The kakeibo budget is an old-fashioned accounting trick that helps you slow down and focus on your finances.
Automating your budget with an app makes a lot of sense for busy people on the go. It syncs up with banking accounts to track your finances in real-time. All you have to do is tap into your profile to see these updates while your app does all the hard work.
But like all things, convenience has a downside. You’re one-step removed from your finances, making it harder to think of it as an actionable spending plan. More still, your budget is just one more thing you can mute and forget about on your phone.
If you’re having difficulty following an online budget, it’s time to give up on digital trends and try kakeibo, an old-school method of balancing the books.
What is the Kakeibo Budget?
Kakeibo is a Japanese method of identifying your financial goals and comparing them with your financial abilities. Somewhere in between, you’ll find a way to do what you want with the money you have.
Pronounced “kah-kay-boh”, it’s Japanese for “household accounting book”, and it involves a literal book that you use to track your household budget by hand.
Why is it Important?
Without a budget of any kind, you run the risk of spending more than you earn. Worse yet, you may be tempted to put things onto credit to alleviate some of the pressure. While you may find smart borrowing options online, an online line of credit should only ever be used in unexpected emergencies — not splurging at the mall.
By tracking your expenses the kakeibo way (i.e., manually), you’ll be more mindful of your spending.
The Four Pillars of Kakeibo
Through the kakeibo budget, you’ll answer the following four questions:
- How much money do you have available?
- How much cash do you want to save?
- How are you spending your money?
- What can you do to improve your finances?
Remember your answers to these questions; they’re here to guide the way you adjust your household’s ledger.
How to Make a Kakeibo Budget
Start by tallying your fixed monthly expenses, then subtract them from your monthly income. The sum you have left is what you use to answer the first question from above.
From there, you’ll have to answer the second question: how much do you want to save? Once you’ve decided on a number, save it. Any remaining cash is what you have to spend on all your other expenses.
What makes kakeibo special is that you record and categorize this other spending in real-time.
Here are the four most popular categories:
Needs: These expenses cover what you need for survival, so it should include things like food, hygiene products, and transportation. It may also cover loan and line of credit payments you can’t miss.
Wants: As the optional, fun things in your budget, your wants represent spending you could live without.
Culture: While similar to the category above, culture covers the arts — things like concert tickets, books, and movies as its own category.
Extra: This last category includes those irregular yet important bills and expenses you face throughout the year. They may be fun things like birthday gifts or a family trip. Or, they may be those surprise bills that press us into using a line of credit, like unexpected car maintenance or surprise medical bills.
At the end of each month, review these categories to see how you did in relation to your goals. If you fall short, take the time to find out how you can do better.
In an impersonal, highly digital world, it’s easy to get screen fatigue. This may be a danger to your finances if you follow a budget online.
Before you give up on a spending plan altogether, give the kakeibo method a chance. Its methodical and manual way of tracking your spending gives you a new perspective on your finances.