How to get brokerage account as part of budget
10+ Year mvelopes user here trying to convert :). Have most of the nuances down courtesy of this forum, but I could not find an answer to this question. Our "budget" is made up of three types of accounts. 1) Checking 2) Savings 3) Brokerage. We have a variety of other accounts, but those are the 3 for budgeting purposes. We budget a fair amount of money for Vacation and Investing. As such, those are two categories/envelopes in the budget. But we hold that money in a brokerage account as we already have a mix of high interest savings accounts for things emergency fund, general savings, etc. So essentially, I want to treat this one brokerage account as a savings account so I can debit & credit the categories/envelopes. A scenario would be that we are putting $7500 away each year for savings, but I do not want a third high interest savings account, so I would rather earn a better return over time as the money sits there most of the year.
You would just add your brokerage account and set the account type to one of those listed in the Budget Account section instead of the Tracking Account section. The Imports aren't likely to work so don't bother linking the account for direct import.
This will allow you to transfer money back and forth without affecting the budget.
At the end of every month, you can do a reconciliation adjustment for the gains/losses.
I would highly recommend that at least 50% of the money in the brokerage account be assigned the job of "Investing", and that's also where you would adjust your budget for gains and losses. This way your other categories won't "starve" in a massive downturn.
Sam Biller said:
How do you avoid that sort of situation when you don’t know “where” your money is located?
All that matters is the account you are spending from has the money in it when you go to spend it. This is a a cash flow concern. and doesn't really have anything to do with the budget.
In your example, you tie a savings account or an investment account to a category or group of categories. You may be saving the money now, but eventually you are going to spend it. So what happens when you go to spend it? You will need to move the money to spending account first. How soon will you do this? Now, all of a sudden your savings account balance doesn't match the category balance, but you still have the money since it's in the account you will be spending from until it comes out.
On the other hand, nearly all of my money goes in or comes out of a single account. My checking account. I can project the future balance of this account by plugging in scheduled transactions. This helps me predict the future balance of my checking account by looking at the running balance in the Scheduled transaction section. I can effectively predict my checking account balance within a few hundred dollars for 30 days out. I
So I set a target future balance to not drop below a certain amount within the next 30 days. if the lowest balance shown is above that target, I move money to a savings account. If the projected balance falls below my target number in the next 30 days, I don't transfer anything. If the projected balance falls below zero, I transfer money from the savings account. The vast majority of my 6.5 months cash is in a checking and savings account at the same bank so I have instant transfers. Some of it is elsewhere but not enough where a 2-3 day transfer time would be a major issue.
In other words, I just spend the cash according to my category balances. If I need to replenish the cash, it will come from future income. In 6 years of using YNAB, I've only ever had to transfer money from my savings account to my checking account 3 times. 1) earnest money on a house, 2) writing a check for a car, 3) one time I did miscalculate my future checking balance and had accidentally transfered out too much. My solution to the third one was to just increase my checking cushion target since the lost interest on that increase really was less than an overdraft fee, so it didn't matter much.