Saving is a common practice, since setting aside or saving a portion of the money we earn is a very valuable habit that not only provides us with some financial stability but also allows us to cover certain future expenses, both planned (such as buying a home or a car) and unexpected. In fact, according to the report “Saving and Investment Habits in Spain,” 6 out of 10 Spaniards manage to save every month, with an average of 288.3 euros.
However, it’s important to note that some people are hesitant to take the plunge because they don’t know where to start, or they save less than they could because they aren’t doing it properly. That’s why today at Culmia we want to tell you about the Kakebo method of saving—a system that has been proving its effectiveness around the world for over a century.
What is the Kakebo method for saving money, and where did it come from?
The Kakebo method, also known as Kakeibo in the United States, is a savings system that originated in Japan. In Japan, household finances are typically managed by women, so it was devised in 1904 by journalist Hani Motoko to help housewives manage their finances. In fact, the word comes from “Kakei, ” which in Japanese means “household accounting ,” and “bo,” meaning “book,” since it involves using a notebook to keep track of all necessary expenses.
Specifically, the Kakebo savings method is based on recording and tracking all of our income and expenses(both fixed and variable) on a daily basis, as well as organizing them into different categories. The goal is to clearly and accurately visualize all the changes in our finances so that we can later make informed decisions and set realistic savings goals.
How do you use the Kakebo method to save money?
First of all, it’s important to emphasize the significance of both pencil and paper. For Kakebo, it’s essential that we use these two tools and physically record our accounts, because writing things down helps us memorize and conceptually understand the changes that occur. That’s why it isn’t compatible with other solutions, such as software or apps (for example, Excel).
So, it’s a good idea to choose a specific notebook to put the Kakebo method into practice. In fact, there are books on this method that already include their own calendar to make it easy, as well as tips. And once we’re ready, we should pay attention to:
- Our monthly budget: Calculate your monthly income on one side and your fixed expenses (mortgage or rent, phone bill, installments, etc.) on the other. Write them down in your notebook—in different colors if possible—and subtract them to see how much money you’ll have left to cover variable expenses and save at the end of the month. In fact, at this point, you can set a savings goal to try to meet in the coming days.
- Daily Expenses: The Kakebo method of saving identifies four types of variable or non-recurring expenses. These are survival expenses (food, medicine, transportation, etc.), leisure expenses (shopping or eating out), cultural expenses (going to the movies, museums, or the theater), and extraordinary expenses (for repairs, gifts, or dealing with small unexpected expenses). Write down all these expenses every day and categorize them, so you can clearly see where your money is going.
- Weekly Review: Every Sunday, review your variable expenses and subtract them from the monthly budget you set earlier. The result will be the budget you have available for the rest of the month, so you can check right away whether you’re meeting the savings goal you set for yourself or if you’ll need to make any adjustments in the coming days.
- Monthly review: At the end of the month, review all your expenses and see if you’ve met your savings goal. By reviewing every transaction in your accounts, you’ll gain a clear understanding of where your money has gone and can take the appropriate steps to try to reduce your expenses (if you haven’t met your goal) or to keep them under control.
The Pros and Cons of the Kakebo Method for Saving Money
As you can see, this system is incredibly easy to use and doesn’t require a lot of resources. That’s why its biggest advantage is that virtually anyone can use the Kakebo method to save money at home, because all you need to know is how to add and subtract (which can also be done with a calculator) and have a notebook and a pencil or pen on hand.
In addition, it can be applied to single-person or multi-member households, and it stands out for its effectiveness: by requiring us to be consistent and to accurately record our income and expenses, it ensures that we have full control over our finances and helps us make the decisions we need at any given time so we can save as we wish.
That said, its major drawback is also related to this need for attention. Anyone who wants to use the Kakebo method for saving at home should know that it requires time and dedication, since you have to set aside at least 5 minutes every day to record every expense you make; while at the end of each week and each month, we’ll also need to sit down calmly to crunch the numbers, analyze each transaction, and make the appropriate decisions.
Tips for Effectively Applying the Kakebo Method to Save Money
To wrap things up, here are a few tips that can help you implement this Japanese system for saving money at home:
- Using a Kakebo planner: As we’ve already mentioned, there are calendars and guides designed to walk you through the entire process and help you take the right notes.
- Put specific money-saving tips into practice in your daily life: try reducing your variable expenses with strategies you can easily implement. For example, in these articles, we’ll show you how to save energy at home, cut down on gas usage, and reduce your most common household expenses.
- Take it seriously: to be effective, the Kakebo method requires your full attention. Dedicate time to it and record every income and every expense, because if you leave any out along the way, the results will no longer be useful to you.
- Identify expenses “ant,” “ghost,” and “vampire” and try to cut them back: with the help of the Kakebo, identify those small , unplanned, and non-essential expenses you make, because keeping track of them is the first step toward limiting or even eliminating them.
- Take one last look back at the entire year: if you want an even broader and more complete picture of your income and expenses, at the start of a new year you can calculate or visualize how much you saved in the previous year and set new goals for the year ahead.
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