Money is something that we will have to know how to manage throughout our lives. Knowing how to properly organise the financial resources we have will lead us to lead a more comfortable life and, above all, will allow us to better cope with situations as complex and difficult to foresee as the pandemic and all the economic consequences that this entails. The COED rightly points out that it is households with a lower degree of financial knowledge that tend to have higher levels of indebtedness and that, furthermore, they do so under more burdensome conditions. For this reason, it is essential to train and have the best financial education possible.
We can define financial education as that set of acquired knowledge that allows us to manage our finances efficiently according to the economic context that surrounds us. Almost all the decisions we make in our life have economic connotations in one way or another, so it is necessary when evaluating the different alternatives of personal management, to have all the financial information possible. Likewise, it is key to understand clearly and concisely all those basic concepts that in one way or another affect our pocket. Planning spending and saving should be the key that guides us in managing our resources.
Having a good savings strategy is the basis on which we must rely to have resources that we can make use of when the general economic situation becomes complicated or when unexpected expenses arise that we must face without delay.
If there is a country in the world that has had high savings rates for many decades
It is Japan and that despite the fact that for a long time the interest rates that reward savings in the country have been zero or even negative. For this reason, it is convenient to look into this culture and see what saving techniques they use because surely we can obtain great lessons from them.
In Japan there is a very popular saving methodology called the Kakebo method, which was born more than a century ago, specifically in 1904. It is a very simple strategy that is suitable for any economy and that will help us to have the income and expenses under control. The method starts from the idea of recording in an account notebook all the income and expenses that we make throughout the year.
It should be noted that despite the fact that nowadays there are modern applications in Japan such as Money tree or even the vast majority of Japanese financial entities allow users to digitally track the structure of expenses and income of their users, these paper account books they continue to be widely marketed in Japan and especially in the last and first months of the year. Proponents of this method argue that it is its manual methodology that makes you much more aware of knowing what you spend your money on and that forces you to think about how to optimise spending.
The method is quite laborious, especially in the beginning, but that is what its success is, experts tell us. The first thing to do is write down your income and expenses, which can be done on a daily or weekly basis depending on what is easier for the user. Expenses and income in turn will have to be differentiated by categories. Thus, for example, we will have essential expenses, leisure expenses and extraordinary expenses such as the repair of the television. Regarding income, they must also be categorised, so that they could be divided into recurring and extraordinary income.
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One of the keys to the method is knowing where you are spending the money and for that the differentiation into categories is key. To make it more visual, expenses can be classified in different colors. For example, we can put in red those expenses that we cannot do without, in yellow those expenses that being extraordinary we can postpone and in green all those expenses that have to do with our leisure or that could be dispensable.
Once we have reached this point, we have to see how we can improve our finances and for that we must calculate how much we have managed to save and how much we would have liked to save. Likewise, we must also analyze how much we have really spent and what expenses we have incurred could be dispensable the following month. Every month or better every week we must do the math.
Saving requires willpower and perseverance, and the Kakebo method can be a tool that helps us improve our financial education. This method will help us to identify those small expenses that we all have and that we are often not aware of but that at the end of the month represent a significant sum of money and take us away from our savings goals.
There have been numerous studies in Japan on the effectiveness of this method and most of them conclude that if we are disciplined with its methodology, the average savings that can be achieved is 35% higher than what we would obtain if we did not use it, but for this we must be disciplined and constant.
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