I'm excited to share a secret money-saving tip that my Japanese grandpa taught me. Stick around until the end, and I'll explain how this tip helped me save ten thousand dollars. For those who don't know, I'm half Japanese—my mother is Japanese, and my father is American. I've spent about half my life in Japan and half in the US. After graduating from Georgetown Law School, I experienced reverse culture shock when I returned to Japan. The approaches to lifestyle and saving money are entirely different in these two countries.
In the US, everything is grander, and people are encouraged to buy more, stock up at Costco, take out loans, and live in large apartments. In contrast, the Japanese are masters of simple living. In Japan, there's a stronger focus on buying within your means and shopping small. You can even buy a single boiled egg at convenience stores. The average size of a home in Japan is 1,309 square feet, about half the size of the average US home, which is 2,687 square feet. So, living a decluttered life in Japan isn't just a fad but a necessity in many cases.
At the heart of this lifestyle is a budgeting philosophy designed to help you slow down and analyze your monthly spending. It's a simple technique that anyone can apply without any technical prowess—no fancy Excel sheets or specialist apps required. All you need is a pen and paper. I first saw my grandpa using this approach. He carried around a small book called "kakeibo," which translates to "household finance ledger." Here's a simple one I found on Amazon, but you can use a plain notebook if you'd like.
Kakeibo is a journal used to set savings goals and spend wisely. The premise is simple: start your month by writing down in your kakeibo how much you'd like to save and then what needs to happen to make this a reality. The kakeibo includes space to write down your weekly spending and look back on the past month. The simple act of filling out your kakeibo means saving becomes part of your everyday life, helping you keep track of all your spending.
Kakeibo dates back to 1904 and was popularized by Japan's first female journalist, Hani Motoko. The tool gave Japanese housewives full control of monthly spending, and this still holds true today. In a typical Japanese household, the wife budgets for the month and gives her husband an allowance based on what's available. So, how does it work?
In Fumiko Chiba's book about kakeibo, she says you need to ask yourself four questions at the beginning of the month:
1. How much money do you have available?
2. How much would you like to save?
3. How much are you spending?
4. How can you improve?
Then, write down the answers in a notebook. It's recommended you write by hand as it helps you slow down. Typing can easily lead to distractions, but writing by hand ensures it's just you, your kakeibo, and your savings. Next, focus on your two-page spending plan.
For step one, fill out all your sources of income and your take-home pay after immediate deductions like tax, student loans, and insurance. Then, move on to step two: write out your fixed expenses, such as rent, phone, and gym memberships. After that, calculate how much you have available to you. On the next page, there are three more steps:
Step three: determine how much you want to save. Be realistic in the first few months. Just because you're ambitious doesn't mean you can drastically change your spending habits overnight. The more you use your kakeibo, the easier saving will become.
Step four: subtract the amount you want to save from the amount you have available. Divide this by the number of weeks left until the next payday to determine your weekly spending.
Step five: add notes. Some people like to set goals, write encouraging quotes, or add doodles. For the next step, keep track of all your spending. I suggest buying a second smaller journal to fill in your main kakeibo once you're back home. The smaller book is easier to carry around, allowing you to make quick notes of all your purchases on the go.
This is a great way to think about money and budgeting in general while also getting into the habit of noting everything down. You don't have to cut out all small expenses, but being mindful of your expenses helps you slow down and really think about them. Our cashless society makes it easy to buy without thinking, and this simple habit can break you out of this consumerism trance.
In Japan, it's still primarily a cash society. In 2019, Shinzo Abe tried to encourage Japanese people to go cashless with his "cashless revolution" campaign, but most people still prefer to use cash. With cash, it's easier to track your spending. The physicality of it is a constant reminder of how much you have and how much you've spent. In Japan, they give you a receipt for everything, so I always come home with a wallet full of receipts. This nuance is often lost when spending with cards.
Now, this isn't to suggest that you suddenly switch to using cash entirely. I'm a huge fan of taking advantage of all the bonuses that cards offer, like cashback, points, sign-up bonuses, and security. That's why this method of writing down all your purchases in your kakeibo is the perfect combination of the two. You gain all the benefits from cards and the physical reminder that cash offers.
It suggests that you divide all your spending into different categories, such as supermarket, eating out, subscriptions, and travel. Similar to Marie Kondo's approach to minimalism, the more granular you get, the easier it is to see the whole picture and know exactly where your money is going. This allows you to identify your "demons"—the categories where you spend the most. Perhaps you notice a large portion of your money goes to subscriptions. If that's the case, investigate which ones can be cut and which ones you actually need.
I've heard stories of people who started doing kakeibo and noticed they had dual subscriptions to the same product, something they had previously missed when using a digital budgeting planner or not budgeting at all. At the end of the week, you'll have a detailed breakdown of all your spending, making it easy to see where your money is going. You can also keep adding notes to inspire you or remind you of special events like parties. If you've gone a little overboard one week, it's easy to remember why.
The last step is reviewing the month. Ask yourself and write down the answers to these four questions:
1. Did you meet your savings target this month?
2. In what ways did you find to save money?
3. Which areas did you spend too much on?
4. What will you change next month?
Don't be too hard on yourself. It's important to feel good about your choices. Focusing too much on the negative can lead to losing motivation and giving up. Similar to dieting, it's easier to gradually drop a few pounds than to start an extreme weight loss scheme. When you take things on gradually, they slowly become part of your daily habits. Before you know it, you can't imagine a time before it. On the other hand, taking on anything extreme often results in quick burnout.
It's also important to remember that kakeibo is not just about saving money but also about having financial reserves for emergencies or unforeseen events. You might want to consider putting some of your savings towards an emergency fund. This can be a dedicated high-interest bank account where all the money goes directly towards building a nest egg in case you need it in the future. This way, you won't worry as much about paying for emergencies, and unexpected events won't catch you off guard as much since you already have a plan.
You should also think about investing your savings. Keeping it all in cash will make it worth less over time due to inflation. Kakeibo is designed for month-to-month planning, but once you're in the flow of things, it's nice to start thinking about the year as a whole. Plan for holidays, birthdays, weddings, special events, life goals, and material possessions you want. It's nice to plan for things you want rather than getting stuck in the "paying off debt" mentality. In the US, there's often a "buy now, get immediate gratification, and pay later" mentality. Perhaps that's why the average credit card debt of US families is $1,270.
Tracking your spending in a journal can help switch to a "plan now, buy later" mentality. Now, how did kakeibo help me? Once I started writing in my kakeibo, I noticed three things I could fix:
First, I had strong sugar cravings and would often mindlessly buy snacks at convenience stores. This wasn't an active decision but more like being on autopilot. When I started writing down all these small purchases, I saw that I was spending around two dollars a day on unnecessary snacks. This might seem small, but over a month, it's $64. It's not good for my health, and that $64 could cover a week of groceries or a full tank of gas.
Second, my subscription plans. My partner and I were both paying for individual Spotify plans. Switching to the duo plan saved us $6.99 per month for the same service.
Lastly, I noticed my insurance plan was gradually increasing. When I signed up, I opted for automatic renewal, which included price increases. This might have been mentioned in the letters they sent or buried in the terms and conditions, but no one actually reads those. I was now paying over a hundred dollars more per month than when I first set it up. If I hadn't noticed, who knows how much I'd be paying in five or ten years.
Just by fixing those three things, kakeibo allowed me to save over $170 per month or 5.34 cents per day simply by being more engaged in my savings. When I was aggressively paying off my student loans, tracking every single dollar and being intentional about spending and setting savings goals helped me save almost ten thousand dollars a month to put towards my student loans. I know the examples I gave aren't ten thousand dollars, but with money and habit formation, it's about starting small. You can't save ten thousand dollars without first learning to save five dollars and ten dollars.
Ultimately, it's about finding what works for you. I go through phases—sometimes I like handwriting my spending, other times I use an Excel sheet or an app. I wanted to introduce you to kakeibo because it's a simple way to start saving. Write down your intentions for the month and note all the little expenses. You'll learn a lot from this process.
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