Maximize your savings & develop responsible budgeting skills with Kakeibo

Quick Notes

  • Kakeibo uses a monthly ledger system to record expenses
  • With this approach, you’ll always be mindful of reoccurring and new expenses
  • This popular budgeting method teaches you to save before you spend.

What exactly is Kakeibo?

Kakeibo is a Japanese form of budgeting that was first introduced in 1904. The basic principle behind it is to squeeze every possible drop out of your income each month. With this step-by-step process, you’ll have the ability to reach your financial goals.

Kakeibo process

1. Beginning of the month: set your savings and spending goals

Everything starts at the beginning of the month. You grab a pen and pad, journal, electronic device, or what have you. Take some time to work out the following:


Keep track of what you have coming in. This includes your salary after taxes, plus any additional amounts such as interest earned, monetary gifts, bonuses, freelance pay, and so on.

Fixed outgoing

This category covers the monthly bills you must pay, such as rent or mortgage, insurance, utilities, phones, and Internet. Any bill you pay monthly needs to go here, even your Netflix or Hulu. Your morning Starbucks run, however, goes below.

What’s left?

After determining your incoming and regular outgoing, you calculate what is left to budget between your savings and spending.

Savings amount

Before you even consider spending, you need to set your savings goal. Those who decide to save what’s left after everything else have nothing saved. If you spend first, there is nothing left to save. Instead, decide on your savings goal.

“Do not save what is left after spending; instead spend what is left after saving.”- Warren Buffett

Spending amount

After subtracting your savings goal from what’s left, you have what you can spend. Divide that amount by the number of weeks you have until your next check. Now you know what you can spend each week.

2. Throughout the month

During the month, you must keep track of your spending, and divide it into the following categories:

– Survival: transportation, food, medical visits
– Optional: Shopping, eating, and more
– Culture: arts, theater, movies, books
– Extra: unusual or one-off spending like flat tires and birthday presents

It is suggested to make notes with your spending, explaining your rationale for the allocation decisions you make. This is so you can look for repeat purchases, ways to cut back, and avoid guilt if you spent more than usual for a good reason.

3. End of the month review

Before making your following month’s plan, sit down and review the current one. Kakeibo suggests asking yourself the following questions:

-Did I spend too much in any area?

-Did I meet my savings goals?

-Did I find ways to save money throughout the month?

-What changes should I and will I make next month?

4. Plan for your year

A very helpful step with Kakeibo is yearly planning. It has become somewhat commonplace to make a monthly budget, or, at the very least, remember what is due every month. Even more common, though, is forgetting what is due only once or twice per year.

Unsplash / Jakob Owens

Everyone seems surprised every year when Christmas arrives, even though it comes every year on the same exact date. We know it is coming and that we should save, but most of us do not. Suddenly, Christmas is upon us and credit card debt skyrockets.

Kakeibo addresses this problem. At the beginning of the year, you take the time to plan out your year. This is the time to list all holidays that you spend money on, yearly auto registration or property taxes, and other similar items. Do not forget, though, to also add in the bi-annual and quarterly expenses, such as oil changes and vehicle maintenance.

This is also a great time to set yearly savings goals for big spending, such as vacations or vehicle purchases. You can then spread that amount over the 12 month period and you have your monthly savings goal determined already. You can then increase it each month if you like, but you will have a start.

Putting Kakeibo to work in your finances can help you make necessary changes. However, it may work much better for you by tweaking it to match your own lifestyle. For instance, the categories of spending may be a little different for you, or you simply need to break each category down into subcategories. Try it out for yourself but tweak it to fit your family needs.

A deeper dive — related reading on the 101:

5 ways to make it through the month without spending a penny | Living 101

Ideas for cutting down monthly expenses.

How to live the dream and retire much earlier than expected | Living 101

Spend less and start saving for retirement.