You must give, whether you want to or not

Now that you have identified the various spend- and save-buckets, it's now time to focus our attention on the third and the final one.

Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.

—Benjamin Franklin

You are saved of the pain of computing this particular give-bucket if you are a salaried employee and your employer deducts taxes at source (TDS). Since you never receive this money, you don't need to create a corresponding bucket.

If you a freelancer, you will have to make an estimate based on your past tax amounts and the prospective change in your business this year. Then again, if you are a freelancer, you might already know quite a lot about running a business, the financial aspect of it, and are ahead in the finance game. If you have not done this before, this is a good time to do this exercise.

The computation might get more complicated if you have multiple sources of income—especially if you are still employed. A part of your tax would be deducted at source while you'll have to account for paying taxes on the income from the other sources. Then again, you would have some baseline data from past years. Use that. On a side note, if you have multiple sources of income, then congratulations! You are already ahead in the finance game.

Compute the baseline estimate for the taxation give-buckets.

You must give, willingly and with joy

This situation might be circumstantial. You might be sending money elsewhere to support your family; or maybe a friend. In such a case, you are not bothered about how the recipient is using the money (i.e., in the micro sense; you might still want to know if it is being used well). The situation might have a larger altruistic motive. You might have a favourite charity, a social cause, or a religious institution that you would want to fund. Also in such a case, you are not bothered about how the recipient is using the money (again, in the micro sense). In either of these cases, it is an outflow and must be taken into account.

Identify and estimate these gifting / donation give-buckets.

You might have a question such as, "What if I do financial planning for my parents as well?" This is certainly possible. It is also possible to seamlessly link the outflow of your plans with the inflow of your parents' financial plans. Hold on to that thought for sometime. Let us focus on you and your co-located nuclear family for the time being.

Now that I have given all the preliminary instructions, and you have executed them, it is time for us to create our first system.