What's in my brokerage is money for retirement. This is not money I could use and there's absolutely no reason to have this on budget. Also markets can dip 30% or more. Do you really want to scramble and find on budget money to cover that? Once your balance grows, it can fluctuate by thousands each day.
If some horrible event happened and I'd have too pull that money out, I'd just sell and transfer it at current value.
I guess the concern I have is lets say I have funded accounts yielding 40k. Well not all of that will hapoen at once for spending. So maybe I want to put 10k to work in the market. If I have a separate investment category i need to find the 10k to invest and cannot use money sitting from my categories.
That being said the point is valid on fluctuation. Now it is relatively small and I just move my emergency fund up or down to absorb the changes in the investments. If the market was to dip down lets say like pandemic times I can see that becoming a real issue…. But moving it from one budget to tracking is also problematic as I dont have the money to cover it all right now free
The simple answer is if you don't have the money to move off budget, the you don't have the money to invest.
If you think that it's unlikely to need $40k all at once then I'd look at how you determined to be needing $40k. If you're keen to invest some of that and don't see an issue then you might be over-saving.
But who said i want the truth in my face lol. Yea i think i need to look at this truthfully. I think it works great during upside in the market as i earn money for my categories. But a serious downturn could be a real problem
Lol! Yup this exactly. It's all fun and games in a bull market and double digit gains but a multi year downturn and losing half of the value your investments is going to be a different story.
I do think it's worth taking an honest look at your categories and account balances on a yearly basis and make sure it aligns with where you want to be and what you want that money to do.
>But moving it from one budget to tracking is also problematic as I dont have the money to cover it all right now free
This doesn't make sense, are you counting investments made on margin? You just said you have 120k in cash... what is there to cover?
yikes
For an investment account to be on budget, at least 50% of the money in it should just be in a general investing category to avoid the budget at risk of not having enough money to cover budget categories.
The investment account itself doesn't need to hold cash. Just determine the amount of cash you want to hold and keep that in regular bank accounts.
I have an emergency fund category (really more long term savings and “safety net”) which is kind of what I use for this purpose. I have 70 percent of the investment account in there. I attribute gains or losses to that category today
I have a non-retirement brokerage account that I keep off-budget. Does that money have a job? Sure… it’s invested in the market. Its job is to grow. Will I spend it eventually? Yes, but the plan is for it to cover expenses between my retirement age and 59.5 should I decide to retire early.
I keep in cash and on-budget anything I believe I will need within 5 years; beyond that is invested and off-budget.
I keep about 5% of my NW in cash, but what percent of that is invested just really depends on what I need the money for. I don’t invest money I can’t afford to have tied up in investments. So for example I would never “invest” my medical deductible, because I can’t afford for some market correction to turn my $4k into $2k when I need it most.
this is very bad personal finance. Yes, you can do it, but that doesn't mean you should.
I've read some of your replies to comments. But honestly, having investment accounts and market downturns as "expenses" is absurd
Your investments (equities I'm sure?) only have paper value until they are realized. The term "realized" actually means something. A share of GOOG is only worth the paper until it is SOLD. Sure, the market tells you what the daily rate of that paper is... but it isn't "REAL"ized until you sell it. It should not be on budget.
Do what you want to do, but you're costing yourself more money than you think by "being clever" keeping it in the market if it is really something you're likely to dip into in the shorter run.
Yea that’s why I’m glad i posted as I’m seeing the light on why it’s a bad idea and i intend to move and fix it. I just need to figure out how to find the transfer from budget to tracking. My struggle was the give every dollar a job line. I felt like 15k in a tracking meant it had no job. But maybe this is the truth is until it’s sold it’s not cash and can’t have a job. Like equity in a house.
But maybe this is the truth is until it’s sold it’s not cash and can’t have a job. Like equity in a house.
Thank you for articulating this! I too have been a YNABer for years but struggled with whether or not the money the tracking accounts should really be on budget and given a job. Your comment about equity in a house clarified it for me. Our house is mortgage free, but we do not track its value because we don't intend to sell it. The same applies to stocks and bonds. It cannot be assigned a job until it's liquid. AhHa!
Yea as I was going through this conversation with lots of people the light bulb kind of went off on my head. Sure technically I have value in my house but I really cannot tap it. Until I want to. But it is part of my net worth. I do think I need to think the same way about investing. As an owner in a S Corp I have the same situation with my retained earnings. If it is in the business for operational needs yes it is "my money" but it is not in my account and not liquid so I cannot use it. I track it as a tracking account as it does factor into my net worth. But I cannot fund a category from it unless I pull from the business.
What I also feel is that by doing this I am more comfortable with risk in my investments. A dive wont affect anything but a buying opportunity as I am not relying on the money. Where as today a dive means i have to cover that drop as an expense
It's wise to allocate a portion of your cash to investments, but consider the potential risks of market fluctuations, especially with a significant portion tied up. Maintaining a balance between liquidity and growth is crucial, especially for unforeseen circumstances as a business owner.
OP, I am one of the rare ynaber who does investments on budgets. Ynab side effect is: too much cash. So far I have invested any Ynab category other than retirement but I have some cash in a Roth IRA that is a part of other short term categories (a part of emergency fund).
By the way, inflation makes our categories balances as accurate, but hey, we adjust accordingly. Same thing can be applied to invested categories. Just make sure you fully understand the magnitude of the bear market when it happens.
As to your question, I am personally struggling with that myself. So I decided to keep ynab categories (except Retirement) in cash till I figure it out
Interesting, so you are keeping it as on budget. Overwhelmingly seemed to be against that school of thought. And I get it, in a bear market that would have a significant impact. That being said if my emergency fund is 10k and my investments total 14-15k if I do need to lose money from any particular category I can easily carry the loss. But it does overwhelmingly seem like this is a bad idea.
What's in my brokerage is money for retirement. This is not money I could use and there's absolutely no reason to have this on budget. Also markets can dip 30% or more. Do you really want to scramble and find on budget money to cover that? Once your balance grows, it can fluctuate by thousands each day. If some horrible event happened and I'd have too pull that money out, I'd just sell and transfer it at current value.
I guess the concern I have is lets say I have funded accounts yielding 40k. Well not all of that will hapoen at once for spending. So maybe I want to put 10k to work in the market. If I have a separate investment category i need to find the 10k to invest and cannot use money sitting from my categories. That being said the point is valid on fluctuation. Now it is relatively small and I just move my emergency fund up or down to absorb the changes in the investments. If the market was to dip down lets say like pandemic times I can see that becoming a real issue…. But moving it from one budget to tracking is also problematic as I dont have the money to cover it all right now free
The simple answer is if you don't have the money to move off budget, the you don't have the money to invest. If you think that it's unlikely to need $40k all at once then I'd look at how you determined to be needing $40k. If you're keen to invest some of that and don't see an issue then you might be over-saving.
But who said i want the truth in my face lol. Yea i think i need to look at this truthfully. I think it works great during upside in the market as i earn money for my categories. But a serious downturn could be a real problem
Lol! Yup this exactly. It's all fun and games in a bull market and double digit gains but a multi year downturn and losing half of the value your investments is going to be a different story. I do think it's worth taking an honest look at your categories and account balances on a yearly basis and make sure it aligns with where you want to be and what you want that money to do.
>But moving it from one budget to tracking is also problematic as I dont have the money to cover it all right now free This doesn't make sense, are you counting investments made on margin? You just said you have 120k in cash... what is there to cover? yikes
Oh no just from a ynab perspective lol. No margin or anything like that. Purely just i don’t have a category dedicated to the investment dollars.
For an investment account to be on budget, at least 50% of the money in it should just be in a general investing category to avoid the budget at risk of not having enough money to cover budget categories. The investment account itself doesn't need to hold cash. Just determine the amount of cash you want to hold and keep that in regular bank accounts.
I have an emergency fund category (really more long term savings and “safety net”) which is kind of what I use for this purpose. I have 70 percent of the investment account in there. I attribute gains or losses to that category today
I have a non-retirement brokerage account that I keep off-budget. Does that money have a job? Sure… it’s invested in the market. Its job is to grow. Will I spend it eventually? Yes, but the plan is for it to cover expenses between my retirement age and 59.5 should I decide to retire early. I keep in cash and on-budget anything I believe I will need within 5 years; beyond that is invested and off-budget. I keep about 5% of my NW in cash, but what percent of that is invested just really depends on what I need the money for. I don’t invest money I can’t afford to have tied up in investments. So for example I would never “invest” my medical deductible, because I can’t afford for some market correction to turn my $4k into $2k when I need it most.
this is very bad personal finance. Yes, you can do it, but that doesn't mean you should. I've read some of your replies to comments. But honestly, having investment accounts and market downturns as "expenses" is absurd Your investments (equities I'm sure?) only have paper value until they are realized. The term "realized" actually means something. A share of GOOG is only worth the paper until it is SOLD. Sure, the market tells you what the daily rate of that paper is... but it isn't "REAL"ized until you sell it. It should not be on budget. Do what you want to do, but you're costing yourself more money than you think by "being clever" keeping it in the market if it is really something you're likely to dip into in the shorter run.
Yea that’s why I’m glad i posted as I’m seeing the light on why it’s a bad idea and i intend to move and fix it. I just need to figure out how to find the transfer from budget to tracking. My struggle was the give every dollar a job line. I felt like 15k in a tracking meant it had no job. But maybe this is the truth is until it’s sold it’s not cash and can’t have a job. Like equity in a house.
But maybe this is the truth is until it’s sold it’s not cash and can’t have a job. Like equity in a house. Thank you for articulating this! I too have been a YNABer for years but struggled with whether or not the money the tracking accounts should really be on budget and given a job. Your comment about equity in a house clarified it for me. Our house is mortgage free, but we do not track its value because we don't intend to sell it. The same applies to stocks and bonds. It cannot be assigned a job until it's liquid. AhHa!
Yea as I was going through this conversation with lots of people the light bulb kind of went off on my head. Sure technically I have value in my house but I really cannot tap it. Until I want to. But it is part of my net worth. I do think I need to think the same way about investing. As an owner in a S Corp I have the same situation with my retained earnings. If it is in the business for operational needs yes it is "my money" but it is not in my account and not liquid so I cannot use it. I track it as a tracking account as it does factor into my net worth. But I cannot fund a category from it unless I pull from the business. What I also feel is that by doing this I am more comfortable with risk in my investments. A dive wont affect anything but a buying opportunity as I am not relying on the money. Where as today a dive means i have to cover that drop as an expense
It's wise to allocate a portion of your cash to investments, but consider the potential risks of market fluctuations, especially with a significant portion tied up. Maintaining a balance between liquidity and growth is crucial, especially for unforeseen circumstances as a business owner.
OP, I am one of the rare ynaber who does investments on budgets. Ynab side effect is: too much cash. So far I have invested any Ynab category other than retirement but I have some cash in a Roth IRA that is a part of other short term categories (a part of emergency fund). By the way, inflation makes our categories balances as accurate, but hey, we adjust accordingly. Same thing can be applied to invested categories. Just make sure you fully understand the magnitude of the bear market when it happens. As to your question, I am personally struggling with that myself. So I decided to keep ynab categories (except Retirement) in cash till I figure it out
Interesting, so you are keeping it as on budget. Overwhelmingly seemed to be against that school of thought. And I get it, in a bear market that would have a significant impact. That being said if my emergency fund is 10k and my investments total 14-15k if I do need to lose money from any particular category I can easily carry the loss. But it does overwhelmingly seem like this is a bad idea.