146289 SIP myths you must know!

For the Japanese, discipline is that root that nourishes everything. In fact, it is even valued more than intelligence by them. No doubt it is popularly said the secret of wealth creation is built on the foundation of discipline.

The Japanese keep an eye on small details to make a larger impact in their life and the result of the same, we all can witness by looking at the sheer size of their economy and lifestyle they lead.

Being a financial market professional, I was curious to know more about the money management habits of people in Japan and I came across this unique budgeting method followed by them called “KaKeiBo”.

When I was going through the entire concept, I could resonate with it. My mother used to apply almost an identical tool to a certain extend when it came to managing our household finance when I was a kid, but off late somehow the age old practice was no more followed at my home, it was replaced by excel sheet and few budgeting apps. After understanding the KaKeiBo Tool, we are back to the old model at home since last three months and the result is truly visible.

KaKeiBo refers to “Household Financial Ledger”. It was invented in 1904 by Hani Motoko, Japan’s first female journalist. KaKeiBo is a smart way of managing your finances to become richer.

Impulsive buying and over-spending are common traits that we are prevalent among the millennials. It is rightly said it is not your income that makes your rich. It is all about your spending habits and if an individual keeps an eye on spendings, it will help him or her in the long run.

Say bye to technology and say hello to pen and notepad

The KaKeiBo Model is based on the foundation of the conventional method of recording the transaction in a note book, it emphasises on importance of physically writing down things, all the inflows (Income) & the outflow (Expenses) in details. Once you build a complete picture in front of you, you can allocate a define amount for each heads of expenses based on what percentage or amount that you wish to spend on a given head.

This helps in inculcating spending discipline. Even though Japan is a technologically advanced country but they stick to the conventional mode of recording the entry with help of a pen and notebook/notepad when it comes to managing their personal finances, Japanese people gave a big no to advance budgeting software, Dynamic Budgeting apps or M-Excel sheets when it comes to using the same for managing record of their personal finances.

Writing by hand has its own advantage and it is been proven again and again by researchers. It empowers an individual to witness positive changes by encouraging them to be more present and aware, it is more to do with the conscious mind taking full control of things, while also acknowledging the triggers or impulse behind an individual bad spending habits.

One must ask himself/herself the following questions before spending on any non-essential items or availing unwanted services:

— Will I actually use it?

— Based on my current financial situation, can I afford it?

— How do I feel about buying it?

— Can I live or Manage without this item?

— What is my emotional state of mind now?

— Do I have the required space for it?

Just like when we are on diet and have the the so-called ‘cheat day’, we need to ensure that the ‘cheat day’ doesn’t become ‘repeat everyday’.

Mindful spending is the true essence of the KaKeiBo Model and once you start taking care of the spending habits, the saving meter will take care of you in the long run.

(The writer is founder, Smart Acumen Consulting. Views expressed are personal)