Tracking Your Budget with a Kakeibo Journal

In addition to your end of month review, I recommend you track your spending each day and carry out a mini review of your progress each week. Once you’ve been budgeting for a month or two, you can probably come up with your own way to track spending. But to start with, it’s a good idea to copy a tried and trusted method like a kakeibo journal.

When you start personal budgeting, I recommend you record your spending at the end of each day – or the next morning – in your kakeibo journal.

Originating in Japan over 100 years ago, it’s a simple way to plan your budget and record your income and spending. At the start of a month, you estimate your income, set a savings target, and calculate how much you have available for spending. The aim is to spend less than your income – to live within your means.

Each day, you record how much you spend. You divide up your spending into common-sense categories that will make it easy to understand and review at the end of the month.

There are three main categories of spending (see the 50-30-20 rule):

• Necessities – you have no practical choice but to spend this money. For example, rent or mortgage, minimum debt repayments, insurances, food to live.
• Lifestyle – the extras that enhance your life. For example, eating out, cinema, holidays, nice clothes.
• Building wealth – building towards your long-term financial dreams. For example, savings and investments, early repayment of debts.

The reason for buying a kakeibo journal when you’re first starting out is that it will contain templates for you to follow. So, it will have pages for your monthly review, and other pages to track your daily spending.

Each day, you record how much you’ve spent in various budget categories. You can decide on your own categories: whatever makes sense. Here are some of the categories that I use:

• Groceries
• House
• Utilities
• Car
• Dog
• Medical
• Treats
• Gifts
• Savings accounts
• (If we had debts, debt payments would be another category)

What categories will be best for you? In the first month, don’t worry about perfection. Set some categories. Each day, record how much you spend on each category. In your end of month review, decide whether it’s best to tweak your categories for the next month.

The key is to make it easy to see where your money is going. You are simply using your kakeibo journal to keep a record so you can make better money decisions. Each month, you figure out how to make steady progress towards your financial goals.

Your kakeibo journal will have an end of month review section. Here, you’ll total up how much you spent in each budget category, how much you spent in total, how this compared to your income, and whether you hit your savings target.

It’s almost certain that you won’t spend exactly what you budgeted. In your review, you’ll consider some questions:

• Did you spend less than your income?
• Did you save as much as you hoped?
• Why did you overspend or underspend your budget?
• Can you see a way to cut back on your spending next month?
• Are there categories where you’d like to spend more?

The answers will help you prepare next month’s budget. But remember, a budget is not important for its own sake. A budget is just a tool you use to help you improve your finances, so you can reach your long-term goals and achieve your dreams.