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I tried 'Kakeibo': The Japanese art of saving money-and it completely changed how I spend my money

Kakeibo

Kakeibo

Kakeibo translates as "household financial ledger" and is a simple approach to managing your finances.

For the past 116 years, kakeibo has been effective in helping people make smarter financial decisions.

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I tried 'Kakeibo': The Japanese art of saving money-and it completely changed how I spend my money

I tried 'Kakeibo': The Japanese art of saving money-and it completely changed how I spend my money

https://www.cnbc.com/2020/01/08/how-this-japanese-method-of-saving-money-changed-my-lifeand-made-me-richer.html

cnbc.com

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Key Ideas

Kakeibo

Kakeibo translates as "household financial ledger" and is a simple approach to managing your finances.

For the past 116 years, kakeibo has been effective in helping people make smarter financial decisions.

Your relationship with money

The idea behind kakeibo is to help you understand the relationship with money by keeping a ledger with all incoming and outgoing transactions.

The difference from other budgeting systems is that kakeibo emphasizes the importance of physically writing things down as a way to observe your spending habits.

Reduce impulse buying

Before purchasing non-essential items ask yourself:
  • Can I live without this item?
  • Based on my financial situation, can I afford it?
  • Will I actually use it? Do I have space for it?
  • How did I come across it in the first place? (Did I come across it after wandering into a gift shop out of boredom?)
  • What is my emotional state in general today? (Calm? Stressed?)
  • How do I feel about buying it? (Happy? Excited? Indifferent?)
  • How long will this feeling last?

Spending money mindfully

  • Leave the item for 24 hours. If you still want it and can afford it, then make the purchase.
  • Don’t let “blowout sales” tempt you. Ask yourself if you would buy the item if it were full price.
  • Check your bank balance first thing every morning. It will ensure that you are aware of how much money you have to spend.
  • Spend in cash. Handing over cash makes you more conscious of what you're spending.
  • Put a sticker to your credit card that states "Do you really need this?!"
  • Change the environments that cause you to spend.

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Practicing financial avoidance

Whether it is about your money or a person you are not fond of, avoidance is the key to a life without unpleasant events. 

Every now and then individuals feel the need to avoid checking ...

Keep track of your spending patterns

According to experts in the field, when dealing with anxiety related to checking your bank account, the best solution to manage your anxiety is by checking your bank account. 

While it might hurt you, this remains the only means to help yourself get in control and start managing your money.

Make a new habit

While planning on how to better keep track of your bank account, you might want to consider methods like starting to check your account once a month. 

In order to do that, it could be useful to schedule a meeting in your calendar, devoted solely to this. Other ideas might include using spreadsheets to keep track of expenses or getting an automatic tracker.

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Money Hacks

# Writing every transaction down

# Using a spreadsheet to track your spending habits

# Loving credit cards

# Never thinking of purchases in terms of *present* value

# Studyi...

Being Frugal Is Not Cheap

Frugal people do spend money, but want the maximum bang for the buck, without stressing themselves.

Frugality does not mean compromising quality, neglecting your social life, or being a...

Be A Smart Spender
  • Use tools like financial books, podcasts, and online savings groups.
  • Avoid indulging in unnecessary expenses daily, reducing them or finding healthier and more affordable alternatives.
  • Cultivate a healthier attitude and the right mindset towards your finances.
  • Know that small, practical, money-saving actions can compound into better living for you in the long run.
Use Smart Hacks

There are plenty of financial and budgeting tools and apps that can help us manage our funds, keep track of our expenses, and trigger us when we are off-track.

Simple hacks like carrying a debit card or cash instead of a credit card, or deleting our card details from shopping sites can help us avoid spending impulsively.

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Salary is not the same as savings
Having a high salary does not automatically make you rich; having a low salary does not automatically make you poor.

Your net worth is more important than how much money you make. It’s amazin...

Saving is more important than investing

Pay yourself first is such simple advice, but so few people do this. 

The best investment decision you can make is setting a high savings rate because it gives you a huge margin of safety in life.

Live below your means...
....not within your means. 

The only way to get ahead financially is to stay behind your own earnings power.

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When budgeting comes in handy
  • You have no idea where your money is going.
  • You’re chronically overspending.
  • You’re not saving any money.
  • You struggle to afford the things you really want.
  • You...
The Golden Rules of Personal Finance
  • Spend less money than you earn
  • Always plan for the future: you should always look forward beyond the current month
  • Make your mon...
Side Hustle to Make More Money

You don't have to sacrifice all of your free time to start a side hustle, use the time you’re comfortable with and make a little bit of progress every day. 

Take Action

Get to working on improving your finances today, not tomorrow. Reading the steps and thinking you’re capable of doing it but postponing it is just an excuse, an unprofitable one.

Communicate With Your Partner

Talking about your financial goals, and scheduling time once a month to go over your finances together can prevent money from affecting your relationship.

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Making Your Budget Too Strict

Budget for the life you have. When you’re going through your budget and assigning spending categories, be realistic. 

Don’t tell yourself you’ll never buy a single discretionary i...

Budgeting for a Life You Can’t Afford

This becomes a problem when you’re spending for a life you can’t afford. It puts pressure on your budget and encourages you to live in a paycheck to paycheck cycle.

Assess your financial situation, cut back on your expenses, prioritize your money goals, and then come up with a new spending plan.

Budgeting Without a Purpose

It’s hard to stick to a budget that doesn’t have a goal.

When there isn’t one, your budget becomes an afterthought rather than a spending plan to reach your financial goals.

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Common budgeting mistakes
  1. Not Tracking Expenses: it's impossible to stick to your budget if you don't know where your money is going.
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Tracking expenses
One of the ugly truths about budgeting is that when you keep track of your expenses, it’s painfully clear when you’ve gone off track. 

Write it down when you’ve gone over your budget. The negativity you feel will help prevent you from overspending more or doing it again. Just think of this step as damage control.

Being frugal and miserable

If you try to deprive yourself too much, you’ll binge later and throw all your hard work out the window. 

A spending binge can set you back far more than treating yourself occasionally, so go for the occasional minor splurge. Just keep your treats within your spending limits and you’ll be fine.