Kakeibo is a Japanese concept art of financial management that teaches us how to save more by reducing the amount of spending each month.
Why learn from Japan’s Kakeibo?
Hundreds of years ago, Japan was famous for its agricultural production in the traditional way. Japan has changed now, even famous for its very advanced technological developments.
Japan is the country with the highest cost of living in the world. This phenomenon occurs because the level of competition between residents is hard. That is why Japanese residents are required to manage finances as perfectly as possible. This is where Kakeibo comes into play
Instead of buying new trending clothes every month, they are better off squandering the extra cash and collecting it to buy more than just clothes.
Understanding Kakeibo: Origins, Recording Plans, Targeting Savings, and Character Discipline
Kakeibo is basically a concept of managing finances where we are required to record all our income, our expenses in detail. Kakeibo does not use applications or technology in its financial records, but instead writes with a notebook.
The main goal of this financial record is to achieve the target of how much money is saved at the end of the month. The average person who implements the Kakeibo financial system is able to accommodate up to 35% more money
Fumiko Chiba, a Japanese writer who wrote the book “Kakeibo: The Japanese Art of Budgeting Saving Money ” . Fumiko stated that the challenge in Kakeibo is to manage hard, be more disciplined to reduce the amount of non-essential expenses, then focus on habits and decisions.
Kakeibo became famous in 1904. It was a Japanese journalist, Hani Motoko, who had popularized Fumiko Chiba’s book Kakeibo and attracted the attention of many people.
Chiba also said that Kakeibo was made to make things easier for women. Especially housewives. Kakeibo gives freedom to women, meaning that women can be trusted to make wise decisions in managing finances even in the traditional way.
The basic understanding of Kakeibo is to get rid of the thought of how to buy the things you want to buy. Replace these thoughts with more attention to other things that are more important.
4 Basic Questions In Kakeibo
Before starting to apply Kakeibo, there are 4 questions that must be answered first. Everything must be answered in order, not randomly or swapped
- How much money do you have? / How much do we earn each month?
- How much would you save? / How much target money do you want to save?
- How much do you spend? / How much do you spend each month?
- How can you make things better? / How do you make things better?
Starting from the first question to the last is the order of the process of managing Kakeibo’s finances. The last question is the stage where you have to do an evaluation at the end of every month, if something goes wrong.
For example, your initial target is that you can save 200 usd per month, but after calculating you only get 150 usd. Then you should start evaluating your financial records .
Maybe you still spend too much money to hangout with friends or other reasons. So in the next month, you try not to do the same thing in order to reach the savings target.
4 Kakeibo Budget Allocation Posts
- Survival / Basic Necessities
Which includes basic needs: Food, clothing, transportation, internet quota, vitamins & medicines, masks, toiletries, debt.
- Optional / Secondary Need
Which includes secondary needs: Eat at a restaurant, snacks, buy clothes that are trending , home decor knick-knacks, new gadgets , hobby supplies, and vacations.
- Culture / Educational needs and add insight
Which includes educational needs: Books, courses, visits to museums, magazines/newspapers.
- Extra / Additional production
Which includes additional expenses: Wedding or birthday gifts, vehicle service, doctor fees, assistance to the needy (Alms)
Recording Income, Expenditures, and Savings Targets Every Month
Applying Kakeibo requires two notebooks, namely a large notebook and a small notebook.
A large notebook is useful for recording all income, expenses and savings in detail.
While a small notebook is useful to carry wherever you go so that when you are shopping, you immediately record your expenses right away so you don’t forget and are accurate.
Large notebooks should reflect the following:
- Monthly Income Plan
You can make notes in the form of bullets or tables. You must keep a record of your income.
Starting from basic salary, bonus salary, debt repayment, sales, and so on, everything is recorded at once along with the date on which you received the income.
- Set aside savings
Savings records are divided into two, namely monthly savings and daily savings. Monthly savings are recorded in the form of targets. Create a record table containing date, description, monthly and daily.
For example, a monthly savings target of 500 thousand, after that we make it in another column of this month’s calendar from the 1st – 31st. Every time we save money in a day, then cross out the stairs on that day.
The purpose of this daily savings is so that our savings will increase. Prepare an envelope to enter daily savings. While monthly savings are taken at the end of the month, which is the rest of our money.
- Pay debt
Expenditures to pay debts must be set aside from the beginning of the month, so they are not mixed with other expense records.
- Allocate 4 Expenditure Budget Items
Record all expense categories in separate tables. For example, in the table of Basic Needs (survival), sub-categories are also included. For example, eating, how much food was spent on that day and continued to be recorded until the end of the month.
Other categories of needs are also recorded in their respective tables. That’s what a little notebook is for. Then in the big notebook, there is one big table that summarizes all the total records of each need.
- Prepare 5 Envelopes
The envelopes are divided into savings target envelopes, basic needs envelopes, secondary needs envelopes, educational needs , and additional needs. Each envelope contains approximately how much money is needed to meet these needs.
End of Month Evaluation and Consistency
One of the most difficult to implement is the application of a disciplined and consistent character. Kakeibo requires us to be disciplined in managing our finances. Demanded to be wiser in spending money.
All records of both income, expenditure and savings are intended so that we know accurately the amount of our money. Usually people will not realize that they have bought a lot of clothes, then after that the money just seems to disappear for some reason.
With records, we know where the money has gone, so when buying expensive things that are not needed, feelings of regret grow.
The evaluation process at the end of the month is a warning to ourselves that we need to improve ourselves. The process of forming this character will definitely not be easy, and it will take a long time for us to keep ourselves consistent and disciplined.
But believe me everything will feel worth it. In the end the savings will be useful for us in the future.
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