After six months of using YNAB to guide my budget, uncover my true expenses, and assign my dollars, I am spending intentionally and seeing a little more cash in my bank account each month. This year, I’m saving monthly for expected bi-annual property taxes, a short vacation, and a home owners association special assessment. Some of this cash will sit doing nothing in my checking account for months or a year, losing value to short-term inflation; here’s what I’m doing to meet it instead.
YNAB is a budgeting method that has no opinion of where your money lives, though for most it’s usually in checking and a saving account of some kind. But, if you’re like me, coming form another method you might have an emergency fund saved elsewhere.
My Inflation Solution for Short-Term Cash
Assuming no long term expenses are due the following month I hold no more than two months of take home pay in my checking account just before payday. Once I reach, lets say $1000 above that limit I transfer the cash to my brokerage account and buy an ultra-short-term US Treasury ETF like VBIL or SGOV, where I receive a modest and safe return, If I need the cash I can sell and transfer it back to my checking account within a few days.
My Inflation Solution for Long-Term Cash
I maintain a strict emergency fund of no less than six months expenses recorded as my “Income Loss” category in YNAB and investing in VGSH with additional months invested in VTI and VXUS at a 60/40 ratio to ideally provide passive long-term growth.
Since YNAB won’t track a taxable brokerage account like checking or savings I record the balance as cash and update it every three months then update the result to my “Income Loss” category.
That’s it, ultra-short-term, and short-term T-Bills for cash I will need and cash I may need respectively with anything left over in a simple Bogleheads two-fund portfolio.