06 Dec 2021

Financial Advice: The Japanese art of how to save money

Making Cents with Liam Croke

Financial Advice: The Japanese art of how to save money

File photo

DO you wish you could have saved more at the end of every month? Or, are you fed up, of trying all sorts of budgeting techniques to help manage your money better, but none work?

The solution to both problems may be found in a concept, created in 1904 by female journalist from Japan, Hani Makoto.

She published an article in a magazine called Fujin No Tomo and in it, she encouraged her readers, which were mainly women, to develop systems and schedules for household tasks. And one of those systems was how the homemaker should manage the household finances.

Makoto put forth a suggestion to her readers called Kakeibo, which is pronounced kah-keh-boh, which translates to, book of accounts for household economy. Makoto believed that financial stability was essential if you wanted to have a happy life, so her altruistic mission was to help people take control of their finances.

And Kakeibo is really just a budgeting journal, but a very effective one at that, and a system that is still followed to this day by the Japanese, where some claim it has helped them cut their monthly spending by 35%.

It’s a manual way of tracking your finances with the goal of (a) helping you achieve your savings target for the month and (b) it prevents you from spending more money than you need to.

When using Kakeibo, you must begin by asking yourself four key questions, and they are:

How much money do you have available?

How much do you want to save?

How much money are you spending?

How can you improve?

The idea behind asking yourself these questions, along with taking a much closer look at what you’re spending your money on, will help you change your spending habits and help you achieve those saving goals you set yourself.

And Kakeibo is that old school, write down everything method of managing your finances, rather than using on-line budgeting tools, which are supposed to do everything for you. Unfortunately, I think these budgeting apps are not the panacea for most people when it comes to taking control of their finances each month.

They don’t make you think about what you’re doing, whereas Kakeibo does.

Manually writing down how much you spend and on what, builds awareness of what you’re up to, and I think holds yourself more accountable than any app ever could. If you want to save for example €300, using the Kakeibo method, you’re more likely to think twice about spending money on something you may not really need or want.

And when you reflect on what you spend your money on in a particular month, it’s easier to recall and process each item using Kakeibo. It’s as if they become cemented in your head once they’re recorded by hand as opposed to relying on an automated budgeting app, where it’s very difficult to remember what you spent your money on, how you felt at the time, and what the reasons for the purchase were. They tend to become detached from everything else going on in your finances, whereas the art of Kakeibo makes that connection with other areas, like saving.

Okay, the first step when using Kakeibo is creating a monthly spending plan.

You must know the answer to two questions:

How much money is coming in?

How much is going out?

Not particularly ground -breaking stuff, but I would say 90% of the people I encounter don’t know the answer to how much is going out. And that’s a problem.

So, you must uncover the amounts you’re spending on fixed items like mortgage, rent, insurance, utilities, loan repayments etc.

Once you know what your fixed expenses total, subtract them from your total sources of net income.

Now, the second step is to think about how much you’d like to save in the month ahead, and what the reason for saving that money is.

And it’s an easy calculation, just subtract the amount from what money is left over and that’s your saving goal for the month ahead.

Let me give you a quick example of what this might look like:

Income €3,000

Fixed Outgoings €1,200

Sub - balance €1,800

Savings (Target) €300

Balance €1,500

Now you know how much you have left to spend each month.

The third step using the Kakeibo principle is determining what your weekly/monthly spending is going to be on variable expenses. And you’re going to do this by dividing your spending into the following 4 categories:

Survival – variable expenses you can’t live without i.e. food, transportation, childcare etc.

Optional/Wants – things you can live without i.e. extra clothes, eating out etc.

Extras – these are expenses it’s difficult to plan for i.e. car repairs, medical costs, home maintenance etc.

Cultural – spending on books, newspapers, courses, museum and cinema visits etc. (having a cultural related expense category is important to the Japanese but you can easily move some of these costs into the extras or optional categories if you want to)

The fourth step is to record purchases as you make them. And that requires you writing them down in a journal.

Kakeibo requires you to track your spending in real time and because your using pen and paper, it slows things down where you pay much more attention to the present moment and you’re much more conscious of the impact a purchase might have on your savings goal.

The fifth and final step is to review your spending for the month.

And this helps answer the questions of how much money you are spending, did you spend too much in some categories, did you reach your savings goal, how can you improve next month?

After reflecting on your answers, you are supposed to write them down in a journal, so you have something to reference the following month, which will help keep momentum if you did very well, or help prevent you from making any mistakes if things didn’t go so well.

If saving money and sticking to a budget has been challenging for you, the Kakeibo method could be your answer. I like its mindfulness element where you are nearly forced to pay closer attention to purchases made, because you are using pen and paper to record them, and then reflecting afterwards whether these purchases made you happy or not.

We live in an age which facilitates mindless spending. We can buy and pay for things incredibly quickly, but when it comes to that post-mortem at the end of the month, where we’re trying to figure out where all of our money went, it can be difficult to identify the areas we overspent on or even remember them.

The Kakeibo method helps because, there’s something about the physical act of writing numbers down on a page that makes purchases more real and how they connect to other parts of our finances. The simple act of knowing where your money is going each month, and that you’ve set aside enough for each category can have an enormous impact on your financial life.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at or

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