Kakeibo Budgeting Method - The Japanese way of doing it

The budget has helped me big time to know where I am spending, how much I am spending and where I can cut off my spending to save more. But I feel the 50/30/20 rule is not meant for me because I cannot keep my needs under 50%, so I have to cut off some of my funds from wants and put in needs.

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Next, I started looking at different budgeting techniques and came to know about Kakeibo. It is the century-old simple budgeting technique which was from Japan. The meaning of Kakeibo is "household financial ledger". So in simple terms, it is like a financial journal for most of the household expenses. Let's go through the Kakeibo budgeting method

Step 1: You need a pen and paper, yes this budgeting requires physical handwriting and thus you need a notebook or bulleted journals to make this budgeting perfect.

Step 2: You need to calculate your monthly income and subtract the fixed expenses. The expenses can be rent, school fees, utility bills etc.

Step 3: You need to set up a savings goal for a month, after getting the amount from Step 2.

Now you may ask, what is special in this budget. Because this is simple, Savings = Income - Expenses. So Kakiebo actually differs in the fact that you need to list down your expenses into mainly 4 categories.

The categories are:

1. Needs - Here are the main essentials like housing, groceries, any loans etc.
2. Wants - It is not necessary but want to have it to enjoy like vacation, outside food
3. Culture - Expenses on foods, TV streaming services etc
4. Unexpected - Any unexpected expenses

Now the task here is simple you need to categorize all your spending mainly into 4 categories mentioned above. At the end of the month, you will know how much you have spent in each category.

Now at the end of the month, you need to reflect upon your spending pattern to know some metrics like:

1. How much money you have and how much you like to save
2. How much you are spending on each category
3. How can you improve next month

Now the ultimate goal of this strategy is to improve and save more at the end of the month. The best part of this method is that it has to be handwritten and what it does is that it increases memory and helps you understand where your money is actually going. Now it helps you to know your category spending and how to save from each category.

Also, you can know how much you can save after every month. It helps people who is actually getting started with the budgeting technique.