Kakebo: the Japanese saving method that is moving masses
A home finances ledger which dates back to turn of the 20th century is gaining traction as a best-selling book in countries like Spain. The key to its success: simplicity and effectiveness, in equal measure.
Let us start with a disconcerting statement, a method Socrates often employed to capture his audience´s attention: MONEY DOES BRING HAPPINESS. Science proves just as categorical on the subject, or at least it does at Harvard University (US). An article published recently by lead author and Harvard researcher Ashley V. Whillans in the prestigious, scientific publication Pnas leaves no room for doubt: how much money one has is not as important as using what one has to reduce stress. This could include paying someone to perform household duties, thereby freeing up more time for other activities, or minimizing future financial uncertainty.
60% of Spaniards are worried that they will not have enough savings to support themselves once they retire, according to BlackRock´s the Investor Pulse 2017 Survey (Spanish report). 32% of the British population, according to BlackRock´s British report, believe they do not make enough money currently to enjoy peace of mind concerning their retirement.
Saving represents one solution, but the same study reveals that only half of the Spanish population (and 60% in the United Kingdom) regularly saves, and almost residually: barely seven of every 100 euros earned find their way to people´s piggy banks. Houston, we have a problem….
Such is the level of collective anxiety surrounding saving that a seemingly simple accounting tool for beginners has gained a spot amongst the top selling books worldwide. The phenomenon (published in Spain by Blackie Books) goes by the name Kakebo, an adapted version of the Japanese name, Kakeibo (家計簿), whose kanjis (characters) literally mean “domestic ledger to promote savings”, according to the Japanese business analyst and nine-year resident of Spain, Kenshiro Mitsumatsu.
Kakebo boasts an attractive design which allows users to manually record all expenditures in color-coded categories, like Survival, Entertainment and Vices, Culture and Extras. At the end of each month, the user´s total spend is calculated and analyzed through the use of animated characters: the pig signals savings, while the wolf represents the eternal villain: expenses. The book also poses questions and provides advice designed to help readers achieve their financial goals (“I promise to”, “What are your objectives?”, etc.).
Perhaps the key to understanding why we look to the Far East while trying to save resides in the importance which these cultures place on managing their assets wisely. “Unlike Spain, in Japan people are more worried about unexpected expenses. They have to pay for all of the services they consume and from a very early age they learn to set money away, just in case,” Mitsumatsu explains.
Why do we find it so difficult to save?
“Sometimes it is not a question of not earning enough – the more we make, the more we spend – nor of irresponsible spending practices, but rather of not knowing where our money is going,” according to the freelance financial advisor Berta González. And this was precisely what motivated Karolina, an ophthalmologist in Madrid with two small children, to buy a copy of the book. “I wanted to understand where I was spending [my money], because I didn´t know,” she admits.
In fact, the Japanese journalist Motoko Hani (1873-1957) designed this self-awareness tool in large part to empower women at the beginning of the 20th century. At that time, women were not permitted to work outside of the family home in Tokyo and were only able to save for themselves whatever was left over from their husbands´ income once all domestic expenses had been paid. For these women, proper household management was vital.
Widely considered to be the first female Japanese journalist and the founder of the country´s oldest feminist publication, Fujin no tomo (Women’s friend), Hani encouraged her readers to manage their finances astutely. This lead to the publication of the first kakebo, in 1904, generating such a profound impact that only four decades later the concept boasted its own user association. Today, dozens of different kakebos are taking Japan, and the world, by storm.
“Kakebo allows users to manually record all expenditures in color-coded categories”
Putting on our “thinking caps”
Like millions of newly converted Japanese-style savers, Karolina starts each year and month by making a note of her available funds. She then defines how much she aims (and can afford) to spend, and she sets small goals accordingly like, for example, “set aside 100 euros for summer holidays.” As González highlights, “most people simply save what they have left over, but it is much more effective to set clear objectives which incentivize [saving] and [then] plan your spending accordingly.”
And then the baton is passed over to those ever difficult travelling partners: steadfastness and resolve. “It seems worse than it really is, because actually it only takes one minute every evening to log your expenses,” Karolina says. Perhaps the mere act of sitting down in front of a kakebo is the key to overcoming the challenges of saving, which in economics is known as hyperbolic discounting: the theory that future benefits deliver less value than immediate satisfaction.
The University of Texas (US) professor Russel James, who studies the application of neurocognitive methods to financial decision making, performed an experiment during one of his lectures. He asked attendees if they would want to eat chocolate or fruit in one week´s time. More than 70% chose the healthy option – however, during a break, almost the same percentage of attendees chose the opposite. Temptation is strong. But, according to James, stopping, reflecting and remembering our objectives can help us to overcome this trance. It seemed to work for Karolina. The surprise she felt when she discovered that these small amounts had added up to more than expected at month´s end encouraged Karolina to change her habits: “Now I buy less beer and eat breakfast at home more often.”
The pen is mighty
When Karolina writes down each expenditure in her paper-based kakebo, she understands and retains the information better than if she had used an accounting app or a computer to complete the same task; a theory supported by a research paper, aptly titled “The pen is mightier than the keyboard“. Authored by the psychologists Pam Mueller from Princeton University (US) and Daniel Oppenheimer from the University of California (US), this research demonstrated that since writing longhand requires more effort than typing, it also requires more attention and therefore increases our ability to retain information. “I prefer the notebook format anyway, since I am always short on time and I find this to be quicker than using my phone. Besides, this way I don´t have to worry about whether the kids have fiddled with the keyboard,” she says, laughing.
And to top it all off, “kakebo is pretty,” the ophthalmologist explains. So, while the book alone does not generate savings – we must make the effort to (in the following order of priority) analyze where we spend our money, define objectives, perform daily tracking and, most importantly, resist temptation – it does make the exercise more bearable. In Karolina´s words, “[kakebo] makes saving enjoyable.”
By Elvira del Pozo