How the Japanese Art of Kakeibo Can Help You Buy a House

There’s a Japanese art to everything, including how to save up for a house! It’s called kakeibo, and it’s catching on for good reason: It claims to help people save more than one-third of their income—which could add up to a down payment on a house pretty quick.

Pronounced kah-keh-boh (which means “household financial ledger”), the term and practice was invented in 1904 by Hani Motoko, purportedly Japan’s first female journalist, to help manage household budgets. While the practice is common in Japan, the newly published English translation of the book “Kakeibo: The Japanese Art of Saving Money,” by Fumiko Chiba, is currently selling like hotcakes here in the States.

Kakeibo promises to help those who follow it save about 35% of their income every month. If you’re interested in amassing this sizable chunk of change to buy a house (or, say, overhaul your kitchen), read on to find out how kakeibo works, as well as how you can adopt these same habits in your own life.

What is kakeibo?

Kakeibo is a method of keeping a journal that helps you meet long-term saving goals by closely monitoring your spending. The main rule is to be mindful of what you pay for so you can trade in frivolous indulgences for a meaningful purchase such as a house.

The approach is fairly straightforward: On the first of each month, you sit down with your kakeibo journal and think about how much you would like to save, and by when. (Not sure how much you need? Here’s some guidance on how much you need to buy a house.)

To kick things off, ask yourself these two questions:

• How much money do you have coming in? This is the amount you take home each month, after taxes.
• How much would you like to save? Set a realistic monthly goal in the beginning—it does not need to be 35% straight out of the gate! Start small with, say, 10%. And once you gain some momentum with this method, you can inch that goal higher.

Break down ‘musts’ vs. ‘wants’

Once you’ve written down how much you have coming in and how much you want to save, write down your expenses for the month ahead. Kakeibo has you divide them between “musts” and “wants,” says Caleb Backe, a finance consultant for MapleHolistics.com schooled in kakeibo. Divvy up your expenses into four categories:

• Survival: Beyond food, water, and shelter, these are things you need to live in the modern world. They could include utilities, cellphone, child care, transportation, and health care.
• Optional: These are things you enjoy but don’t necessarily need, such as eating out, having new clothes, and going on vacations.
• Culture: These are entertainment and experiences (e.g., books, movies, concerts, and Netflix or Spotify subscriptions).
• Extra: These are things you don’t necessarily face every month but that crop up fairly regularly—think birthday gifts.

Add up your expenses to see how much you spend each month. Once you know where your money is going, kakeibo urges you to ask yourself: How can you cut back? Here’s where you whittle down your “wants”—meaning your “optional” and “culture” spending—so you can bank the amount you want to save.

Let’s say you want to save up about $24,000 for a down payment in a year’s time to buy a house. That would mean you’ll have to save $2,000 a month. That may sound tough, but by scrutinizing your “wants,” it’s possible to purge many from your budget without feeling the pinch. Rather than buy books and movies, borrow them from the library. Work out at home instead of paying for gym membership, or stick to staycations for the next year.

Practice kakeibo every day

Kakeibo is about saving money one day at a time. So every evening, write down each penny you spent in your journal, place it in the correct category, and then reflect on it. The logic is very similar to how keeping a food diary makes you watch what you eat: This extra dose of consciousness is all that’s really needed to cut back.

“The basic act of writing down every dollar as you spend it and then categorizing it makes you less likely to spend more,” says Jennifer Beeston of Guaranteed Rate Mortgage.

“The biggest reason people don’t have money for a down payment is they have no idea what they are spending their money on,” says Beeston. Kakeibo solves that mystery by making you accountable for your spending, as well as making saving a part of your daily life.

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