Mindful Money Management

June 29, 2020

As the world attempts to emerge from the Covid-19 lockdowns and tentatively eases up social distancing restrictions, I noticed something unusual. I haven’t been spending nearly as much money as I usually do. This makes sense, of course; I have hardly been going anywhere to spend money (except for online shopping at Amazon, that is). Being forced to limit our activities, and subsequently our spending, might be a silver lining to this whole pandemic thing and it has me thinking. Since we are getting accustomed to spending less because we were forced to do so, how can we steer this into an ongoing and positive savings behavior?

Most of us understand that having an adequate emergency fund is one of those fundamental financial priorities, yet keeping enough in that cash account is a challenge for way too many of us. Likewise, saving up for vacations and large purchases, rather than charging them to a credit card and taking forever to pay off an expensive balance is a habit with which many of us struggle. And there is the all-too-common struggle with getting out of debt. Since we are already slowing down our usual spending, why not channel some of that idle cash toward other goals we want to improve?

Easy to say, but not so easy to do, right? I agree. I also admit, even as a seasoned personal finance professional, I am not a fan of budgeting. Keeping track of my own budget, that is. I’m not anti-budget; you should have your own budget (or my preference, a “spending plan”). I just don’t enjoy the process of budgeting, and from my conversations with many people over the years, chances are neither do you. Let’s change that.

Becoming More Mindful

A few years ago, as my age and blood pressure began to noticeably creep up, I began exploring the world of mindfulness meditation as a way to relax, calm my noisy mind, and keep that pesky blood pressure at bay (yes, it did work; no BP meds for me!). As I discovered with my physical health, mindfulness at its core is the ability to focus, particularly on something you want to change, but without becoming overwhelmed or unduly emotional about it. I’m not the first person to marry mindfulness practices with money management, however.

The Japanese have been applying mindfulness to money for quite some time. They also have a lovely word for the tool they use, kakebo (or sometimes spelled, kakeibo, and pronounced “kah-keh-boh”). Creation of the kakebo concept is attributed to journalist Hani Motoko who in 1904 first touted this relatively simple household finance journal as a tool to help housewives keep better track of the household accounting. There is more to it than simple accounting, of course. More on that in a moment.

First, as an American who routinely coaches and counsels other Americans on money habits, let me first clarify the idea of mindful spending and then discuss how kakebo fits into the mix. Whereas a budget is largely a cold, heartless, unfeeling mathematical process that ruthlessly pits income against cash outflow, mindful spending warms up and humanizes this activity by including awareness (that’s the mindful part) of why we spend money on the things we do in accordance with not only our needs but also according to what is important and meaningful to us. As humans with big brains and opposable thumbs, we certainly apply logic to our decisions (budgeting), but ultimately, it is our feelings and emotions (mindfulness) that drive our actions. Why else would companies spend so much money on marketing and promotion?

As you are probably thinking, yes, mindful spending can seem like the touchy-feely-woo-woo side of personal finance. It is that, but it is also pretty easy to do. Mindful money management can be as simple as pausing for a moment before we pull out the cash, credit or debit card and think about how we are feeling as we start to make a purchase. Thinking about how spending makes us feel gives us an opportunity to check in with ourselves and identify habits we might want to change. So pause. Take a breath. What are you feeling? Is this expense a want, or a need, or a stress response? Will it be truly beneficial to you or to someone who is important to you? I told you this was going to get all touchy feely. It’s okay. Give it a try. Embrace it.

Create Your Kakeibo

If you want to take things a step further, this is where a kakeibo can help you. If you are familiar with the envelope system of budgeting, kakeibo uses that concept at its core. What makes kakeibo different, however, is its incorporation of the touchy-feely concepts related to how we feel about different expenditures. For instance, kakeibo categorizes all spending into just four basic categories:

Needs (must pay these; rent, food, insurance, etc.)
Wants (feels good but could exist without it)
Culture (think, museums, activity groups, club memberships, experiences)
Unexpected expenses (emergencies, repairs, etc.)

These simple categories can make the mindfulness part easier to manage as you focus on where spending does or does not match your goals and priorities. The entire concept focuses on four key questions to contemplate each month:

How much money is available to spend?
How much of it would you like to save?
How much do you spend each month?
Where are opportunities to improve?

Crafting your own kakeibo is very simple. Here is how to get started:

Download a free kakeibo journal from Credit.com (saving money already!).
Write down your monthly income and expenses.
Set your monthly savings goal.
Track your spending each week.
Calculate how much you spent on needs, wants, unexpected, and cultural purchases.
How much was left for savings?
Reflect on your performance (and write that down, too). Did you meet your goals? Why or why not? What will you focus on improving next month?

That’s it! You are now mindfully spending. Kakeibo was meant to be a physical, written process, but you can apply some automation to it if you like. Personally, I like to use the pen and paper method first, then switch to using an app or two. For instance, the GoodBudget app is free and simple, easily adapting to your kakeibo strategy. You can also record personal notes within the app to assist with capturing and focusing your mindful thoughts. Give it a try and don’t be discouraged if you note a few weak spots or experience a setback or two. As with meditation, the key is to keep doing it. There is no “wrong” way to go about it. Find your own path. You do you. Breathe.