The Secret Money Saving Rule I Learned In Japan

Summary

Discover the Japanese saving strategy 'kakebo'—a simple, paper-based budgeting system that has helped millions save effectively since 1904. This method focuses on planning savings first, then spending the remainder, and categorizes expenses into needs, wants, cultural, and unexpected. By tracking every purchase and reflecting monthly, kakebo encourages mindful spending and financial improvement. Incorporate this technique with other Japanese habits, like receiving bonuses and using cash, to enhance its effectiveness and develop a lasting saving habit.

Takeaways

• 📚 The Japanese saving strategy called 'kakebo' is a budgeting system that has helped many achieve financial goals without the need for complex tools.
• 🗓️ Kakebo takes a monthly approach to budgeting, starting with calculating monthly income and fixed expenses, followed by setting a realistic savings target.
• 💰 The strategy emphasizes planning for savings first, then spending what remains, which is a shift from the common approach of saving what's left after expenses.
• 📝 It involves categorizing expenses into 'needs', 'wants', 'cultural', and 'unexpected', which helps in tracking and reflecting on spending habits.
• 🔍 Kakebo encourages daily tracking of expenses, which can lead to increased awareness and control over spending due to the psychological effect of writing things down.
• ❓ The script suggests asking oneself five questions before making non-essential purchases to ensure they are worth the spending.
• 📊 At the end of each month, reviewing and comparing actual spending to the savings target can provide insights into spending patterns and areas for improvement.
• 🔄 The process includes identifying and addressing unexpected expenses that may have been overlooked in other budgeting methods.
• 🧘‍♂️ The script highlights the importance of the end-of-month reflection, which is crucial for maintaining motivation and making continuous improvements in financial habits.
• 💼 In Japan, bonuses are a significant part of the annual income and are often mentally accounted for separately, leading to a higher likelihood of saving or investing them.
• 💵 The preference for cash transactions in Japan is linked to the tangibility of money, which can enhance spending awareness, although kakebo can be adapted for use with credit cards.

Q & A

What is the Japanese saving strategy mentioned in the script?

The Japanese saving strategy mentioned in the script is called 'kakebo,' which is a budgeting system translated as 'household financial ledger.'

What is the origin of the kakebo technique?

The kakebo technique was developed in 1904 for Japanese housewives to help them plan their household finances.

How does the kakebo system approach budgeting?

The kakebo system takes a monthly approach to budgeting, starting with calculating monthly income, fixed expenses, and savings target, then determining the total cash available for spending.

What are the four types of expenses categorized in the kakebo system?

The four types of expenses in the kakebo system are needs, wants, cultural expenses, and unexpected expenses.

Why is writing down expenses on paper considered beneficial in the kakebo system?

Writing down expenses on paper leads to more brain activity, strengthening understanding and memory of the purchases, which is beneficial in a cashless society where transactions are often frictionless.

What are the five questions to ask oneself before making a non-essential purchase according to the script?

The five questions are: 1) Can I live without this item? 2) Can I afford it based on my financial situation? 3) Will I actually use it? 4) How did I come across it? 5) How do I feel about buying it and how long will this feeling last?

How does the kakebo system help with the end-of-month reflection?

The kakebo system helps with end-of-month reflection by allowing individuals to compare their actual savings with their target, break down spending by category, and identify areas for improvement.

What are the additional factors mentioned in the script that contribute to the Japanese being good savers?

The additional factors mentioned are the practice of receiving a significant portion of annual income as bonuses and the preference for cash transactions for better tracking of spending.

How does the script suggest incorporating the bonus practice in the US?

The script suggests talking to your boss about receiving a larger portion of your salary in the form of bonuses to be saved or invested.

What is the psychological concept of 'mental accounting' as mentioned in the script?

Mental accounting is the concept where we mentally sort our funds into separate accounts, affecting how we think about our spending and budgeting.

Why is it important to start small with the kakebo system according to the script?

Starting small with the kakebo system is important because it helps form habits. It's about learning to save small amounts first before saving larger sums, making the habit more sustainable.