Kakeibo: The Japanese minimalist method for saving money

Distilling Books - Number 6

Welcome to Mental Garden. The following letter is part of our “Distilling Books” collection, in which we extract the most revealing ideas from literature. For the complete library, click here.

🏷️ Categories: Minimalism, Mathematics, Habits.

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Have you ever noticed that feeling? You get paid... and within a few days, you don't know where it all went. It wasn’t one big purchase. It was a steady drip of small expenses...

And suddenly: nothing.

If you’ve ever thought, “This month I’ll definitely save,” only to end up in the same spot, let me show you a minimalist Japanese method—created over 100 years ago—that has transformed the way millions of people manage their money.

You don’t need apps. Or anything complicated.

Just paper, a pencil, and a little honesty with yourself.

In 1904, a woman in Japan had a brilliant idea.

Her name was Hani Motoko, and she’s considered Japan’s first female journalist. She noticed that many homemakers didn’t have an efficient and simple system to manage money… So she invented one.

She called it Kakeibo (家計簿), which in Japanese means “household account book.”

The idea was simple: handwrite your income, expenses, and evaluate your habits.

Today, in a consumerist world filled with credit cards and digital banking, what we truly need is not more technology. It's more awareness. Over 100 years ago, Hani understood something we still underestimate: counting every expense by hand (Chiba, 2017).

By writing it down manually, every coin counts, and you become more aware of your daily habits.

Let’s learn Hani Motoko’s method: the Kakeibo.

Saving is a Fixed Expense

Most people view saving like this: “First I spend… and if there’s anything left, I’ll save it.”

That never works.

Kakeibo takes the opposite approach: “Save first, live on the rest.”

Let’s take an example: Imagine you earn €2000 per month. The usual mindset would be to spend on what you need and if at the end of the month you have €100 left, you save it. If you want to save, you think about spending less, but there’s a problem...

There’s rarely anything left. There’s always a perfect reason to spend (or overspend) more.

It’s similar to Parkinson’s Law, but applied to finances:
“Expenses expand to fill all available income for the month.”

Kakeibo’s approach is this:

1. As soon as you receive your income, set aside the amount you want to save.

2. Then, manage with the rest.

This strengthens what psychology calls “response cost”: the effort required to carry out a behavior. Having accessible income makes spending easy; setting it aside and making it less accessible prevents impulsive purchases and breaks bad habits.

Continuing with the example, if you decide to save €200, you set it aside immediately and don’t keep it at hand. Now, you truly have €1800 to live on. The first step is this mental shift. You’re no longer trying to save what’s left.

You’re spending what remains after saving.

That’s a radical difference.

Kakeibo Method in 5 Steps

1. Monthly Income and Expenses

Write your available monthly income in your Kakeibo notebook. If you have a fixed salary, this is easy. With variable income, estimate conservatively.

Then, write down fixed monthly expenses: rent/mortgage, insurance, payments, subscriptions, etc. We’ll call these “Essentials.”

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2. Desired Savings

Set a realistic savings goal and write it down as an essential expense.

📘 Example:
Income: €1800
Desired savings (essential): €200
Available income: €1600

Now comes the daily tracking…

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3. Daily Logging

Writing down every daily expense by hand makes you more aware. It makes you think twice before spending. If you don’t carry your notebook around, record the expense in your phone’s notes, then copy it to your notebook at home.

📘 Example: April 2
€8 — Coffee + croissant
€24 — Lunch with friends
€75 — Groceries

Take 5–10 minutes each day to record what you spent.

When you write it, you see it. When you see it daily, you become aware of your habits.

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4. The 4 Spending Categories

Every daily expense you write down should fall under one of these categories:

• Essential: Desired savings, rent, food, transport, utilities…

• Wishes: Clothes, restaurants, entertainment, travel—anything non-essential.

• Cultural: Books, courses, education, museums...

• Extra: Gifts, emergencies, unforeseen expenses.

Tip: Your essential expenses (including savings) should be about 60–70%. Keep whishes and cultural spending around 10–15% and reserve about 5% for extras.

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5. Review Your Habits and Adjust Your Budget

At the end of the month, don’t just flip the page without looking back. Now, evaluate yourself.

• How much did I save? Did I meet my goal?

• Where did I overspend, or is there still room to save more?

• How can I improve next month?

📘 Example:
Income: €1800
Desired savings: €200
Available income: €1600
Total spending: €1750
Result: –€150

“This month I overspent because I ate out too often. I need to reduce dining out and find more affordable daily meals—cook at home more.”

The first step is awareness.

The next is action.

• Use the Pareto Principle to analyze the expenses that make up 80% of your total spending. That’s where a small change can yield a massive saving.

• For the smaller expenses (the remaining 20%), use the Japanese concept of “muda” to eliminate those little leaks that turn into a huge financial drain by the end of the month.

You don’t need to be a finance expert. Or have an app. Or use Excel. If you sometimes feel like money slips through your fingers, try this. You’ll see how something starts to shift in you very quickly. Saving isn’t magic—it’s a decision.

A decision you can make today.

✍️ Your turn: Do you use any system to manage your finances effectively?

💭 Quote of the Day: “Our world moves so fast that everything can be bought and paid for instantly. A Kakeibo helps us slow down and really consider what we’re buying with calm and care.”
— Fumiko Chiba, Kakeibo: The Japanese Art of Saving Money

See you next time! 👋

References 📚

1. Chiba, F. (2017). Kakeibo: The Japanese Art of Saving Money.