Set and follow a budget, live within your means, and save money. These are all common suggestions for how to improve your finances.
But actually making these changes, and making them stick, can be a lifelong challenge. It’s even more frustrating if you’ve tried to budget, only to fall on your face.
If this sounds like you, it might be time to try the pen-and-paper method of “kakeibo” (pronounced kah-keh-boh), a Japanese word that means “household ledger.” A kakeibo budget provides a simple and flexible structure to money management.
4 questions to create a kakeibo budget
Kakeibo is an analog method of budgeting that’s been used in Japanese households for over 100 years. It combines elements of keeping a money journal, a planner, and a ledger all in one. This creates a system that helps you set, track, and achieve savings goals.
To get started with a kakeibo budget, you’ll need a notebook or journal. You can start with a blank notebook, or you can find a kakeibo journal such as “Kakeibo: The Japanese Art of Saving Money” by Fumiko Chiba.
Once you have your kakeibo journal, you’ll use the following four questions to guide your budgeting each month.
1. How much money is available?
The first question is how much money you have available. To figure this out, you’ll need to list these amounts in your kakeibo journal:
Monthly net income: Get your most recent pay stubs to find out how much money you take home each month.
Monthly fixed expenses: Next, review all your expenses and record the monthly amount of each fixed and recurring cost, from rent to your Netflix subscription.
Once you know your income, you can subtract your fixed expenses to find the money available to spend or save, also called your discretionary income.
2. How much do you want to save?
Now that you have the bare bones of your kakeibo budget, you can start fleshing it out. For this step, you’ll need to decide how much of your discretionary income to save.
It can be tempting to try to save 100% of your discretionary income, but it’s not usually realistic. Decide on a savings goal that’s reasonable given your usual spending. It’s also best to shoot for a concrete amount, such as a dollar amount or percentage of your discretionary income.
Besides setting a savings target, try attaching it to a bigger goal or reason to save. Are you carving these funds out of your budget to make extra payments on student debt? Will they help fund a small getaway in six months? Writing down why you’re saving will help you stay motivated as you follow the kakeibo method.
3. How much are you spending?
Another important part of keeping a kakeibo budget is recording every dollar you spend. Every time you hand over cash or swipe a card, you should write the expense down to the cent in your kakeibo.
The kakeibo method also includes some categories that can be helpful to identify needs versus wants:
Survival: These are usually expenses that are nonoptional but can fluctuate from month to month. This category would include your grocery budget, gas, utilities, and similar costs.
Extra: What about those one-off costs, such as holiday spending or a repair for your home or car? These expenses would be grouped here.
Optional: These are your “wants” — purchases that are nice to make but could be cut back if needed.
Culture: Most of these would also be considered wants, not needs. But the kakeibo method has a category specifically for purchases that enrich you and your life, such as hobbies and interests.
The simple act of reaching for your kakeibo notebook and recording an expense can make you more mindful with your money. And this increased awareness of your spending will help you get a firmer grasp on where your money is going, for better or worse.
4. How can you improve?
The final question prompts you to consider more that you could be doing to improve your finances. Besides following the general kakeibo budget, identify a small and realistic money goal you can make.
If you already have a starting point, you can commit to change in the first month. You might choose to cancel one or two outdated subscriptions to avoid the monthly fees. Or you could decide to cut back on going out for lunch or lattes. Starting small and simple is key.
As you get going, you can also use your spending records to identify new areas for improvement. You can reflect on your wins, note any slips, and decide what to try each month to save a little extra.
If you’re intrigued by the kakeibo method, give it a try. It’s a low-cost, low-commitment budgeting method. And you can use it to work toward almost any money goal, from paying off debt to saving more for retirement.
With your new kakeibo notebook in hand, you’ll build healthy money habits and take control of your finances.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|