Kakeibo: What is it, and how does it work?

At a glance:

Created in 1904, Kakeibo is a traditional Japanese method of financial organisation and household saving. It involves recording income and expenditure, setting a savings target, and reflecting on every spending decision.

  •  Kakeibo is a Japanese system for managing your finances that helps you keep track of your income, spending, and savings goals.

  •  The Kakeibo method encourages you to keep a careful record of your spending, helping you to think twice before making purchases and identify areas where you can save money.

  •  With Carregosa NextGen, you’ll receive support in developing more mindful financial habits that align with your goals.

Instead of asking "How much money do I have to spend?”, what if you started by asking "Do I really need to spend this money?”. This shift in perspective lies at the heart of Kakeibo, a Japanese method of financial organisation that turns the simple act of recording expenses into an opportunity for reflection on your spending habits.

Find out how it works and how you can incorporate it into your daily life.

What is the Kakeibo method?

Kakeibo (also written as Kakebo) is a Japanese method of money management that literally means "household account book”.

Hani Motoko, considered Japan’s first female journalist, created the first Kakeibo in 1904 and published it in a women’s magazine. The aim was practical and, for the time, almost revolutionary: to provide women with a means of managing the household’s financial decisions. Despite all the apps and spreadsheets available today, Kakeibo notebooks are still being sold in Japan every year, more than a century after they first became popular.

The concept is based on a simple idea: recording income and expenditure, and reflecting on every financial decision. Unlike some budgeting approaches, which focus solely on setting limits for each expenditure category, Kakeibo places particular emphasis on financial awareness. The aim is not just to reduce spending, but also to understand your spending habits and distinguish between what you need and what you buy on impulse or out of habit.

In practice, this method encourages you to work out how much money you have available, how much you would like to save, and what your expected expenses are. You record your spending throughout the month and then, at the end, analyse your spending to see if you have met your goals and where you can improve.

How does the Kakeibo method work?

At the start of every month, you should first calculate your available funds and record your financial commitments.

You then set a savings target for the period in question and estimate the expenses you’ll incur. Throughout the month, you record your actual spending and organise your expenses into categories.

The traditional method groups expenditure into four main categories:

  •  Essentials: food, transport, healthcare, housing and other necessary expenses;

  •  Discretionary: restaurants, entertainment, travel or other leisure activities;

  •  Culture: books, courses, magazines, cinema or other learning-related expenses;

  •  Unforeseen: unexpected expenses such as gifts, repairs, and one-off purchases.

One of the most interesting features of Kakeibo is the opportunity it provides for reflection before making a purchase. Before spending money, you might ask yourself: "Can I live without this?”, "Can I afford it?”, "Will I actually use it?”, and "How will I feel after making this purchase?”.

At the end of the month, it’s time to take stock. How much did you save? Did you spend more than expected in any category? Were there any unnecessary expenses? What could you do differently next month?

The Kakeibo approach transforms budgeting into an ongoing process of observation, decision-making and learning, rather than reducing it to a mere list of numbers.

Advantages of the Kakeibo method

If you’re looking for a simple way to start getting your finances under control, the Kakeibo method has several advantages. The main ones are:

Being more aware of your spending

One of the main benefits of Kakeibo is that it draws your attention to things that often go unnoticed. Recording every expense gives you a clearer picture of where your money is going and can reveal patterns that you might not have recognised before.

Fewer impulse purchases

Kakeibo encourages you to take a moment to think before you spend. Rather than buying things automatically, you’re encouraged to ask yourself whether an expense is really necessary and if it aligns with your priorities. Taking a moment to reflect can help you to reduce impulse purchases and make more considered decisions, especially with regard to non-essential spending.

Saving with intention

Setting a savings target at the start of the month means you stop saving "whatever’s left over” and start deciding how much you want to set aside and for what purpose. The key difference isn’t about the amount spent; it’s about the intention behind it. Money is no longer spent by default, but is instead being directed with purpose.

Straightforward financial organisation

The Kakeibo method doesn’t require any complicated tools. You can use a notebook, spreadsheet or personal finance app to record your transactions. This simplicity makes the method accessible to beginners who are just starting to organise their personal finances and haven’t yet found a budgeting system that they can consistently stick to.

Greater alignment with your goals

Saving isn’t just about spending less; it’s also about understanding your reasons for putting money aside. Setting specific goals, such as building an emergency fund, going on a trip or starting to invest, allows you to assess your spending in relation to what you want to achieve. The Kakeibo method helps you to see the connection between your current financial decisions and your future goals.

What is the difference between Kakeibo, the 50/30/20 rule, and the envelope method?

Unlike other methods, Kakeibo focuses on spending behaviour rather than income allocation. The table below compares it with the two methods with which it is most often confused: the 50/30/20 rule, which determines how much you can spend on each type of expense; and the envelope method, which allocates a budget to each category.

The Kakeibo method works well alongside the other two. You can use the 50/30/20 rule to allocate your savings and use the Kakeibo method to identify where your "discretionary” budget is being spent. In addition to these, there is the "pay yourself first” method, zero-based budgeting, the 70/20/10 method, and the 52-week challenge. Each of these is explained with examples and figures in the article 7 savings methods you should know.

How to use the Kakeibo method

Now that you’re familiar with this method, you can start applying it easily. Follow this step-by-step guide, adapting it as necessary to suit your financial situation.

1. Calculate the amount of money you have available

At the start of each month, identify your net income and any fixed expenses you know you’ll have, such as rent, loan repayments, transport costs or utility bills.

Once you’ve deducted these expenses, you will have a clearer idea of how much money you can use for variable expenses and savings. The first step is to make sure your goals are realistic and won’t put you in a financial situation you can’t handle.

2. Set a savings target

Decide how much you want to save each month. Make sure that this amount is realistic, taking into account your income, expenses, and goals.

Instead of setting yourself an overly ambitious target and giving up at the first sign of an unexpected expense, start with a goal that you can consistently achieve. The more you understand your spending habits, the easier it will be to adjust them.

3. Plan your monthly expenses

Before you start spending, make a note of any anticipated expenses. Group them into categories and distinguish between what’s essential and what you can postpone or cut out.

You can also set aside a contingency fund for unexpected expenses from the outset. This means that if an unforeseen expense arises, it won’t necessarily mean you’ll go over your monthly budget.

4. Keep track of your expenses

Throughout the month, make a note of every expense, no matter how small. The goal is to gain a comprehensive understanding of your financial habits.

You can do this in a notebook, spreadsheet or app. The most important thing is to choose a simple system that you can stick to. The more complicated the process, the harder it will be to turn it into a habit.

5. Pause for a moment before making any non-essential purchases

Before making an impulse purchase, try asking yourself the following Kakeibo questions:

  •  Do I really need this?

  •  Can I afford this without compromising my savings goal?

  •  Do I already have something similar?

  •  Will this purchase add value to my life?

This doesn’t mean that you have to stop spending money on leisure activities altogether. The goal is to figure out which purchases you truly value and which are just a fleeting impulse.

6. Take stock at the end of the month

At the end of each month, compare your plans with what actually happened. Take a look at how much you spent in each category, how much you saved, and where you went over budget.

Instead of simply labelling the month as "good” or "bad”, try to draw some useful conclusions. For example, if you spent too much on eating out, you could set a different limit for the following month. If you saved more than you expected, you might want to consider raising your target.

7. Adapt the method to suit your own situation

You don’t have to apply the Kakeibo method rigidly. You can adapt the categories, set different goals, and choose the recording tool that works best for you.

The most important thing is to stick to the logic of the method: keep track of your money, reflect on your decisions, and use this information to gradually improve your financial habits.

What happens after Kakeibo?

Kakeibo solves the first part of the equation by helping you to understand where your money is going and enabling you to deliberately save some of it. However, money that sits idle loses value over time due to inflation.

Once you’ve established a consistent savings habit and built up a financial safety net, it makes sense to consider the next step: how to invest that money. This is where investment decisions come in. The same intent-based logic you learnt from the Kakeibo applies: set your goals, time horizon, and risk level before making a decision.

The next step: start by finding out your investor profile, check out our 12 tips for beginners, and learn how to start investing with a small amount of money.

Discover the Kakeibo method and boost your savings with Carregosa NextGen

The Kakeibo method is a simple way to start paying closer attention to your finances. You can organise your priorities and make more informed financial decisions by recording your expenses, setting goals, and reflecting on your habits.

Founded in 1833 as a foreign exchange house in Porto, Banco Carregosa is the oldest financial institution operating in the Iberian Peninsula. It is a regulated entity supervised by both Banco de Portugal (registration no. 0235) and the CMVM (registration no. 0169).

Carregosa NextGen is the division of Banco Carregosa dedicated to younger investors. It offers specialist information to help you manage your money more effectively. To make the most of your savings and find out about our solutions, contact us and take the next step towards building your future.

If you are looking to save in the long term, there are specific solutions for this, such as Pension Savings Plans (PPRs), which have their own terms, conditions, and timeframes.

Keeping your finances in order is the foundation for everything else. Knowing where your money is going puts you in a better position to decide how to invest it. This is the natural next step after saving.

Kakeibo: FAQs

In the following section, we address the most frequently asked questions regarding the Kakeibo method.

1. What does Kakeibo mean?

The Japanese word "Kakeibo” can be translated as "household account book” or "household finance book”. Developed in Japan in the early 20th century, this method involves recording income and expenditure, setting a savings target, and reflecting on financial habits.

2. What are the categories in Kakeibo?

Traditionally, the Kakeibo method organises expenditure into four categories: essentials (essential expenses), discretionary (leisure), culture, and contingencies. This breakdown not only helps you to understand how much you’re spending, but also what your money is going towards and how much you have left to save.

3. Can the Kakeibo method really help you save money?

The main purpose of Kakeibo is to make you more aware of your financial habits and encourage you to make more considered spending decisions. Setting a savings target in advance and regularly tracking your spending enables you to identify unnecessary expenditure and adjust your budget accordingly.

4. Is it necessary to use a notebook for Kakeibo?

Traditional Kakeibo involves recording expenses by hand, as writing down every purchase can encourage you to pause and reflect on your spending habits. That said, you can adapt the method by using a spreadsheet or another financial organisation tool, such as an app, while still adhering to the fundamental principles of recording, categorising, setting goals, and reflecting on results.

Legal disclaimer: This article has been prepared by Banco Carregosa for information and educational purposes only. Under no circumstances does it constitute an investment proposal, recommendation to purchase, or personalised financial advice. Investing in financial instruments carries risks, as well as the possibility of losing the invested capital. Past performance is no guarantee of future returns. You should consult your account manager or financial advisor before making any financial decisions to assess whether they are suitable for your risk profile and financial objectives.