Tax Tip Thursday

I happened on this article about a Japanese approach to saving money and I thought it tied in nicely with the previous weeks’ shows. I found it interesting and thought I would share with people. It has some great strategies.

Understanding Kakeibo

Rooted in Japan’s rich cultural tapestry, Kakeibo translates to “household financial ledger”.

Its inception can be traced back to 1904, pioneered by Hani Motoko, an icon for being Japan’s premier female journalist.

What I like about these strategies is it is a hands on a approach and forces you to think about your purchases.

Why $5.34?

The $5.34 rule isn’t about strictly setting aside exactly $5.34 daily or weekly. Rather, it’s a symbolic gesture. It’s the representation of recognizing small, seemingly inconsequential amounts and realizing their potential over time. In essence, saving as little as $5.34 a day can accumulate, and alongside the Kakeibo method, it can lead to significant savings.

I was talking about that a couple of weeks ago to a client who was having cash flow challenges. I provided them with a number of ideas and strategies, but one of the things I kept emphasizing was that there are no short term wins, this is a long term game.

Embracing The Questions That Count

Central to Kakeibo’s strategy are a series of reflection questions before any non-essential purchase:

• Do I truly need this?
• Is it financially wise to get it?
• When will I use it?
• Do I have a place for it?
• What sparked my interest in it?
• What’s my emotional state right now?
• How will buying it make me feel, and for how long?

Strategies Inspired by Kakeibo:

1. Pause Before Purchase: Allow a 24-hour window before purchasing an item. If after a day you’re still drawn to it and can financially justify it, then proceed.
2. Resist Sale Psychology: Deals can be enticing, but it’s crucial to evaluate if you’d want the item at its original price. If not, maybe that “deal” isn’t worth it.
3. Daily Balance Checks: Familiarize yourself with your account balance. A daily check can enlighten your spending habits and make you more intentional.
4. Cash is King: There’s a certain finality in handing over cash. Utilize it to make your spending more tangible and deliberate.
5. Wallet Reminders: Annotated cues or stickers on credit cards can act as deterrents to impulse buying.
6. Rethink Your Triggers: Recognize what spurs needless spending – be it marketing emails or social media influencers. Altering these patterns can reduce impulse purchases.
7. Allocate For Treats: Remember, Kakeibo doesn’t aim to remove all joy from spending. Occasional treats are encouraged but should be rooted in mindfulness.

Use Kakeibo to Save for your Taxes!

If you have a single source of income and are an employee of a company, this should not be a problem for you. Your taxes will be deducted from the source, and you shouldn’t find yourself owing money at the end of the year. However, if you have multiple sources of income or are self-employed, making sure you have enough money at the end of the year for your taxes can be challenging. Try using Kakeibo to set money aside throughout the year to ensure you can afford your tax bill.

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.