving money at the same time. But in cases like parties and anniversary gifts, one must try and save money by delaying them as much as possible or wrapping them up frugally.
PRO TIP: To cover yourself from unexpected expenses, get insurance for your assets and yourself.
Now that you know the four pillars of Kakeibo Method, write them down and mention your expenses in your Kakeibo Journal. This will give you a clear view of how much youâre spending on every category.
Traditionally, the followers of Kakeibo Method take four envelopes and name them with respective pillars. Now fill those envelopes with the amount of cash which you labeled in each category of your journal.
The method of stuffing cash with envelopes is kind of old skool (and risky), so it would be better if you write your expenses down in every pillar and its category.
Now that you know what youâve been doing and where is it going wrong, it is time to shake things up. Remember when we told you about color-coding? Thatâs where those colored pens will be of use.
Highlight all those nefarious expenses and start working to stop the money from flowing there. Some of the biggest expenses that youâll find are completely useless after maintaining the Kakeibo Journal are:
Now that you know where it is all going wrong, it is time to make it right. Here are some assistants thatâll help you with cutting your spending in all useless categories:
Now that youâve wrote everything down in the Kakeibo Journal, have a look at it. Hereâs what youâd see:
If you were wondering why the Kakeibo Method would help you save money, this notebook does nothing out of ordinary. Thereâs nothing new with the philosophy and it is just self-introspection doing the trick.
In short, youâd get a detailed insight into the world of your own finances, which would be nothing less than an eye-opener. Maintaining a journal is fun, takes your mind off the bad stuff and makes personal finance fun.
Start maintaining a Kakeibo Journal today and delve into the world of financeâthe classic way!