I've been playing around some more with YNAB, partly to help me write my review, and partly still considering if I would want to switch to it if I can get over the transaction import hurdle.

The budget paradigm takes the classic envelope system and turns it a bit sideways. In a classic system (I'm mainly comparing with Mvelopes here), the flow is as follows:
1. Create your budget based on your monthly income.
2. Put money in the envelopes at the start of the month
3. As money is spent, the envelope balance goes down.
4. If an envelope gets to 0, either don't spend any more for that catagory that month or move some money from one envelope to another.
5. At the end of the month, decide whether to let your envelope keep its balance for the next month, or to "sweep" the extra funds into another envelope.

In YNAB, the flow is very similar, but there are a few twists:
1 & 2. For the budget, you start with an "Available" amount of money shown at the top of the screen. As you assign budget amounts to catagories, the Available number goes down. Instead of predicting how much you will receive in income, the "Available" amount comes from the previous month's paychecks. For many people it is a big challenge to save up enough of a buffer to do this month-ahead funding of their budget.
3. As money is spent, the balance for the catagory goes down.
4. If the balance for a catagory gets to 0, either don't spend any more in that catagory that month, or change the budget for that month to match your spending. This may make your Available balance go red (negative). You can choose to fix this by changing the budget in other catagories (in effect moving money between catagories) or else the tool will subtract the negative amount from the next month's Available balance, leaving you with less money to allocate in the next month.
5. At the end of the month, positive catagory balances roll over to the next month, while negative catagory balances get subtracted from the next month's Available. There is no provision to sweep extra funds, instead you just reduce the budget for that catagory and assign the money somewhere else.
6. When you go to budget the next month, a right-click pop-up gives you the choice of budgeting the same as last month, the amount spent last month, or the average spent in recent months.

So the big difference I see is that in Mvelopes, you set your budget once and then manipulate the envelope balances, while in YNAB you are mainly manipulating the budget. I can't decide if I like this shift in thinking or not. It seems to me that with YNAB your budget will eventually converge with what you are actually spending rather than with what your best intentions to spend are. In either case the discipline comes in deciding what to do when a balance reaches 0 -- do you stop spending or move the money from elsewhere?

One of the big downsides to YNAB is that they don't have an account view, so you (intentionally) can't use it to track your current account balance. This can make it difficult to determine if you've missed a transaction. The author of the software is working on how an account view would fit with his budget philosophy so I'd expect to see something added within the next year.

YNAB is definitely the way to go if you work on commission and your income varies a great deal from month to month. I'd definitely recommend it over Quicken for budgeting purposes. It's good software for the price ($40), but at the momemnt I'm not completely convinced to switch away from Mvelopes ($120/yr).

YNAB (see

www.youneedabudget.com) finally released a new version of software that supports downloading transactions from banks and credit cards. I've been eagerly awaiting for this release for a couple of months now because the screenshots of the program look so promising.

There doesn't appear to be any way to get a trial version -- instead you can purchase and there is a 60-day money back guarentee that you can get a refund if you're not happy with it. So I went ahead and spent $40 to purchase the PRO version.

I'm planning to do a full review later -- but the inital verdict is that it looks like I would recommend the software but won't be able to use it for myself.

The problem is that our primary credit card is through BankOfAmerica. For some strange reason, while the BofA site provides the ability to save transactions to a QFX file, you can only do this for months that have "closed". So although today is March 19, the latest transaction I can download is the full statement that closed Feb 22. Mvelopes has worked out some way to connect to BofA directly and download transactions on a daily basis. There's usually a 2-3 day delay between when I make a purchase and when it clears "pending" status and can be downloaded, but I can live with that. I can't live with a month-long delay. (And I refuse to enter all my transactions manually, so don't go there.)

I may eventually close my BofA card over this. The current one gets Hawaiian Air freq flier points, and I've been considering switching to one that can be used on any airline.

I'm so disappointed. While I still like the Mvelopes paradigm better, I could live with YNAB and really like the price.

Why do I use a full-service broker? It's a good question. My dad was a broker before he was promoted to the home office, so when I needed to do my first 401k rollover it just made sense to ask him to recommend someone. So at least I know I'm dealing with a firm and an individual I can trust. The first time I sold a house, I was originally going to sell it myself, but then balked when I realized how much paperwork was involved in CA. It was a good thing, too, because the realtor correctly priced and sold it for much more than I would have, more than making up for her commission. I think a good broker can help in the same way -- preventing you from making some costly mistakes. DH would probably prefer to see me move the account to Scottrade or someplace similar and manage it ourselves. But I find investing to be really dull, and I know I wouldn't spend enough time on it to do a good job of managing it myself. (I don't agree with DH's investing philosophy, so I'm not comfortable turning the money over to him to manage.) I'm currently trying to educate myself so that I'm an educated client rather than just blindly following what the broker says.

We met with the broker for about 2 hours. His take on the asset allocation was that 50% foreign was just fine. In fact, he recommended that the most aggressive portion of the portfolio should be in funds that have a significant foreign component.

Based on risk tolerance, I'm considered to have a focus on "growth". (The other styles are "income", "aggressive income", "balanced growth & income", and "aggressive growth").

Here's how my retirement portfolio compares to the brokerage recommendation:
cash 4% (rec 0-10%)
income 0% (rec 10-20%)
growth & income 64% (rec 40-50%)
growth 28% (rec 20-30%)
aggressive growth 4% (rec 5-15%)

Although in the past he has urged me to put 10% in a bond fund (ie income), I've always resisted, something I'm reconsidering as I read The Intelligent Asset Allocator. So his recommendation was for me to reduce the growth & income portion by about 20% and move part of it into aggressive growth and part into growth. Since it's in an IRA and the fund family allows changes between the funds without any charge, this is very easy and economic to do. Two of the growth & income funds have so much duplication that he recommended them as good candidates for the move. My "aggressive growth" fund is showing a big profit right now, and when I asked about selling it, he said he could support doing that to take the profit and then dollar cost averaging back in, because it is still a good fund to own.

Here's how my taxable portfolio compares:
cash 4% (rec 0-10%)
income 0% (rec 10-20%)
growth & income 52% (rec 40-50%)
growth 33% (rec 20-30%)
aggressive growth 13% (rec 5-15%)

In the taxable account, we'd like to be closer to 40% growth & income, so he recommended which fund to sell. What he said to do to minimize taxes was to sell an amount equal to the original investment, but to leave the gain. So if you put in $25k and the fund is now worth $35k, you would sell $25k and leave the $10k gain in the fund. No taxes due this year because your sale is equal to your basis. Then if you later wish to sell the remaining $10k, do it when you have a loss that can offset it.

For my ROTH, we're going to sell the one stock that I still own. It's worth about $4k, and is showing a $1k profit. I just don't pay enough attention to own individual stocks.

I plugged in all our mutual fund and stock info into Morningstar's x-ray program to get an idea of what kind of asset allocation we currently have. In all I had to make 26 entries -- no wonder I'm having trouble getting this straight in my head! There are actually only 10 unique funds and 4 unique stocks because many funds are in both the taxable and the retirement accounts, but it's still a lot to get my head around.

Cash 12%
US stocks 41%
Foreign stocks 42%
Bonds 5%

The large amount in foreign stocks seems a little worrisome at first glance.

For "stock style diversification":
type value core growth
large..32....27....24.....(83%)
med.....4.....4.....5.....(13%)
small...1.....1.....2.....( 4%)

In other words, mostly large cap, some medium cap, a little bit of small cap, equally divided between strategy -- seems reasonable, although I don't really know enough to judge.

For "stock sector" the breakdown was
information 23%
service 39%
manufacturing 37%

Here's where I really have no idea whatsoever of which sectors are good to be in.

The "stock type" area wasn't useful as 49% was unclassified.

Unfortunately the book I started reading on asset allocation was due back at the library. They wouldn't just check it back out to me because I'd already renewed it once, and insisted on sending it back to its "home" library before routing it back to me again even though nobody else had placed a hold on it. So I'm still waiting to get it back.

We have a meeting with my full service broker later today to do an annual review. It will be interesting to see what he has to say.

Questions I want to ask:
* Why am I in each fund?
* Would you recommend moving any money and why?
* If there is a recession coming, should we move to a strategy that focuses on dividends rather than growth, and how would we accomplish this?
* Where should I put the $10k in cash in the IRA? Should I move it all at once or dollar-cost average it?
* I want to sell $4,000 of something taxable and put it in the ROTH -- which would you recommend?
* Is my son's 529 plan (a gift from my father) enough to cover a public university? How much more do we need to add as a lump sum to cover a private university?

Not much progress on the investment front. We didn't talk about our portfolio as we had planned -- I'll have to make sure we do it next weekend. DH is so worn out from his last project at work, the poor guy just needs some downtime. Getting his resume updated to find a better situation was a higher priority. We did do the end-of-month budget review at least.

The original lawyer who did my will and trust never called back, so I called him today. $300 for an hour of his time just to change the executor and guardian. I really don't want to give any more business to this guy who can't even be bothered to return my call!

In my last post I mentioned that the 400 point drop in the market yesterday didn't bother me and I wasn't planning any trades because of it. My husband, on the other hand, came home and said that the drop and Greenspan's prediction of a recession indicated we should watch the volitility of the market and be ready to move some or all of our holdings into cash, and to sit on the sidelines for some time (how long was unclear to me). We got into a minor argument about investment philosophy -- the same one we had 5 years ago that shut down our communication on investing. It was never resolved and we've only contributed to our separate retirement accounts since then. This is a mistake I don't want to make a second time, so I asked him to promise me we'd talk more this weekend.

My investing philosophy to date has been buy and hold and hold and hold and hold...to a fault. I had some AT&T stock (from an employee stock purchase plan) that went way way up, split into many companies, and collectively went way way down before I cashed out at a loss. I should've paid more attention to it and cashed out years sooner. I also tend to let money just sit in my funds, not rebalancing them or making moves based on performance. To be honest I don't find investing all that interesting. I've realized that I do need to understand my investments better and be more proactive about them.

DH's investing philosophy...I guess I don't really understand it. We don't even agree on what the definitions of "market timing" and "long-term" mean. When he says we should hold off on investing because the market is high or move into cash because a recession is coming, that sounds like market-timing to me. He says it is not because he is not proposing moving in and out and in and out of the market on a monthly basis. I think "long-term" means a minimum of ten years. I'm not sure what he thinks is "long-term", but he has said he doesn't believe in holding things for ten years. DH does not believe in "buy-and-hold" -- he blames that philosophy for influencing him to hold on to a stock that he knew was on the way down, and ultimately resulting in a $20k loss. It's hard for me to judge DH's investing philosophy -- he hasn't been actively managing much money since we married. On the other hand, he pursuaded me to do some rebalancing in my IRA, and the funds he picked have been the best performers of the lot.

I don't feel like I understand what we have and why we have it. I want to understand it before making any moves. DH listens to the market news and wants to act quickly. And so every conversation we've had about investing turns into a minor argument.

I just started reading a book called The Intelligent Asset Allocator. I've seen it recommended by some people who seem to be the kind of prudent investor I want to become. DH says he doesn't know anything about asset allocation theory. I am hoping it helps us to find some common ground.