The Japanese way of saving money — and it completely changed how I spend and save my money
Saving money is hard…
Have you ever heard about minimalist living?
The Japanese are called “minimalist” because they are masters of minimal living, able to manage with less in all aspects of life, whether it’s de-cluttering personal belongings or professional junk or savvy seasonal cooking. They believe that tidiness in your finances is as important as tidiness in your office and home.
Saving money is an art. No matter how much you feel you’re scrimping, in the end, you’re always left with nothing more than a few dollars in your savings account. In my experience, a huge chunk of monthly income goes on rent, bills, travel costs, and groceries. Sometimes we spend a lot of money on unnecessary entertainment and things we don’t even need.
You are not alone in this chaos.
3 years back I was in the same mess. I wanted to improve my spending and saving abilities. Ever since, to sort out my finances I started using the Japanese way of spending and saving — which is known as kakeibo.
Kakeibo — A Japanese “budgeting journal” helps you to keep an eye on your incomings and outgoings.
Kakeibo, pronounced kah-keh-boh, was invented in 1904 by Japan’s first female journalist, Motoko Hani, according to Fumiko Chiba, author of the guide/journal Kakeibo: The Japanese Art of Saving Money is basically a technique that is used to set saving goals and spend wisely.
It’s basically a three-step process —
Save, Reflect , Improve
To get a grip on my spending and achieve my financial goals, I started finding ways to save for the things that really matter in my life. I started asking myself questions like —
- Is it really necessary to buy this item? Can I live without it?
- Do I have alternatives? Can I build it myself?
- Based on my financial goals, can I afford it?
- Will I actually use it? If yes then where?
- Since I don’t want to clutter my house, do I have space for it at my home?
- Being a techie myself, I started questioning is the technology affecting my purchasing moods or choices by throwing ads based on my browsing history?
- Is my emotional state affecting my mood?
- Would I feel excited once I buy this item?
These questions helped me a lot. For the kind of foodie I am, I used to eat out every day with my friends, over a meeting or just when I felt lazy. One day, I just invited my friends over dinner and cooked the food myself. My friends loved the food and asked me to cook more often. By the end of the day, not just I loved the food, I also calculated the time I invested in cooking and the money I spent on the food every day.
I was shocked!
I spent around $2400/month while eating out. I could have easily saved around $800- $900 and put it in my savings if I cooked food myself. I learned my lesson and started cooking over the weekends for the weekdays. Not just I saved some money, I found that cooking is something I really enjoy. It became a part of my routine where I could detach myself from the world, work, and just cook while listening to my favorite songs.
Over a period of 12 months, I saved around $10,000
So, the whole premise of this technique is —
- At the beginning of each month, you sit down with your kakeibo and think actively about how much you would put under your savings and what are your savings goals for each month.
- Then in the space given by Kakeibo, you can jot down your weekly spending and reflect on the month just gone.This simple act of completing your kakeibo ensures that you reach your savings goals by saving every day, while also giving you the opportunity to improve every month.
The “kakeibo monthly cycle” depends on four questions:
- How much money do I have available?
How much do you earn monthly after taxes ?
2. What are my savings goals per month?
You can start small and then progress. Like I started with $30 and for every, other days, previous day-saving amount + $1 which means $31 the next day, then $32 and so on. I created this loop and it worked well for me.
3. How much am I spending?
Make a priority list of the necessary things you cannot live without.
The kakeibo approach subdivides expenses into 4 key areas:
1.Survival mode(things you can’t do without, eg. rent, bills, and food),
2. Entertainment and culture ( Amazon Prime, Netflix, etc),
3. Optional (things you don’t need but choose to do)
4. Extra (unexpected expenses such as repairs and replacements, birthdays).
You can create your own key areas, for example, I value fitness more than entertainment and culture, so, a gym membership is more important to me than a Netflix membership. So, in short, you can and customize to suit your lifestyle.
Basically using the Kakeibo method, you can weigh your Needs vs Wants. Don’t give up what you want most for what you want now. This way you can put more money in your pocket every month and it’s one of the quickest way to identify areas of wasted spending to help you succeed in meeting your savings goals by giving you a broader perspective about your spending habits.
So, get yourself a Kakeibo and start saving from today. I’m sure, by every month’s end, you will feel happy about your savings.
Remember — saving money is an art.
