Did you know that on average the Japanese have twice as much in savings as Americans?
To be exact, according to Statista, a Japanese household has about 17.91 million Japanese
yen in savings, which is $137,569.
In contrast, the average American has about $73,100 in savings, according to a study by
Northwestern Mutuals.
We wondered what that might be and came up with an interesting way the Japanese population
manages their money.
They have a method called Kakeibo that leads to spending more mindfully and saving more
money at the same time.
It is very different from a system to save more money, but is more of a financial philosophy
that is supposed to be easy to implement.
So if you are someone who is currently having trouble creating or keeping a budget, are
new to saving money or have always been put off by rigid budgeting methods, we have definitely
found the right thing for you and in the next few minutes we will explain to you exactly
how this kind of money saving works, what our results are and at the end we will show
you tips that will help you master Kakeibo completely.
But before we get to the main topic of the video, first of all welcome back and if you
are new on our channel...
We are the Finance Nerds and we try to help you to fix your finances and spread our knowledge
from topics in saving money to investing!
And we know many struggle with their finances, because it’s difficult to keep track of
everything and that's why we built our all-in-one personal finance tracking sheet.
If you like, you can find the link to the free download in the video description and
now let's get started!
Before we get into how to use it, it is important to understand what it's all about.
Kakeibo is a Japanese term that translates as "household financial ledger".
The term was coined by a Japanese author who wanted to establish an effective method of
controlling finances.
Basically, it is like the budget, where all financial activities are recorded, for example,
shopping or a restaurant visit.
However, it has certain differences from the traditional budget such as specific questions
to ask yourself or savings goals to define.
As mentioned above, this is not a traditional budget system, but rather a financial philosophy.
So how can this help you?
With a Kakeibo, you always have your goals in mind and can track whether you are on the
right track or not.
Moreover, it is there to plan your financial situation in the future without being stressed
or frustrated in the present.
And in the next few minutes you will learn exactly how the Kakeibo method works, how
you can integrate it into your life and what our experiences are.
So now we'll deal with the questions of how Kakeibo works and how you can integrate it
into your life.
The beauty is that you don't need any technology and it's all analog.
So, for the Kakeibo method to work you only need 6 steps.
The first step is that you should get a notebook.
I recommend you get one of these This is what I used for the Kakeibo method and what I usually
use for my journal when I'm reflecting or preparing video ideas like this one.
This notebook is for documenting your financial situation and recording future finances like
income and expenses and also planning your future financial situation.
What do I mean by documenting your current financial situation?
This brings us to the 2nd step.
The 2nd step is to calculate your monthly income and subtract your fixed expenses.
Simple, isn't it?
Everyone should know this step by now and it shouldn't be too challenging.
Again, for those who don't know what is meant by this: Take your monthly income and subtract
fixed expenses such as rent, electricity, water, car, etc.
Let's move on to the 3rd step and that is to set a savings goal at the end of the month.
Ask yourself the following question after you have calculated your remaining income:
What would be a realistic and reasonable savings goal?
Just answer this question from your gut and write it down.
The point of this step is not to find the perfect amount, but to get started in the
first place.
We'll get to how we can optimize it later.
First, let's take care of step 4, which is to categorize your expenses.
And in the Kakeibo method we decide between 4 basic categories:
1.
necessities 2.
desires 3.
culture 4.
unexpected.
Now you're probably wondering: what the hell does he mean by "culture" right?
Culture is a category you certainly haven't heard often and to be honest neither have
we.
Culture means the following expenses: That's spending on cultural activities like museum
visits or concerts.
Now that we have cleared that up, the question is what do we actually do with the categories?
For each category, it should be determined in advance how much money should be spent
on it per month.
Just to be clear: Necessities include food, for example.
Wants include expenses for hobbies, for example, and unexpected includes expenses such as repairs.
You should never neglect unexpected expenses, because they are usually the reason why many
people get into financial problems.
Let's move on to the 5th step, which is to categorize your purchases.
Means: From now on every purchase you make will be registered and assigned to one of
the 4 categories and at the same time it will be checked how close you are to your set budget
in the respective categories.
The 6th and last step in this process is in my opinion the most important one, because
it will decide if you stay on the right course or if you move away from it again.
At the end of each week you should schedule a feedback session where you ask yourself
the 4 key questions of the Kakeibo Method.
These questions will help you to optimize your finances and reflect on your financial
spending: 1.
how much money do I have?
2.
how much money do I want to save?
3.
how much money do I spend?
4.
how can I optimize my financial expenses?
It is, as I said, the most important but at the same time the most difficult part, because
you have to admit mistakes to yourself.
But how did this method work for me, what is my conclusion and what tips did I find
out so that you can really master this method and get everything out of it?
I myself have used this method now for 3 months and must say that it basically worked very
well, especially if you like to have a little more freedom when planning and do not want
to follow a fixed and rigid system.
For me the part with the reflection questions was the game changer, because this process
forces you to deal with your finances, shows you mistakes and you can always optimize until
you have found your own complete system.
However, I'm more of a digital guy and prefer to track my finances with a google sheet from
where I can always access it.
If you are interested, you can also find the link in the pinned comment.
However, I have learned 2 things what and should be understood as tips for the implementation
of any budgeting methods: 1.
allow for setbacks.
It happens more often than you'd like that you don't meet your monthly goals and that's
ok.
But don't let it demotivate you and even make you quit, because be sure, without that goal
you wouldn't have started in the first place.
Even 80% of the goal is 80% more than without it.
2.
be mindful with your money.
By keeping a handwritten record of my spending, I've noticed that I'm even more conscious
of my money and think more often about whether I really need this product, and it's kept
me from impulse buying a few times since.
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