With our top-down approach, you need to start with a timeframe for planning purposes. MoneySMARTS uses a year-by-year approach, as it fits well with annual periods used for many other aspects of money and cash flow such as taxation, bonuses, etc. So, at the top level, you need to have worked out how much income (money in) you expect to receive for the coming year, and how much you expect to spend for the same period (money out).
Keeping it simple means starting with the yearly expenditure rather than starting from your daily expenditure. In theory, ‘what money’s left’ should always be enough for what’s coming up. When you start using this system, you will follow seven steps in the two-stage process outlined below (remember we go into more detail in the next chapter, but here is a very quick overview).
Also, think about the ad-hoc income you may receive. When it comes to irregular, inconsistent or unlikely income, such as the out-of-the-blue random Christmas bonus you got last year from your employer, it’s best to treat this as surprise income and not factor it into your ongoing calculations.