Blue Flower

Kakeibo is a budgeting model used in Japan to help save money and improve your financial status. It is a very simple accounting model that anyone can use. It is designed to help you be the master of your budget. It prevents you being enslaved by money and credit models. If you are more mindful of your expenses, then you have a better chance be becoming financially stable and independent.

The Kakeibo method of saving money provides you a framework with four questions.

The four questions are:

  • How much money do you have to spend?
  • How much money are you spending?
  • How much would you like to save?
  • How can you improve next months?

Kakeibo Four Questions 

When you answer these four questions, you get a practical sense of what is happening to your money and how you could save better.

Often, it is the case that one does not have a clear sense of how much money they have to spend. For example, do you know how much money is left in your wallet at this very moment? From today for the next seven days, what will be your income? If you are employed with a salary, how much money is left for you to spend? After you pay for all your regular commitments such as rent, insurance installment, loan installment, light and water bills what would be left for you?

The second question is very different from the first one. Although you might assume that you are only spending the amount of money you have for spending, that might not be true. For example, if you have a credit card that you use to pay for your expenses, it could be the case that you are spending more than what you have. Hence, how much money you are spending needs to be tracked. For this, you need a simple ledger. Some have the habit of noting down all their expenses. But many people hardly have a track of what their real expenses are. For example, do you know how much money you spent last week on tea or coffee? What are your transport expenses? How much do you spend on your phone bill? How much money did you spend last month on eating out? If you are unable to answer any of these questions, then you have no idea how much money you are spending. And the solution is to note down all your expenses as and when you do them, and you have the answer.

One of the primary reasons to be aware of how much money you are spending is to help you understand your potential to save money. We all have a dream on how money we would like to save. However, to ensure that you practically do the saving, you need to answer the question on how much money you would like to save. That will help you realize your dream on saving.

Once you know the answers to how much money you have to spend, how much you are spending and how much you want to save, you have all the data to make informed decisions on how to improve. Once you have a clear picture on the reality, you can make better decisions on how to improve your monitory status month over month. It is a continuous improvement model for your financial stability.

Kakeibo Four Spend Categories

There are four categories of spending identified by Kakeibo method. They are

  1. Needs
  2. Wants
  3. Culture
  4. Unexpected

Kakeibo Four Spend Categories


Needs are things that you absolutely cannot live without. Some examples are food, soap, shelter, clothes and utilities.

As the quality of life enhances, our needs also enhance. Given needs are essential for our livelihood, spending on those is a fundamental requirement.


Wants are things that you enjoy but don’t need. Some examples are branded cloths, new perfume, takeout meals and a luxury watch.

Wants are things that we can live without. We can limit the sending on the wants. Given wants are not essential for our livelihood, spending on those can be managed, postponed and even eliminated.


There are many elements of culture that we enjoy. Some examples are music, drama shows, books, religious and national events.

Spending on culture related goods and services is part of our life. We can pick and choose how much we want to spend on culture. You can prioritize the spending based on your personal preferences and even refrain from spending.


Unexpected spending is those that we did not anticipate. Some examples are a car repair, a broken equipment such as your blender, a doctor’s visit and a funeral of some close relative.

Unexpected expenses are often harder to eliminate, postpone or prioritize. We are better off if we have an emergency fund to deal with these unexpected expenses.

Benefits of Categorizing

Grouping your expenses into the four categories have multiple benefits. A key benefit is the insight you gain on your own spending. Another is that you become more mindful of your own expenses and spending habits. Eventually, this will lead you to avoid wasting money. If your spending is not in line with your life goals and savings goals, then you can easily make informed decisions to get rid of those unwanted spending.

How to use Kakeibo?

Here are few steps using which you can use the Kakeibo method very effectively.

  1. Fix your budget
  2. Set your savings goal
  3. Track your expenses
  4. Calculate money spent in each category
  5. Sum-up the money you spent and saved
  6. Evaluate your performance

Fix Your Budget

When you get your monthly income, you need to first allocate money for your monthly fixed expenses. If you have a daily or weekly income you can divide your monthly fixed expenses by days of month, or weeks of month and figure out how much you have to allocate on a daily or weekly basis.

Once you have allocated for your fixed expenses, you can now understand how much money is left with you for all your monthly spending. (You could do the same based on your daily or weekly revenue levels). The money left with you is the maximum budget you have for spending within the rest of the month.

Set Your Savings Goal

With the Kakeibo method, an important step in your financial planning is to set a realistic goal for your monthly saving. You need to note down how much you want to save and what you are saving money for.

Once you know the goal, you need to allocate that money from the money you have available for spending within the month.

Track Your Expenses

Every time you spend something, you need to note them down into a ledger. You can use a simple spreadsheet, a notebook or a mobile application for tracking your spending.

With Kakeibo method it is critical that you note down all your expenses real time.

There are multiple advantages of this practice. It helps you pay attention to amounts you are spending. It also helps you to slow down your spending. Further, it forces you to think about the future impact of your spending.

In essence, it is about being mindful about your expenses.

Calculate Money Spent in Each Category

At the end of each month, you need to do a self-audit of all your spending you have done throughout that month. You need to classify your spending into your needs, wants, cultural and unexpected expenses.

Once you do this, you have a clear picture of where your money is going each month. If you never knew what is happening to your earnings, now you have the insight.

Sum-up the Money You Spent and Saved

The next step is to add all the spending you have done and then deduct that amount from your monthly budget. The remainder from your budget is your saving for the month. You can now compare this actual saving to your saving goal that you setup at the beginning of the month.

If you have met the goal, then great. If your savings exceed your goal that is excellent. If you have missed the goal, then you need to focus on better managing your expenses next month on.

Evaluate Your Performance

With Kakeibo method, the most important part is the performance evaluation and mindful reflection on the performance.

If you successful met your goals, you need to reflect on what made that success happen. You need to note down what went well. Then you need to have a plan to ensure the repetition of that success.

If you did not meet your monthly saving goals, you need to reflect on what did not go well. You need to make notes on what did not go well and what could have been done better. Then you need to have a plan to execute better next month.


Kakeibo method is a great tool for you to use to help save better and reach your personal financial stability. As you keep building better saving and spending habits, you will realize that you get richer. Sometimes, being rich is not about earning more money, rather it is about managing what you earn better.

When you save more money over several months, you need to get into the habit of investing some of your savings so that you can increase your income. Focus on acquiring better assets that will help you increase your income over time.