Kakeibo is a 100+ year-old Japanese method of budgeting that only needs a few basic tools – a pen & paper! Kakeibo is a great tool to help you take control of your spending and find financial stability.
Here’s how it works:
- Get a small notebook (that you can carry with you).
- At the beginning of the month, write down:
- How much money you have available to spend this month. To get this number, take how much $ you have coming in and subtract your fixed expenses (those you can’t change – rent/mortgage, car payment, etc.).
- How much money you want to save this month. Figure out a reasonable number then to add some motivation, write down why you want to save it.
- Every day, write down what (and how much) you are spending. Kakeibo categorizes spending in 4 ways – survival (must haves), extra (one-off costs), optional (wants), cultural (enrich your life).
- At the end of each week, review and think about how can you improve. Just the act of writing down your finances can make you more mindful with your spending but this final step prompts you to consider what additional steps you might be able to take.
- At the end of the month, look at how you did and repeat step 2 with what you have learned in mind.
Still struggling? Take the process one step further and withdraw the cash you need for the week or month and physically divide it into envelopes that are labeled with each spending category. Once the cash in an envelope is gone, it’s gone! Make sure you create an envelope for savings and put that cash aside as well.
Sometimes having your money in hand and physically seeing how much you have left can make your decisions much more real.
Try kakeibo out for a month. It may help you build more healthy money habits and get your finances in a great place!