Investing for medium-long term goals with YNAB?

This is something I'm thinking about for the future, I'm not ready for it right now, but I'm wondering how people who are already doing this do things.  If you are investing some of your category balances into the market, where the balances can go up and down, do you do that with an off budget account and just transfer money off budget?  That's how I fund my Roth IRA so far, but I've never invested in anything but a retirement account...yet.

 

Once my balances for my house and car repair categories get above a certain amount, I will invest future contributions into a tax efficient investment account to more efficiently fund future medium-long (5-10 year) goals, but I don't want to stress when the balance goes up and down with the market.  It will, as people are remembering the least few days. I just zoom out to 5 years on the x axis and realize, so far, it's just a blip.  But I don't want to feel like it's messing with my budget to invest money for those medium-long term goals, which I know in the long run is a good idea.  So I'm thinking off budget.  But that seems so unYNABy.

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  • Every month I add to my taxable investment accounts which is an off budget tracking account. It's an expenditure from my budget. I have an Investments category that I budget X to every month and every month there is a transfer of X to the tracking account so it gets counted just like any other spending but has a net zero impact on the Net Worth (monthly gain/losses are a different matter which do impact Net Worth)

    If you have slack in your budget and it's something that you are saving up for 10 years from now (such as buying a new car), you could maybe take the risk of having your investments on budget for that. But you'll have to be willing/able to weather monthly losses from the category.

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  • I was just talking about that, here:

    https://support.youneedabudget.com/t/p8hhqpl/investment-balances-and-buy-stock

    I do as jenmasSuperbone just told me he (or possibly she? Haven’t paid attention) does keep investment on budget.

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  • Yes, I would recommend keeping it off-budget to start. Way down the line once you have an abundance of funds, you can look into keeping it on-budget but I definitely consider that an advanced move.

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  • Thanks for the responses ya'll!  I think I will start with using an off budget tracking account that I reconcile once a month for my medium-longer (5-10 year) term category goals.  I may get that started sooner rather than wait.

    I will keep tracking my net worth, including my retirement account balances and house value, in Mint once a month and not put those accounts into YNAB.  I don't want to worry about those balances changing day to day.  I'm trying to ignore the noise as much as possible without losing important information that is actionable.  My retirement accounts are all in Target Retirement funds so I don't need to rebalance them.

    Has anyone tried Ally's robo investment options?  I've never invested in taxable, I know people that do on Bogleheads would talk about tax efficient investment.  I need to find their expense ratios before I can decide where and what to invest in.  I could just pick some sort of balanced fund at Vanguard, but you usually need a larger balance to start with and a bear market, if we're hitting one now, is a great time to start new investing, if your time horizon is long enough.  I was thinking so far I like Ally and I already have a savings account so that's one less bank to deal with if I use them for taxable.

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 3 mths ago
      • Reported - view

      PhysicsGal I started off using a robo advisor (Betterment) for my taxable funds but then learned how to do it myself. I don't like even the idea of a 0.25% fee. I highly recommend the Dough Roller podcast. I learned a ton about investing from it. Also the book, A Simple Path to Wealth by JL Collins. Also, Rob Berger from Dough Roller just released a very good book called Retire Before Mom And Dad.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
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      PhysicsGal 

      PhysicsGal said:
      I've never invested in taxable, I know people that do on Bogleheads would talk about tax efficient investment.  I need to find their expense ratios before I can decide where and what to invest in.  I could just pick some sort of balanced fund at Vanguard, but you usually need a larger balance to start with and a bear market, if we're hitting one now, is a great time to start new investing, if your time horizon is long enough.

       I would recommend Vanguard. It's nice and easy, and they have the best funds for tax efficiency generally.

      I would not recommend a balanced fund in a taxable account. They are not tax efficient because they must maintain their balance, which means buying and selling under the hood, which will result in extra taxes needing to be paid.

      Rather, my recommendation would be to have an asset allocation for your overall portfolio, invest in a tax efficient broad market index fund in the taxable account, and put the bonds you need to offset them in traditional tax advantaged accounts (or maybe add I Bonds to your portfolio if you are at least 30 years old. 

      And then, once the account is about double the size of your emergency fund, then you might consider bringing it on budget.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
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      Additionally, I came up with a formula to figure out how much money I wanted to hold in cash (6.5 months net income + the sum of certain categories), and used the YNAB API in Google Sheets to populate the values in my formula needed to that tell me how much money I can move to the investment account. Once the money is invested, I then rebalance into bonds in one of our 401k accounts..... although after this past week I've got way too much bonds.

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      • Pedro
      • Pedro
      • 3 mths ago
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      nolesrule you API usage is very cool. I am longtime ynab 4 user who hasn’t made the switch yet, but I recently started learning python and working with APIs. 
      The YNAB API intrigues me because it’d be a nice way to learn and tinker on.

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    • nolesrule This sounds like a good plan. Can you share some steps on how to write this formula in google spreadsheet or sample code?

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  • Sky Blue Harp I'll write this out U.S. tax form style

    Step 1... figure out how much cash you want to hold. I plugged in our net paycheck amounts and multiplied by number of pay periods in a year to get the net takehome amount (we have different pay periods), then took that number and divided by 12 then multiplied by 6.5 to get 6.5 months.

    Step 2. Get Total money in your budget

    Step 3. Get balances of any accounts on budget you want to consider part of your investments. For me it's limited to my Treasury Direct account and my Brokerage account.

    Step 4. Subtract Balances of Step 3 from Step 2 total money in your budget.

    Step 5. If you have any categories in your budget you want to ignore from the calculation and hold in cash anyway, total them up. Then subtract them from the result of Step 4. (For example you have a Car Replacement category with a large amount of money, and you are planning to buy the car in the next month or two, you obviously don't want to invest that money).

    Step 6. Subtract Step 1 from Step 5. This tells you how much money you have available to move to investments.

    I use Google Sheets and wrote functions that use the API to get me Total of Budget accounts, Total of all accounts, retrieve a specific account balance by YNAB Account ID, retrieve category balance by YNAB category ID, retrieve Category Group Balance by YNAB category Group ID. Some of these functions require summing.

    I have a tab in Google sheets where I have 3 columns Name, YNAB ID, function call to get a total. I can then use VLOOKUP using my account/category name on this tab from elsewhere when I want to insert a value somewhere in my overall spreadsheet.

    My investments spreadsheet is actually quite complex, and this is just a small part of it.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 mths ago
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      Lastly, my recommendation is always to have at least an amount of money in your investments at least equal to the amount of your Emergency Fund category (or categories) prior to moving any budgeted money into investments. After the last couple of weeks, the reason why should be obvious. What this means is you've built up the money in your brokerage account using money not needed for your budget... money explicitly devoted to investing. It took us a couple years to get to that point.

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    • nolesrule Sounds like a great plan. But for newbies like me, would you mind  explaining in a simpler math calculation with some basic assumptions on numbers to begin with. For e.g assumption for person X with salary around  50K, and so on, sorry still getting a hang on these stuff. Sorry, if i m asking very basic, but really keen to understand the process.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 mths ago
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      Sky Blue Harp Newbies shouldn't be investing their budget. It's an advanced skill. If you can't understand what I did, you are not ready.

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    • nolesrule 😂

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    • nolesrule I do investments as well, but not as thorough and calculative as you, hence making an attempt at it. I will review your list more closely to see how this can be helpful.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 mths ago
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      Sky Blue Harp Yeah, it wasn't meant as an insult. if you have any specific questions I will do my best to answer.

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