Measuring our finances is one of the best habits we can develop.
And to be honest, I’m not very keen on it. Living in Asia for a couple of months is not necessarily that cheap. So when I couldn’t figure out where all of my money was going, I decided to start tracking it.
When I was on the boat in the Philippines I was listening to the audiobook of “Your Money Or Your Life” (for the third time). They suggest that you track every cent there is going in and out of your life. By doing so. You should be able to reduce your spending by a minimum of 20 % in three months.
That was my call.
When I asked the big old fellas Google on how I should do it, the answer was the following:
KAKEIBO. (Pronounced Kah-Keh-Boh)
What Is Kakeibo?
Kakeibo was invented by the first Japanese female journalist Motoko Hani, in 1904. I fell in love with Kakeibo because it is so simple. It is like a bullet journal for your finances.
How To Do It
Kakeibo suggests that you use a pen and paper to write down your finances. And I really like that. It makes every transaction more mindful. You have to put it down on a paper, with your own handwriting, which makes you think about that transaction more than if it showed up on an app.
What I do is that I have a note on my phone, and every time I buy something I write it down in the note. So when that list starts to creep up. I write them down in a notebook and delete them from the phone.
The Start of Every Month
The first thing you do when the month starts is to have a look at fixed income and expenses, and list them up.
It could look something like this:
- Work – 2.500 $
- Sold my old PC – 200 $
- Phone – 10 $
- Internet – 20 $
- Insurance – 200 $
- Gym membership – 20 $
And so on.
During The Month
From there, I write every purchase down on my notebook on the phone. And when it creeps up, I transfer them to my notebook.
In the notebook, I also give the transactions a category.
The normal Kakeibo categories look like this:
I didn’t like the fourth category, and I think it belongs to the “Optional/Wants”, and I think there is a category missing for saving/investing. So I created my own categories.
Loui’s Kakeibo Categories:
From Hate to Enjoyment
I really hated starting on this project. I just didn’t feel like the idea of a habit that was so ongoing all of the time.
And at the start I hated it. Whenever I had made a purchase I thought it was super ignoring that I had to write it down. But as days went by, I kind of like the filled out notebook. I started to feel like I was in control.
My March Month
March was a hectic month. I was in the Philippines about to go back on the boat I was sailing in November and December. But this time as a skipper. I started to get a bit bored where I was, so I decided to visit a friend from Copenhagen who was on a vacation in Bangkok.
All that was in the middle of this Corona pandemic. So there was a lot of talking back and forward on whether we should go home or not.
The numbers total numbers in March looks like this:
- Category = 5.713 DKK (836 $)
- Category = 7.889 DKK (1.155 $)
- Category = 558 DKK (81 $)
- Category = 0 DKK
Total 14.160* DKK (2074 $)
As you can see, category two is the biggest of them all. Which is the “Optional/Wants” category. This category is the one I would like to be zero each month. Whenever there is a dollar in that category it means that I have spoiled myself in some way. Which I most of the time doesn’t think is worth the money.
* This is ONLY my spending during the month. It does not include my apartment rent.
My Criteria for Success
I have promised myself to do it for at least three months, but I kind of like so much already that I can imagine myself doing it for the rest of my life. It is such a good feeling to know exactly where your money is going.
But I have made some statistics on how a typical spending day look for me. By doing that, I can easily set myself up for doing better the next month, because I know how many transactions I make in a day, what the average transaction is and how much I have spent on an average day.
The statistics look like this:
Average Spending on a day = 456 DKK (68 $)
Average spending per transaction = 186 DKK (27 $)
Average transactions a day = 2.45
Then it should be super easy for me to make progress because I know if I can:
- Make less than 2 transactions a day
- Make the transactions less than 186 DKK (27 $)
I should be good to go!
Things are going great! I’m in the countryside on Langeland (Long Island), and the only spending I do is grocery shopping. That shopping can creep up too since I like to cook a nice dish AND make a pre-dinner whiskey sour. But it is still way less than the last month.
The averages so far looks like this:
Average daily spending = 73 DKK (11 $) – Improvement: 524 %
Average spending per transaction = 176 DKK (26 $) – Improvement: 7 %
Average transactions a day = 0.41 – Improvement: 519 %
Stay tuned, to see if I can keep up this great improvement.
I’m eager to help you out on your minimalism and financial independence journey! Write me and tell me about how you are doing, or what problems you may have.