Kakeibo: the Japanese budgeting method, interested in trying it?

It’s not just ikigai, Japan has so many great life philosophies that you can apply to your daily life. One of the famous ones is kakeibo. While ikigai talks about life’s purpose, kakeibo focuses on managing money.

So, what is kakeibo exactly? How do you apply it to benefit from it? Stick around and read this article until the end, and you’ll find a complete explanation about kakeibo!

What is Kakeibo, Anyway?

Kakeibo is a simple yet powerful Japanese financial management art! The main idea of kakeibo is teaching us to manage money in a more mindful way. It encourages us to truly understand where our money is going by recording our income and expenses in detail.

But it’s not just about writing things down at the beginning of the month. We also set financial goals on how much we want to save, what for, and how to control spending so we don’t go overboard. So, kakeibo isn’t just about managing money; it also emphasizes the value of money itself and how we can live more frugally without going into debt.

The fun part is that kakeibo helps us become more mindful of every shopping decision. It encourages us to distinguish between what we really need and what’s just a fleeting desire. Not only that, but kakeibo also teaches us to always have a clear financial target, like saving for investments or emergency funds. Besides making your wallet safer, kakeibo also helps you live a more peaceful and organized life.

How to Apply Kakeibo in Daily Life

Now that you know what kakeibo is, imagine applying this method to your daily life guaranteed, you’ll never be confused about where your money went at the end of the month! To make it clearer, here are some ways to apply kakeibo in your daily routine. Start slow!

1. Set monthly financial goals

As mentioned earlier, kakeibo teaches you to have clear financial targets. That’s why it’s really important to set your financial goals when the new month starts. Your financial goals can vary depending on your own needs. For example, this month your goal could be saving for a vacation, paying off debt on time, or building an emergency fund. These financial goals will act as reminders to help you stay focused and prevent you from letting money slip away.

2. Kakeibo’s saving technique

In the kakeibo method, saving is a top priority. Kakeibo’s saving technique is to decide the amount of money you’re going to save or invest first. Make sure to set aside money for savings before allocating the rest to other expenses. This way, you can be more disciplined in managing your finances and prioritize savings or investments.

The amount you set aside for savings depends on your financial goals; the bigger your goal, the larger the amount you need to save. However, remember to balance your present life and your future life.

3. Record every expense

Once you know what your financial goals are, it’s time to record every expense. In Japanese, the act of recording finances in the kakeibo method is called ‘kakeibo no kiroku’. The word kakeibo literally means "household financial record book." So, recording is an essential part of this method.

Try to record every expense, no matter how small it is, even things you might think are insignificant like buying coffee or paying for parking. Why? Because the essence of kakeibo is understanding the flow of your money transparently. Kakeibo isn’t just about writing things down, it’s also about being honest with yourself about your financial habits.

For example, every time you buy coffee for Rp20,000, write down the amount and the date of purchase in your book or app. Do the same with other daily expenses like transportation or snacks in the afternoon. When everything is recorded, you’ll have a clear picture of how much money you spent in a month just on coffee or snacks.

If you’re the type who often forgets to record expenses or find it a hassle to write things down manually every time you shop, using an app that automatically tracks your spending might help a lot. There’s the Honest Credit Card app, which has real-time notifications, so every time you swipe your card or make a purchase, it’s automatically tracked without any effort. Imagine, with the Honest App, every transaction pops up instantly, and you can see how much you’ve spent from your budget without worrying about missed or hidden expenses.

If you pay bills with the Honest Credit Card, you can manage your finances more easily without worrying about unexpected expenses breaking your budget. Not only is it practical, but it also makes you more aware of your spending habits. It’s like having an assistant constantly reminding you, “Hey, that’s been recorded,” so it’s easier to keep your money in check and avoid waste.

4. Categorize your expenses into four categories

Besides being diligent about recording your finances, an example of kakeibo is to divide your expenses into four categories: survival, optional, culture, and extra. Survival includes essential needs like food, transportation, and regular bills that must be paid. Optional covers entertainment or pleasures like watching movies or dining out. Culture involves investments in education, books, and hobbies that support self-development, and Extra is for unexpected expenses that usually pop up without warning.

This division helps you better understand which expenses are really essential and unavoidable, and which ones can be cut back if you want to save or allocate funds for bigger financial goals. Wants and needs are different things, so prioritize meeting your needs first.

5. Don’t forget weekly reflection

Sticking to a disciplined financial routine by recording and categorizing your expenses isn’t easy, it takes determination and consistency. To stay on track, don’t forget to do a weekly reflection.

At the end of each week, take a look at your expenses again. Have they aligned with your target, or did you miss anything? This is important so you can rein in spending that might have been too high and find ways to be more frugal in the next week.

6. End-of-month evaluation for future planning

Finally, besides the weekly evaluation, the end-of-month evaluation is also necessary for your next planning. Take a look at all your expense categories, did you go over budget? Or maybe there were expenses that you could have avoided or reduced? This is where you’ll realize any shopping habits you might not have noticed before.

Then, also check your savings. Are they on track with your goals? If something is lacking, it might be time to adjust your budget for the next month. This evaluation is really important so you don’t just know where your money went, but also so you can plan more wisely for the future. With regular evaluations, your finances will be more controlled, and your financial goals will get closer!