What is the Kakeibo Method of Budgeting that can Help Save Money?

6 mins read
by Angel One

One of the toughest challenges for any individual is mastering the art of budgeting and having a consistent amount of savings every month. To tackle this problem, you can incorporate the values of Kakeibo, a Japanese budgeting method used for managing household expenses. If followed religiously, the practitioner of Kakeibo can see savings of up to 35% on their monthly expenses.

What is Kakeibo?

The Japanese word for Kakeibo means ‘household financial ledger’. Kakeibo is a Japanese budgeting method that allows individuals to be mindful of their spending habits and aids them in achieving their saving goals. This technique was first conceptualized by Japanese first female journalist Hani Motoko in 1904 for Japanese homemakers to help them to manage their monthly household expenses. Since anyone can use this technique/values in their life, this has led to its rising popularity among young individuals.

Kakeibo allows an individual to understand their spending habits better and ponder the necessity of their every purchase. It also allows you to teach frugality into your lifestyle, which aids you in saving for your financial goals and account for any unforeseen expenses.

What is the Kakeibo Method?

The Kakeibo method makes an individual account for every spending habit. They do these activities by first asking an individual to divide his expenses across four broad categories:

1. Needs

These are the items you cannot live without and are the bare minimum for an individual to survive, such as your foods, daily necessities, medical expenses, transportation expenses etc.

2. Wants

These are the expenses that allow you to enjoy your life but are not necessarily required for your survival, such as eating out, shopping, etc.

3. Culture

These are the purchases that allow you to have cultural experiences in your life. These include expenses such as those made on books, recreation activities like visiting museums, plays, cinema etc.

4. Unexpected expenses

These include expenses that were necessary but could not have been forecasted in advance. These include expenses such as health emergencies, house repairs etc.

To keep track of your expenses, you would need to maintain two notebooks. One a big notebook for the four broad categories of expenses, i.e. needs, wants, etc. and a smaller notebook which you carry with you always. In the smaller notebook, you note down every expense you make throughout a week. The expenses in the smaller notebook are later noted down in the giant notebook under each of the four categories. By writing each expense, it allows an individual to have more accountability for them.

How do you use Kakeibo in your life?

An individual should use the following steps to incorporate Kakeibo in his life fruitfully:

1. Note down your fixed expenses:

You start with analyzing the monthly expenses, including your monthly fixed expenses such as rent, utility expenses, loan emis etc.

2. Analyze your monthly income

Here you include all the sources of income you are going to have over the next month. For salaried employees, these include their monthly income, and you also add back the deduction such as health insurance premiums or provident funds that are deducted first before giving you your salary.

Non-salaried individuals such as entrepreneurs and freelancers can work with a future income they expect to generate over the next month.

3. Decide upon the saving goal for next month.

Here you decide how much exactly you wish to save over the next month. The goals should be such that they are not easily achievable or unrealistic that you can’t save anything.

4. Analyze how much you can spend

These expenses include all the expenses apart from your fixed expenses. Let’s try to understand all of these with an example. Let us assume you have an

Income = 50000

Fixed Expenses (Rent, Utilities etc.) = 20000

Saving Goals = 10000

Then considering the above four points, the amount of money you are left to spend monthly is as follows:

The money you can spend = Income – Fixed Expenses – Saving

i.e. The money you can spend = 50000 – 20000 – 10000 = 20000

Thus, as an individual with a 50000 income, you are left with 20000 to manage all your expenses apart from your fixed expenses.

5. Divide the spending money by 4

The assumption being we have four weeks within a month. As an individual with 20000 spending money, you are allowed to spend a maximum of 5000 every week. Thus it would be best if you restricted your weekly expenses to 5000 such that you do not ever go over budget

6. Comparing Planned vs Actual Expenses

At the end of every week, compare what you spent vs how much you were planning to spend. Then ask yourself the following four questions:

  • How much money do you presently have?
  • How much money do you want to save?
  • How much are you spending this month?
  • How can you improve your situation?

It is the final question that makes an individual contemplate his spending habits. Here you are made to evaluate which expenses were truly essential or non-essential. It also allows you to recalibrate your planned expenses where you can choose to spend less on wants and culture to make up for the expenses in needs or unexpected expenses—all of this in such a way that your saving goals are not affected.

Additionally, by making a review of your actual vs planned every week, it allows you to mind your expenses before you reach a situation where you have nothing left at the end of every month.

Other Kakeibo Lessons

You can also incorporate the following life lesson in your everyday life such that it helps you be more careful of your expenses:

  1. Delay any non-essential purchase till the next month. If you still feel the urge for that item after a month, analyze its affordability and what value it may add to your life.
  2. Always carry a shopping list when going to market for your monthly purchase. By using a list of items, you are less likely to make impulse purchases.
  3. If an item is on sale, ask yourself, ‘if it was not on sale, would you still buy it.
  4. Try to use cash for every purchase. By using cash, you mentally account for it, making every transaction much harder to make. This effect is not the same with credit cards.


The Kakeibo method is a disciplined approach towards expense management. This method teaches us the value of each expense made and the sacrifices that need to be made to achieve our targets.