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.

TIA

12replies Oldest first
  • Oldest first
  • Newest first
  • Active threads
  • Popular
  • 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.

    Like 3
    • nolesrule I’ve set up my Merrill Cash Management Account as an unlinked Checking account. This is money I can afford to lose as I have other brokerage accounts to fund many of the categories shown. I’ve done this because I don’t want to leave $40K plus in a checking account or savings account earning almost zero interest. I use the reconcile capability of YNAB to adjust the balance periodically to match. For example, in the photo below, the sum of my available balance is $41,308.12 so I make sure that the Merrill CMA account also has $41,308.12 in it. If the account value is higher when I reconcile, the money moves to inflow to be budgeted. I then allocate the inflow to be budgeted to one of the categories shown in the image below. When I do a transfer, I adjust accordingly. This has been working very well for over 3 months but I’ve tweaked my methodology a bit by adding “real budget” categories outside of the Merrill CMA category. For example, I have a Gifts category in my main budget. If I have a $500 expense in my normal BofA checking account that is a gift, it will be categorized in that category. I have the ability to withdraw from the appropriate category in the Merrill CMA group via a transfer when needed. Hope this makes sense. The groups outside of Merrill CMA ensure that I have proper reporting for expenses that are sometimes charged to credit cards or come out of my normal checking account. 

      Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 wk ago
      • 3
      • Reported - view

      Sam Biller The issue I see here is you are tying the account to the sum of categories.  It's really not necessary and creates extra levels of work.

      My solution above just treats the brokerage like any other account. You just decide how much you want to keep safely in cash. it's the next step after how much to keep in checking vs. savings... how much to keep in a brokerage vs. cash accounts.

      Personally at the start of each month I calculate 6.5 month takehome plus a couple near term large expense categories and sum it up. Any cash over that amount goes to the brokerage. if the difference is negative, I just don't send money over. Cash flow management.

      I don't fund any budget categories from gains in the investment account. The budget is all funded by incoming cash. All gains just go into my investment holding category and as it grows, the risk of having budget funds invested goes down. Currently 73% of the money in my investment account is pure investing, and the remaining 27% belongs to regular budget categories. As long as it remains over 50:50 my budget is safe.

      The nice thing about the YNAB API is I can at any time pull in my category balances and account balances into a spreadsheet, so the calculations are managed for me once I set up the data pulls and create the formulas.

      Like 3
    • nolesrule I’m intrigued and confused! As a fellow Nole (went to FSU from 1983-84), could you give me a few more details? What do you mean, decide how much you want to keep safely in cash? Can you give me a more concrete example? Do you have only one category in your investment account? TIA, Sam

      Like
    • Sam Biller Categories live anywhere you deem then to be, because money is fungible. Read this:

      https://www.youneedabudget.com/the-relationship-between-your-budget-your-accounts-its-complicated/

      Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 wk ago
      • 1
      • Reported - view

      Sam Biller   Mrs. nolesrule and I were at FSU between the first 2 football championships. We never lost a home game, although there was that one tie. 😄

      So, as Isaid, we decided we want 6.5 months of takehome pay in cash, plus a few other categories(Mrs. nolesrule has a fully funded car category and her car is 15 years old, a daughter is having a lifecycle event in the near future, things like that where i want the money in cash). Call it CASH NEEDS.

      Why 6.5 months of takehome pay? Because I've been using YNAB for a long time and I'm comfortable with that number. We got to a point where our cash on hand was so large that I felt like it was just sitting their idle and we had plenty of income to cover new spending and savings., with plenty unneeded money left over each month I can't really give any other reason, besides to say that the extra half month was just based on pay cycles.

      I then look at the sum of my budget accounts and subtract out the balance of the investment account in YNAB. Call it CASH ON HAND.

      If on the first of the month CASH ON HAND - CASH NEEDS > 0, I take the delta and move it to my investment account via account transfer. If it's < 0, I do nothing and allow the cash on hand to grow for the next month from new income.

      Separately I have an Investment budget category. I budget extra money each month to this that isn't needed to fund any of the categories in savings. So this is pure investing, not needed for anything in particular, essentially used to fund retirement in a taxable account beyond what we already contribute to all retirement accounts. It also serves as a safety cushion for market fluctuations, which I inflow/outflow directly to the category each month, reconciling the investment account balance (instead of having it go to TBB like a normal reconciliation adjustment). So this Pure investment category has grown over time from investment growth and also from adding money specifically for investing.

      Hope that helps.

      Like 1
    • dakinemaui Okay... I just read the link you provided. I don’t like the approach recommended in the blog post. Maybe its my OCD but I like to know that my Savings account balance matches what I have available in the budget categories assigned to Savings. Similarly, I like the real account balance in my Merrill CMA to match the budget categories assigned to my Merrill CMA group. If I don’t follow this approach I risk potentially overdrafting my checking account if I have a large expense that is located in the Merrill CMA or savings group. How do you avoid that sort of situation when you don’t know “where” your money is located?

      Like
    • nolesrule Yes. This helps me understand your methodology a bit better. It sounds like you reconcile once per month. 

      Like
    • Sam Biller said:
      How do you avoid that sort of situation when you don’t know “where” your money is located

      I know about upcoming outflows and their impact to account balance well in advance. For larger than normal ones, I would just transfer less to my savings account after being paid. For truly exceptional ones (e.g., house down payment) I would transfer from any other account or just pay  directly from that other account.

      Put it this way, when a category and account balances are supposed to be synced, one of those balances is redundant -- assuming they agree. When they don't agree, one of them is misleading and you have a similar risk of overdraft (possibly higher given a difference is accidental and therefore unknown until discovery).

      Like 3
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 wk ago
      • Reported - view

      Sam Biller 

      Sam Biller said:
      It sounds like you reconcile once per month. 

       Yes, I don't see the point in any other frequency. I use the last day of the month account balance. The change in account balance throughout the month doesn't affect my ability to use my categories properly, and YNAB's net worth only reports at monthly resolution, so my preference is to have an accurate final net worth figure for each month.

      Like
  • 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.

    Like 4
  • Y’all are sure making me re-evaluate my approach. 👋 As I think I mentioned earlier, my brokerage is also an instant transfer with my checking account so I can take advantage of that if I need instant cash. 

    Like 3
Like1 Follow
  • 1 Likes
  • 2 wk agoLast active
  • 12Replies
  • 336Views
  • 4 Following