Many of us avoid getting real about our finances because we’re afraid of the skeletons we might uncover. However, taking the time to intimately understand your money brings its own kind of peace, because you aren’t saddled with the stress that comes with not knowing exactly where your finances stand. This is where becoming your own bookkeeper comes in. Becoming your own bookkeeper simply means keeping detailed records of the money you have coming in, the money you have going out, and categorizing how you use that money every month. It doesn’t require complicated math equations or expensive apps – all you need is a pen and paper. The best part is that it can help you manage financial stress in a way that’s healthy and proactive.
Don’t know where to begin? One method of personal bookkeeping that’s gaining popularity is kakeibo, a Japanese word that translates to “household financial ledger.” It was developed in 1904 by Hani Motoko as a way for wives to manage family finances and curb mindless spending, and has been a staple in Japan ever since. There’s no “right” way to do kakeibo, but here are the four basic steps, organized under questions you should ask yourself every month:
- How much do I have available? – Establish your budget by subtracting fixed expenses from your income for the upcoming month. The number you get is your budget.
- How much do I want to save? – Set your savings goal (or another financial goal) for the month. Subtract this number from the amount you got in step one. The money left over is your spending money, which is divided into weekly spending limits.
- How much money am I spending? – Track your spending every day using your preferred expense tracker, keeping in mind your weekly budget. Make sure to write each purchase down on paper.
- How can I improve? – Reflect on how you did for the month by adding up overall spending and categorizing those purchases across four categories: needs, wants, unexpected expenses, and cultural. As you reflect, ask yourself the following questions and write the responses in your financial ledger/kakeibo:
- Did I reach my goal?
- If so, what went right? If not, how can I improve?
- Are there any categories where I’m uncomfortable with my spending habits?
- What can I do next month to meet or exceed my goal?
And there you have it! While kakeibo is far from the only household bookkeeping method, I’ve found that it encourages me to be more mindful about how my actions align with my goals and values. It seems like a lot of work at first, but I can tell you from experience that it becomes easier each time you do it. If you want to give kakeibo a try, here’s a free, printable worksheet that I used before I developed a more personalized version to fit my lifestyle. If that one doesn’t work, here’s a link to other options.
Becoming your own bookkeeper is an integral part of mindfully engaging with your money. Whether you use an old school method like kakeibo or prefer a budgeting app instead, it’s impossible to reach your financial goals without having a firm grasp of where you are, where you want to go, and how your actions and behaviors can help you get there.
Nay’Chelle Harris, Financial Education Coach