Have you ever received your salary and one day got surprised where everything went? We all have. Who stole the money? Did a mythical dragon gnaw away your hard-earned cash? Why is it eating everything every single month?
Unless you are on some dangerous drug, stop your hallucinations. Most probably, you spent everything. Period. I know you know. Countless have said that regardless of how big or small your income is, we all know we should budget our money.
How do you take control of our finances? The Japanese have devised again an ingenious way to budget. Let me invite you to the world of “Kakeibo”, the art of saving.
It’s Kakeibo. Not to be confused with any cosmetic brand. It promises roughly 35% automatic savings per month when done right. Excited? Let’s move on.
Read as /kah-keh-boh/, Kakeibo is literally translated as “household finance ledger”. This ledger was invented by journalist Motoko Hani dated 1904. It’s a tool used by the Japanese to manage their household finances and be mindful of where the money is going at any given time.
Its effectiveness is already tested. Its use is still widespread in Japan to date. Based on statistics, Japanese households with savings have been steadily growing with an average 11.94% from 1970 to 2017. It reached an all-time of 50.10% just this past 2017. Is this their magic sword to stop that ferocious dragon? Let us find out.
Now, To Start Wielding The Weapon
To use a Kakeibo, first, summarize all your earnings and deduct your fixed expenses. Let’s say you have P25,000 monthly income, deduct your monthly rent, mortgage, memberships, etc.
Let’s say you are left with P12,500 after deducting everything. Now, deduct your target savings. An amount of 10% – 35% is ideal. But just make sure that is possible and realistic for you. You don’t want to eat just rice and salt every day. (And you can’t, you might die).
This figure will be the budget you’ll be working on.
Financial Mindfulness: Recording Your Daily Expenses
Wait! We’re not done yet. Now, comes the hard part: recording your daily expenses. By now, you probably have a Kakeibo in hand or a simple notebook. Every day you must write your expenses in the journal. Yes, no electronics. It should be handwritten.
As you move towards your Kakeibo journey, you should be able to answer these questions:
How much money do you have?
How much would you like to put away?
How much are you actually spending?
How can you improve on that?
This process allows us to face our fears and finally see the numbers. This is called Financial Mindfulness. As you write down every single outflow, you become more aware of your financial mishaps and goals.
Categorizing the Expenses
As you write down your expenditure, we categorize the expenses into four groups:
Survival – Basically, food, transportation, and anything you can’t literally live without.
Optional – These are usually social things like eating out, new clothes, shopping, etc.
Culture – These are expenses for cinemas, books, films, music, etc.
Extra – These are the non-recurring things you don’t usually pay for like repairs, buying someone a gift, furniture, etc.
You can even go as far as using envelopes to segregate each budget. When the envelope goes empty, you can’t spend more for that category. And if the opposite happens, you can treat it as additional savings.
It may take some time before you get used to. But it’s worth it.
Savings Pig Versus the Expenses Wolf
Every week (and every year), the fierce battle between the Savings Pig and Expenses Wolf awaits. For the final requirement, you should check how well you did. After tallying everything, did you hit your goal?
Do you have more savings than expenses? Did you reach your savings target?
If you’re like me, not everyone hits it at first. But at least now you know your figures. From there, you can adjust.
Adjusting and Getting Your Goal
Maybe try to lower your savings percentage first and work towards increasing it. Or maybe you can get a part-time job to supplement your income.
For what’s it worth, this is just a simple method. But what makes it so useful is the mindfulness you get. Now that you are aware, you can improve. And later, become successful with money.
Cheers to reaching your goals!