How you approach managing your finances could affect your ability to reach long-term goals. The Japanese spending philosophy “kakeibo” could help you practice financial mindfulness and get more out of your assets.
Spending money without thinking about how it’ll affect your long-term finances could mean you miss opportunities to secure the lifestyle you want. On the other hand, focusing only on accumulating wealth, rather than how to use it to support your wellbeing, could leave you feeling unfulfilled too.
Kakeibo might offer some useful tips for striking the right balance.
The term roughly translates to “household financial ledger” but the art of kakeibo is more than simply budgeting – it’s about monitoring your outgoings to see how they align with your values.
The practice was developed by Japanese journalist Motoko Hani in 1904. More than 100 years later, you could still use some of the tips Hani shared to be more mindful of your money.
How to embrace the Japanese art of kakeibo
Start by breaking down your existing outgoings
Figuring out how to make decisions that are right for you starts with understanding how you’re using your money now.
Rather than simply looking at your income and outgoings, kakeibo breaks your expenses down into four categories.
- Essentials: This category includes the expenses you must maintain, such as your mortgage repayments, household bills, petrol, and other outgoings that you need to survive.
- Non-essential or leisure: The next section covers “wants”, it might include eating out, treating yourself to the latest technology, or picking up a coffee on the way to work each morning.
- Cultural: Interestingly, the kakeibo method carves out a section for cultural activities and recognises these are often essential for wellbeing. In this category, you might include purchasing books, visiting a museum, or a trip to the theatre.
- Unexpected: Finally, account for those unexpected extras that life throws at you, such as car repairs or property maintenance.
Tracking your money using these four categories can help you see where your money goes and give you a chance to reflect. You might need to track your spending for several months to build an accurate picture of how you’re using your money, but it may be a valuable task.
Set out your financial values
If you’ve already created a financial plan, you’ll know the importance of setting out your goals. Kakeibo takes a similar approach by encouraging people to spend some time thinking about their financial values.
So, reflecting on what really matters to you and what helps you lead a fulfilling life is essential.
Setting out your goals could help you interrogate your spending. For instance, you might state that you love visiting art exhibitions or attending workshops. Yet, you’re currently spending a larger proportion of your disposable income on “wants” that don’t improve your wellbeing.
Recognising these patterns could help you shift your mindset, so you intentionally spend your money on things that support your happiness.
You can take the same approach with long-term finances too.
Perhaps you’re looking forward to a retirement that allows you to travel the world and experience new cultures. However, outgoings for a new car might mean you’re not putting as much aside for your retirement as you could.
Use kakeibo to guide your financial decisions
Having set out your values and what’s important to you, it’s time to use what you’ve learned to take a more mindful approach to how you spend money.
Kakeibo isn’t about cutting down your non-essential spending, but rather a process for understanding if you’re getting the most out of your money by intentionally using it in a way that aligns with the lifestyle you want.
Before making non-essential purchases, you might want to consider if it’ll support your wellbeing or long-term goals, or if it will simply fulfil a short-term want. It’s a process that could help you balance spending money today to create a fulfilling life and saving for your future so you may secure long-term goals that are important to you.
Get in touch to create a financial plan that focuses on your values
If you’d like to talk to us about your financial plan, please get in touch. We can work with you to understand what’s important to you and how your assets may be used to achieve your goals.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
