Please criticize my AA (YNAB side effects!)

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Topic Author
BogleMelon
Posts: 1876
Joined: Mon Feb 01, 2016 11:49 am

Please criticize my AA (YNAB side effects!)

Post by BogleMelon » Sat Jul 13, 2019 9:56 pm

I am using YNAB for budgeting. [For those who don't know it, it is a virtual (electronic) envelope budgeting (Zero-based budgeting) system. Through it I can let all my cash to set in only 1 saving account, but it gets allocated to many budgeting buckets. The total of these bucket balances = exactly my bank balance. Think about cash distributed into different envelopes kind of system, but virtually]
A very nice system for me, except could result in too much cash. For instance, Saving for EF is one bucket, an upcoming car is a second bucket and the upcoming 6 mo auto insurance premium is another bucket and so on.
I am now around $50K cash (again, distributed among different buckets), renting my home (have no bucket for a down payment yet), 40 years old married with now kids.
My overall Asset Allocation according to Personal Capital (including EF):
Cash 33.16%
Intl Bonds 0.72%
U.S. Bonds 8.34%
Intl Stocks 19.36%
U.S. Stocks 37.22%
Alternatives 1.2%
Grand Total (between retirement accounts and the bank) $167,006.00

My question is, does my system causing me to be too conservative? Should I increase/adjust my asset allocation to reflect different ratios specially that it is very unlikely to spend all these buckets in the same time?

Thanks!
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

mhalley
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Joined: Tue Nov 20, 2007 6:02 am

Re: Please criticize my AA (YNAB side effects!)

Post by mhalley » Sat Jul 13, 2019 11:16 pm

I would exclude money that is not for retirement from your asset allocation. Emergency fund, short to intermediate term savings for things like vacations, house remodeling or down payment, car purchase, etc would not be included in the retirement aa. I believe you can uncheck various accounts in pc when figuring the aa.

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FiveK
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Re: Please criticize my AA (YNAB side effects!)

Post by FiveK » Sat Jul 13, 2019 11:28 pm

BogleMelon wrote:
Sat Jul 13, 2019 9:56 pm
A very nice system for me, except could result in too much cash.
...
Should I increase/adjust my asset allocation to reflect different ratios specially that it is very unlikely to spend all these buckets in the same time?
The definition of "too much cash" is for you to decide.

Perhaps there is redundancy between your emergency fund and some of the other buckets?

retiredjg
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Re: Please criticize my AA (YNAB side effects!)

Post by retiredjg » Sun Jul 14, 2019 8:42 am

Cash intended for short term needs should not be included in the asset allocation of your retirement portfolio.

Of course, once your portfolio is large, it does not matter much because the cash portion will not make your AA wonky. You are not there yet.

Topic Author
BogleMelon
Posts: 1876
Joined: Mon Feb 01, 2016 11:49 am

Re: Please criticize my AA (YNAB side effects!)

Post by BogleMelon » Sun Jul 14, 2019 8:47 am

FiveK wrote:
Sat Jul 13, 2019 11:28 pm

Perhaps there is redundancy between your emergency fund and some of the other buckets?
I was thinking about that too. My EF bucket has $20k in it. Me and wife both working full time (she works for the state). The risk of we both be unemployed is a bit low IMO. Aside from EF, I have a bucket for medical needs (including deductible), another for unexpected cars repairs...etc
Do then I have too much in EF?
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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FiveK
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Re: Please criticize my AA (YNAB side effects!)

Post by FiveK » Sun Jul 14, 2019 10:41 am

BogleMelon wrote:
Sun Jul 14, 2019 8:47 am
Aside from EF, I have a bucket for medical needs (including deductible), another for unexpected cars repairs...etc
Do then I have too much in EF?
Only you can determine how much is too much, but medical and car expenses may be some of the more common uses of emergency funds. In that case, holding "both buckets" would be duplicative.

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Tamarind
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Re: Please criticize my AA (YNAB side effects!)

Post by Tamarind » Sun Jul 14, 2019 11:32 am

Your EF should not overlap with planned costs you are explicitly saving for. But I'm not sure you have too much cash, given all those short term earmarks will be spent and not available for retirement. I agree that if you are looking at your AA for retirement investing, leave out money you know will spend in the short term, though you might wish to include your EF.

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