budgeting

Savings Techniques for Women Who Can't Save

maki — Thu, 09 Apr 2009 18:44:11 +0200

This article about my favorite Japanese personal finance book is part of Frugal Food Month. While it’s not directly about food, I hope it’s of interest to Just Hungry readers anyway!

Previously, I wrote about some household budget management tools and methods which are fairly standard in Japanese society. While I’ve known all about these things for years - the kakeibo household ledger, the envelope management method, and so on - I had a hard time following these methods myself for a very long time. As a result, my personal savings have always been on the meager side, to put it mildly.

It actually took a small book that I picked up a couple of years ago to make me really see the light. The book is called Finally This Time! Savings Techniques for Women Who Can’t Save (貯められない女のためのこんどこそ!貯める技術). It’s actually a manga (comic) book. In Japan, it’s quite common for difficult concepts to be explained with manga. And what’s more important to really understand than how to manage your money?

The book starts by recounting how the author, Kyoko Ikeda, was totally unable to accumulate any kind of savings. One day she discovers that she only has about 11,000 yen in the bank (roughly US $110 at current exchange rates), and that has to last her for 10 days until her next client payment (she’s a freelance illustrator and manga artist) is due in. She somehow manages to make it through those ten days, and goes to the bank fully expecting the client payment to be in…and it isn’t. She has a serious moment of panic, especially when she goes home and tries to get online - and she can’t. Has her internet already been cut off due to nonpayment? What is she going to do? What about the rent that’s due?

She survives that crisis when the payment is credited to her account later that day. Some time later, she goes to a class reunion, where she talks to a former classmate who not only have bought their own home already, but has paid off the mortgage. She realizes that she’s single, in her late 30s, has no savings or any kind of assets to her name, and is always living from payment to payment, walking a financial tightrope.

She wonders, where has all the money gone? It’s not like she hasn’t been earning a good income. Her basic expenses like rent are not that high either. She doesn’t buy expensive clothes or accessories, or go on lots of trips. When she really analyzes her past spending habits, she realizes that she’s just been frittering her money away. Where did it go: On things like an expensive computer she really couldn’t afford (on ‘easy monthly payments’ of course); lessons for things she was all fired up to learn, but never followed through on; equipment and stuff for hobbies soon abandoned. She also has a habit of comforting herself with food (chocolate, an ice cream sundae, a nice curry at the local restaurant…) or little trivial, non-lasting purchases (Aromatherapy! Miracle skincare products!) Finally, she’s also always fighting clutter and disorganization at home, and constantly buying new organizing gear - more shelves, more boxes, more…

Does any of this sound familiar to you? To me, it was almost like reading about myself, especially the parts about using small purchases to make myself feel better. And getting frustrated with all the clutter and going out to buy more and more organizing gear. Oh, and the part about spending too much on computer stuff too. And the supplies for soon-abandoned hobbies (ouch!). And the lesson fees for half-finished courses (ouch again!). And, and… The similarities were quite shocking.

Keeping it simple

Of course, it wouldn’t be a personal finance book without solutions. What made sense to me was that she kept it very simple.

Every month, she’d subtract her fixed costs - rent, utilities, and so on from her income.
The rest, she withdrew as cash and divided up into envelopes (see the envelope method described previously). She made a strict pact with herself never to let one envelope/category “borrow” from another; e.g. if her entertainment expenses envelope ran out, no transferring from her office supplies envelope!
She kept a kakeibo (household ledger), but didn’t use a commercially available one, since she found the categories to be too complicated. She just used a regular notebook, using 2 pages per week, and used broad categorizations that fit her lifestyle and spending patterns. One that made a lot of sense to me is that she divided her food spending into ‘food for survival’ and ‘food for comfort/entertainment’ categories. Things like eggs, milk, vegetables were ‘food for survival’; chocolate, cake, or eating out for the sake of eating out were ‘food for comfort/entertainment’. Most if not all Japanese pre-printed kakeibo divid ‘food’ into too many categories (carb, protein, vegetables, etc) which can get tedious to keep track of.
Instead of writing down what she spent, she just stuck down her receipts and wrote down the totals.
She got rid of unplanned spending. Whenever she wanted to buy something, she would write down her requirements first, and carry the notes around until she found something that fit.
She had a couple of variations on the coin saving scheme. First of all, whenever she could she paid with bills rather than coins, so she’d always end up with change. Then any change, especially ‘big’ change (500 yen coins) left at the end of the day was put into the coin jar. (That would be easier to duplicate in countries that have big-denomination coins; here in Switzerland I try 5 franc and 2 franc coins. In the US, you could try quarters, those elusive dollar coins, or even $1 and $5 bills.) At the end of the month, the contents of the coin jar were deposited into a separate savings account, at a different savings institution from her regular bank (she chose the post office).

Decluttering leads to saving

Ms. Ikeda’s best known books are actually about decluttering and organization. I picked those up before getting to her savings book. In any case, she says, and I agree from my own experience, and decluttering your personal space leads to saving money too. Not only do you stop wasting money on duplicate purchases (10 pairs of scissors because you keep misplacing them, etc.) but clearing your physical space seems to clear your mental space too.

So, has it worked for me?

Since reading this book as well as her decluttering books, I can say that I have improved my personal finances quite a bit, as well as decluttered my environment and life. It’s been a small yet significant factor in leading to the situation I’m in now, looking for an ideal place to live and work, with just enough funds to make that choice. So I’d say it has worked, and is continuing to work.

Ms. Ikeda has a lot of other ideas in her little book, some of which go a bit too far for me (like when she determines that white flour is the cheapest carb, and tries to live on udon, okonomiyaki, and so on). But I truly love this book. Maybe it should be translated into English! In any case I’ve tried to cover the highlights of the book here. If you do read Japanese at all, and have problems with saving money, I highly recommend it. Besides being practical, it’s very cute and funny too, and while the title says ‘For Women Who Can’t Save’ it’s just as useful for men too I think. (Her organizing and decluttering books are just as good, if not even better. If you all are interested I’ll try to describe them also in an upcoming post. She’s also published a couple of books on investing in stocks, and new one on dieting, but I haven’t read those yet.)

(Note: a related post on my language blog about a term she uses often…that leads to a lot of wasteful spending!)

The Kakeibo and Japanese household budgeting tools

maki — Wed, 01 Apr 2009 15:33:45 +0200

A few kakeibos, and Japanese womens’ magazines with budgeting-oriented articles. Look for these words: 家計 (household finances), 貯める　(save money), 家計簿　(household finance ledger).

To kick off Frugal Food month, here is an article from the archives about Japanese household budgeting tools, which was supposed to be the start of a series - but then All Hell Broke Loose around Chez Maki, and the series sort of got forgotten. Well, the series will be revived this month, so in case you missed this one, here it is!

(Original intro: So why is there a money management article on a food site? Well, I think that the subject of our money is on a lot of people’s minds these days, and food spending is a major part of that. An it’s about Japan, and I know a lot of you read this site because it brings you bits of interest about my homeland. So, I hope you’ll enjoy this little derail.)

Many people worldwide are concerned these days about the economy. While it’s difficult for us as individuals to influence factors like what our financial institutions do, we can control where our money goes. While this topic is not directly about food, I thought it might be interesting to see how Japanese people handle household budgeting.

Why look at what Japanese people do? For one thing, Japan went through a severe economic correction (aka the “bubble economy”) in the late ’80s, largely in part due to overvalued real estate and resulting defaults on loans, which lasted well into the ’90s and even fundamentally changed the way Japanese society works. While the current Japanese stock market, yen, and banks are on a wild and bumpy ride just like the rest of the world, individuals (except for those who invested in stocks, currencies and such) on a whole seem to be a tiny bit less worried than people in North America or Europe. This may be because saving rates in Japan are amongst the highest in the developed world, estimated to be around 25% of income (though that has fallen from previous savings rates of 30 to 35%; in contrast, the saving rates in the U.S. average around negative 0.5%), or simply because household budgeting skills have been talked about for quite a long time.

The wife is in charge of the household budget

In the West, money is considered to be the domain of males. This is not the case in Japan. In a typical Japanese household, the wife (who may or may not work outside the home) is firmly in charge of the household finances. She decides on how the money is spent, how to plan for big ticket purchases, even in many cases how money is invested. Financial products are often marketed with ‘cute’ themes, to appeal to a female audience. (See the cute kakeibo in the picture above).

The kakeibo, the household finance ledger

The 家計簿　(kakeibo) is the essential tool used by any money-savvy Japanese household budget manager. Kakeibo literally means household finance ledger. You can buy all kinds of kakeibo (here are the Amazon Japan search results for 家計簿). While there are several kakeibo software packages, Excel templates and the like, hand-written kakeibo are still popular. Many magazines aimed at housewives include a giveaway version as a supplement in their December issues, for use in the coming year.

A typical kakeibo has:

A monthly summary page, where monthly income is noted, and monthly budgets and savings/loan repayment goals are set.
Weekly pages (or 2 pages per week) with expense and income categories on the left, and daily columns.
A section for planning for irregular or unexpected expenses
A yearly summary section.

A truly diligent budget manager/housewife diligently keeps up her kakeibo every day, noting down items in each budget category, but there are alternative kakeibos and kakeibo methods out there for lazier people. Here’s the cover of a kakeibo where the user can just stick on receipts for example.

I know that it’s a lot easier to use personal finance software, and in a bank account, check, and credit/debit card reliant society like the U.S. for example, it may make better sense, especially if you can automatically import your information online. But there’s something to be said for actually writing down amounts by hand too: it may give a more tangible sense of how you’re spending your money.

Focus on food costs

One thing that all kakeibos focus on is food costs, since food spending is both one of the biggest budget categories and one of the easiest areas to cut down on costs. Rather than lumping every eating purchase and activity into ‘food’ as a category, the kind of purchase or activity is sub-categorized too. Traditional kakeibo categorize food purchases by the nutritional type: carbohydrates, meat and fish, dairy and eggs, vegetable and fruit, etc. It also serves as a way to see if food purchases are balanced health-wise. More recent, easier kakeigo may divide it into larger categories like regular food, fun food (snacks and drinks), eating out, and so on. There are kakeibos that combine budgeting functions with meal planning and recipe tracking too.

Cash envelope budget management

In Japan, most people get paid by direct deposit (checks are rarely used by anyone) and pay things like utility bills electronically. But for other household spending, cash is still the king. One often recommended budgeting method is to draw out the cash you need for a week or a month, depending on how you manage your budget, and physically divide it into envelopes that are marked by spending category. Once the cash in an envelope is gone, it’s gone - no cheating afterwards. It’s a remarkably effective method - it almost becomes a game to try to have as much money left over at the end of the month. And having your money in your hand, rather than as numbers on a screen or a piece of printout paper, makes it much more tangible.

Another cash-oriented saving trick (which isn’t that uniquely Japanese really, but is very popular there) is the coin saving method. At the end of every day, extra coins are put into a piggy bank or a jar, and when there’s enough accumulated, it’s either used for buying something extra or deposited into a bank account. Japanese ATMs even have coin deposit slots.

This is just a brief overview of the budget management methods discussed ad infinitum in Japanese magazines, books and blogs. Next time, I’ll talk about my favorite Japanese how-to-manage-money book for money dummies like me. (Update: Here’s my review of the book.)

April is Frugal Food Month on Just Hungry

maki — Mon, 30 Mar 2009 21:08:03 +0200

As I have noted over on Just Bento, April will be Frugal Food Month here on Just Hungry (and Frugal Bento Month over on Just Bento).

Personally, saving money has been on my mind a lot these days, as I realize that we need every penny we can scrape together to buy a house that we really like, in an area we really want to be in. While Just Bento will be concentrating on the money saving benefits of making your own lunch, here on Just Hungry I will be talking about a wider range of topics related to frugality and food. Some will be related to this site’s main topic, Japanese cooking (and culture), but not all.

Above all though, I hope to keep things fun and not too heavy.

So…stay tuned! :)