By Monika Ritchie
Could your finances use some decluttering? Maybe you want to tidy up your bank accounts and credit cards, organize your pre-authorized payments, or keep better track of where your money goes. Whether it’s books, magazine articles, or the latest Netflix shows, trying to simplify has become another way for us to “fix” our problems.
You might be familiar with Marie Kondo, who helps people tidy up their own homes. It turns out that there’s also a Japanese method to saving money. Kakeibo (pronounced kah-keh-boh) translates to “household financial ledger” and is a simple, gimmick-free method for budgeting and money management. Considering how stressful managing money is for many people, a back-to-the-basics approach to budgeting can be very helpful. Here’s how it works.
Keep a Notebook to Track Your Money
Kakeibo works by simply using a notebook or ledger to track all the money you get and spend. Writing things down by hand is a focused way to process and observe your spending habits. If your finances are complex, such as when you’re running a business or working multiple jobs, you can use 2 notebooks instead of one. For those just getting into budgeting or who are uncomfortable using technology, pen and paper is an accessible and familiar way to get started.
Reflect on Your Spending Habits to Declutter Your Budget
When helping people to declutter their homes and decide what to keep and what to remove, Marie Condo starts with a question: “Does this spark joy?” For most people, the words “joy” and “budget” don’t come up in the same sentence. Instead, ask yourself the following questions when choosing what to keep and what to remove from your budget:
- Can I live without this expense?
- Can I afford it?
- Is there an emotion that’s driving me to buy it? Which one(s)?
Focusing on Your Purchases Leads to Conscious Spending
Being mindful of your purchases is an excellent way to avoid impulse spending – a big cause of broken budgets. Whether you’re shopping online or in a store, don’t make it easier for yourself to spend money. Take the time to think about why you’re purchasing the item, how you’re feeling about it, and what benefit it will bring to your life.
Tips to Help Reduce Impulse Spending
Kakeibo is not meant to regiment your spending to the point that you never have any enjoyment or room for an occasional treat. The goal is to approach your finances with mindfulness and small, thoughtful changes so that you can spend your money in a way that helps you reach your overall financial goals. Here are some tips to help you manage impulsive spending:
1. Try a Cool-Off Period Before You Buy
Split-second spending is everywhere these days. Between online shopping, tapping our credit cards, and the ability to store your credit card information on your favourite online stores, you can spend a lot of money in a terrifyingly short amount of time. Stalling a purchase for 24 hours and then coming back is an excellent way to gauge whether you really “need” it or if it’s just a passing whim.
2. Don’t Let Yourself Be Swayed by Big Sales
There’s nothing like a big, red 50%-off sign to get the blood racing. We’re conditioned to think that if something has been heavily discounted, it would be a waste not to take out our wallets. But do you really need something just because it’s been discounted? If you wouldn’t buy the item at full price, then ask yourself why you want to buy it now.
3. Check Your Bank Account Balance
Here’s an area where online banking does really come in handy. We can check our bank account balance in seconds, as many times as we want. It’s actually an excellent habit to get into. However, if doing this makes you nervous —listen to that feeling! You might have a spending problem that you’re not even aware of. By making a habit of checking where you stand financially, you’ll know how much (or how little) you have to spend. Watching your savings increase as your spending goes down is also a great incentive for avoiding frivolous purchases.
4. Pay with Cash Wherever Possible
Physically handing over cash for a purchase increases the mindfulness around your spending, similar to the way writing down your spending in a notebook does. Swiping, clicking, and especially tapping to buy makes it easy to underestimate how much you’re really spending. And because your card is always with you, it’s much more difficult to curb its usage. Sticking with a specific amount of spending money will make you more conscious of where it’s going as your wallet gets lighter. When it’s gone, it’s gone.
5. Identify Your Spending Triggers and Remove Them
Is there a store you simply can’t resist on your way home from work? Are you subscribed to an online shop that always seems to have irresistible deals? Whatever sets you off and makes you spend your money, get rid of it. Take a different route home from work, unsubscribe from the newsletter, and ignore the siren call of spending. You’ll feel more in control and your bank account will thank you.
Keep Yourself Accountable & Stay Organized
Whether it’s sticky notes, an alert on your phone, or just a friend to check in with, try to make healthy spending habits a regular part of your day. Leave your debit and credit cards at home, put a sticky note on the mirror reminding you of how much debt you’ve paid off or what your savings goal is. Try to check in with a friend who will remind you why you’re being careful with your money. Be creative and have fun. When you’re organized with your money and you keep yourself accountable, it makes managing your finances easier.
Free Help to Manage Money Better and Get Rid of Debt
Spring cleaning your finances, getting organized, and establishing a system that keeps you on top of your money and debt can be challenging. If you want to improve your finances but don’t know where to start, contact an accredited, Canadian, non-profit credit counselling organization. Over the phone or in person, a Credit and Debt Counsellor will help you review and declutter your budget, find ways to get rid of debt, and give you expert tips on how to reach your financial goals. Use Kakeibo, a budgeting spreadsheet, or an app on your smartphone - it’s really not worth struggling to fix your money problems on your own.