Getting your finances in check can be easy. It’s as simple as being clear on what you want to spend, and why – Kakeibo, the Japanese art of mindful saving can help you do exactly that. But, what on earth is Kakeibo?
Kakeibo is a process of manually jotting down what you spend on. It is a zen and mindful budgeting habit which help you get your finances in order through journaling, which essentially makes you keep an ongoing record of your incoming and outgoing expenses. You’d be surprised that this simple act can improve your relationship with money greatly. So how does Kakeibo curb your overspending habit with efficient budgeting, while saving more moolah?
1. Reduce impulsive buys
Writing out your budget brings you to the present and raises your awareness about your spending habits. You can also opt for an eco-friendly and sustainable digital journal, if the traditional pen and paper are not your tools of choice.
You can start by tracking down each expense daily. When you write out your purchases, it’s easier to take a step back and identify patterns and bad habits that harm your savings plan. Start questioning yourself, “Was it a necessary purchase? Did I really need it?” – When you are forced to think deeper about your every purchase, you will be able to better set your needs apart from your wants. Pretty soon you would probably find yourself deliberating three, four times before giving in to your FOMO.
If you do need to give yourself a treat or a quick retail therapy from a stressful week, you can make your shopping worthwhile and get some money back by using credit cards which can give you great cashbacks. For example, Standard Chartered’s Unlimited Cashback Credit Card earns you 1.5% cashback on all your spends with no minimum spend nor a cap on the amount of cashback you can earn.
2. Bring out the limitations of your budget
Writing down your outgoing cash helps you compare it to your incoming cash – this may help you take out unnecessary expenses that eat into your limited disposable income.
By listing out your outgoing cash flow, you will quickly get a bird’s eye view of your finances that most budgeting methods miss out on. From there, you can see where and how you can shift your priorities in spending at a glance.
For instance, your weekly karaoke expenses will immediately stand out. You’ll be able to decide if it was necessary, or how you can budget for it if it isn’t – maybe by going once a month? Use Kakeibo to understand your spending habits to ensure your finances remain healthy always.
3. Increases your accountability
The process of writing down your daily spend encourages you to “face the music” at the end of each month. Numbers and words don’t lie – be sure you don’t either when jotting them down!
Listing out your payments breaks down the vague idea of “overspending” and paints a clearer picture. Tackling your budget gaps becomes a lot easier once you are aware of the expenses that you have to subtract.
Let’s put it into perspective. Have you ever gone grocery shopping without a grocery list? Chances are, you would be distracted with buying things that captures your fancy and forget the one or two items you actually did need – worse still, those were the things your parents specifically told you to get!
On the flipside, when shopping with a grocery list, you would immediately be able to focus on the things you need to purchase and you waste less time deciding if you should add extra, unnecessary purchases.
Kakeibo works the same way. With a physical list of all your expenses, you will be able to immediately spot redundant spending. You can even plan ahead for upcoming or fixed expenses you know you’ll have.
50/20/30 vs. Kakeibo
The 50/20/30 rule is a popular guide to divide your taxed, take-home salary after CPF deductions. It is segmented according to 50% needs, 20% savings and 30% wants. How does Kakeibo as a means of budgeting, measure up against the 50/20/30 rule?
1. Kakeibo allows more flexibility
The 50/20/30 rule is a fixed template. This may not be the best solution for you if you are facing a unique circumstance as the recommendations are generalised. For example, you may need to save much more than your peers if you if you aim to own a house in 1 to 2 years. Alternatively, if you have existing debts or liabilities, a portion of your cashflow will already be limited as it is used to pay your dues.
Kakeibo, on the other hand, encourages you to think deeply about your own personal situation which forces you to allocate your budget to your discretion.
2. Kakeibo keeps you ‘goals-focused’
The 50/20/30 rule directs your perspective to what you currently have. Kakeibo encourages a long-term perspective as you are measuring every act in relation to your desired lifestyle outcome.
The habit of manually tracking where your money can be motivating and can reinforce the goals you have in mind, inspiring you to be strive harder towards your financial goals.
Do you know how many people are still working diligently towards their 2020 new year’s resolutions? Can you recall the resolutions you’ve set for the year and how gung-ho you were to achieve them? Like most of us, you might have already forgotten them. In fact, about 80% of new year’s resolutions fail by February – common reasons include losing focus of your goals, or not being clear about what you want to achieve. Imagine how your progress would be like if you followed through every day of the year.
Just like your finances, if you’re in the habit of tracking your expenses manually, you’d be constantly reminded of your targets. This helps sustain your focus and build your motivation to work towards it.
If “manual” seems like a tiring term, use apps to help you automate your expense tracking. For instance, the Standard Chartered Money Manager, a feature within the Standard Chartered Mobile App helps you keep track of your spending, set monthly budgets and locate your spends all at your fingertips. It even has a built-in Google map that allows you to map out exactly where you spent your money in real-time! How cool is that?
Saving and growing money beyond the Kakeibo method
Kakeibo simply teaches you how to manage existing cash, but not on how you can generate money for yourself. What are other ways you can save and grow money, after using the Kakeibo method?
1. Increase your savings
For most of us, the building block of our savings begins with our emergency funds. Typically, this is about 6 to 9 months of your expenses saved. This protects you against unforeseen events or the unfortunate loss of employment.
Your savings can also be increased if you generate more inflow of cash. Using Kakeibo, you can easily identify the income-generating actions in your life. Double down on these actions to increase the amount of savings you have. Additionally, save your money in bank accounts with higher interest rates like Standard Chartered’s Bonus$aver Account, which allows you to earn up to 2.38% bonus interest per annum.
2. Make your savings work for you
Inflation can cause the value of your savings to drop over time. $10,000 today will not have the same value in 20 years. In order to beat inflation, on top of saving, invest your reserves to generate returns for you. You can also reach out to a financial advisor for guidance and to help you make informed choices to grow your money.
But first, #konmari your finances with Kakeibo to ensure you get the most out of your income, expenses and savings.
Singapore dollar deposits of non-bank depositors are insured by the Singapore Deposit Insurance Corporation, for up to S$75,000 in aggregate per depositor per Scheme member by law. Foreign currency deposits, dual currency investments, structured deposits and other investment products are not insured.