Kakeibo: A Life-Changing Method for Saving Money

Japanese woman keeping household accounts with smart phone

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This Japanese approach to managing household spending may be over 100 years old, but it's as relevant as ever.

First there was Marie Kondo, who exploded out of Japan with her bestselling book, "The Life-Changing Magic of Tidying Up," and managed to declutter and organize homes around the world with her detailed instructions and quirky philosophy. Now another Japanese organizational method promises to get your finances in order -- something even Kondo couldn't whip into shape.

The method is called 'kakeibo,' which literally translates as 'household finance ledger.' It's an old-fashioned method that relies on -- you guessed it -- the good old pen-and-paper combo. Kakeibo was first published in a women's magazine in 1905 by female journalist Motoko Hani. Hani believed that financial stability is crucial for happiness (she's right!) and wanted to help households take control of their spending.

How Kakeibo Works

The kakeibo approach starts each month by recording fixed income and expenses, then setting a savings goal for the month, as well as a promise to oneself that will further the likelihood of achieving that goal. Wise Bread gives an example: "For instance, you might make it your goal to set aside an additional $100 that month for an upcoming vacation, and you might promise yourself that you will brown bag your lunch at least four days a week."

Throughout the month, expenses must be recorded in four categories, described as 'pillars':

Survival: necessary expenses such as accommodation, groceries, medical, etc.
- Culture: costs incurred by cultural activities, such as reading, films, theatre, music concerts, etc.
- Optional: things you don't need but choose to do, such as restaurants, shopping, having drinks with friends
- Extra: unanticipated expenses like birthday cars, repairs, replacements

The end of the month is met with four questions:

How much money do you have?
- How much money would you like to save?
- How much are you actually spending?
- How can you improve on that?

The Culture of Saving

The original kakeibo books have fun illustrations featuring a 'savings pig' and an 'expenses wolf' that are battling each other throughout the month. The hope, of course, is that the pig will beat the wolf every time.

Finance blogger Moni Ninja provides some interesting background on the Japanese mentality toward saving. Parents teach their kids from a young age that traditional cash gifts should always be kept in the bank to avoid impulse spending. Perhaps most fascinating was this statement: "[Children] are taught that the more money they save, the higher the quality of personal items they can buy in the future." (emphasis mine) Contrast this to American parents' tendency to tell their kids that more money in the future means greater quantity, rather than quality. The statistics speak volumes, as well:

"In the UK, 4 in 10 adults have less than £500 in savings and the average household saves only 3.3% of their earnings. The average American saves just 4% of her earnings. If we take Japan instead, households averaged 11.82% from 1970 until 2017, reaching an all time high of 49.70% in December of 2015 and a record low of -9.90% in May of 2012."

While kakeibo books are difficult to find in English, the philosophy can be easily applied using a regular bullet-style journal (especially if you're good at drawing cartoon pigs and wolves). The key is to write down everything, which aids in remembering and staying accountable to yourself, and to reflect on it throughout the month. There is something about the act of writing numbers down that makes spending seem more serious. After all, as the original book's slogan stated succinctly, "Memory can be fuzzy, but the books are accurate."