How to organize retirement savings goals?

  • 1
  • Question
  • Updated 6 months ago
  • (Edited)
First, I'd like to say I've been using GB for a while and am fairly experienced with it, so this is not another noobie asking "how do goals work?" I'm trying to do something I cannot find any answers for in the documentation.

Basically, I want to create a retirements saving goal each year. Here's how I've been doing this so far:

I create an Annual Goal envelope each year. For example, last year I had "2018 Savings" with a goal of $20,000.

As the months went by, I allocated money to it from "Unallocated" as expenses allowed, and by end of year I hit my goal. Great. Except the money is all still sitting in my savings account earning < 2% interest.

Here comes the tricky part: I moved that money out of my savings account into a tax-protected brokerage account and buy some ETFs, but my brokerage account is not tracked in GoodBudget. Next time I imported my bank transactions, I had to assign that $20,000 debit to "somewhere".

What I've done is created a fake bank account called "[Virtual] Investments". It's not a real account, it's just a place for me to "put" money that has left my GB-tracked accounts.

This system is not ideal. In fact, I hate it because it has three major drawbacks:

1. When I look at my "2018 Savings" envelope, it's always full, and there is no way for me to see how much of it has actually been converted to investments, since account transfers (from "Savings" to "[Virtual] Investments") don't show up in an envelope.

2. Each year's envelope lives forever. I'd like to delete the "2018 Savings" envelope now, but that will just result in all of the fund in it being dropped back into "Unallocated" which is inaccurate.

3. My total money across all envelopes is massively overstated, as it shows all previous years' retirement savings.

Here is an alternative approach I have been considering:
  • Get rid of the "[Virtual] Investments" pseudo-account
  • Create an Annual Goal savings envelope for the year
  • Allocate funds as over time
  • Whenever some funds are converted to investments, import the savings account debit as a payment to "Investments" or something (rather than an account transfer) to make the money "disappear" from GB and the envelope. Think of it as: "I've gone to the EFT store and bought some ETFs", same as "I've gone to the grocery store and bought some bread."
This is nicer, because at the end of the year, once all funds are invested, the "2018 Savings" envelope should be at zero, and I can delete it.

However, this has that downside that I cannot track my progress towards my goal! The envelope will never reach $20,000 because it keeps getting filled a bit, then the money is "spent" on investments. I can generate a report for the envelope to get the total spend which is nice, but I can't easily track my progress from the main GB page.

Does anyone have any alternative strategies for annual retirement savings?

I think my ideal solution would be that GB introduces a new type of envelope - an Annual Goal envelope with a SPENDING goal, rather than a SAVING goal. That would solve my problem perfectly, as the envelope would be at zero at end-of-year, but I could see the green bar "fill up" over the year as I actually "spend" the cash to buy investments.
Photo of stoanhart

stoanhart

  • 4 Posts
  • 0 Reply Likes

Posted 7 months ago

  • 1
Photo of Alex Park

Alex Park, Official Rep

  • 367 Posts
  • 71 Reply Likes
Hi stoanhart,

Thanks for your post. There are a few different ways you can track investment-type accounts in Goodbudget, depending largely on what details are most important to you and what kinds of numbers you want to see. You've covered a number of those solutions, such as simply "Expensing" the money out of your household and not tracking the investment balances. I'm going to propose two more possible options for you below -- note that each of these options have their own pros and cons, and I'll explain those.

The first option is a slight extension of what it sounds like you were doing before. In this option, you would track your ongoing investment balance on "both sides" of Goodbudget, using one Envelope and one Account specifically for this purpose. Then, when you buy ETFs or otherwise add money to your investment balance, you would make two Transfers, one Envelope and one Account, of the money from wherever it was held before to the investment Envelope and Account. This would allow you to consistently track the investment balance, as well as growth over time, and discard your yearly savings Envelopes. The drawback here is the need to make sure your Envelope and Account balance are matched up, and the need to make two Transfers each time money is moved.

Another option would be to use a Credit Card or Debt Account...but backwards. Essentially you would "Expense" your investments from your household out of your Savings Envelope and relevant Account, but the growing balance of your investments would be tracked by the rising balance of your "Credit Card" or "Debt" Account. This is the simplest method, requiring only one transaction, but if you enjoy the at-a-glance numbers or would be thrown off by an Account-that-isn't-a-real-Account, this option could be confusing.

Generally speaking, Goodbudget is best optimized for tracking your "day-to-day" spending and budget versus things on a longer term like retirement savings, but I've also added your request to better support those types of balances and accounts to our tracker for future development consideration.

Hope that helps!
Photo of stoanhart

stoanhart

  • 4 Posts
  • 0 Reply Likes
Thanks for the detailed reply.

Just want to make sure I understood both of the options correctly.

In Option 1, I would have:
  • Account: Checking (real account)
  • Account: Investments (virtual account)
  • Envelope: 2019 Savings Goal
  • Envelope: Investments

When I convert to some paycheck money in my checking account into ETFs in my brokerage account, I would:
  1. Record the debit in my "Checking" account as an account transfer from "Checking" to "Investments"
  2. Do an envelope transfer from "2019 Savings Goal" to "Investments"
This would have the benefit that "2019 Savings Goal" is empty at end of year and can be deleted. It still has the downsides that:
  • It's hard to track actual progress to my goal without generating reports: putting no money into "2019 Savings Goal" would look the same at EOY as successfully reaching the goal and converting it all to ETFs.
  • My overall funds across all envelopes is still overstated, since the "Investments" envelope becomes a dumping ground for all previous years' savings.
In Option 2, I would have:
  • Account: Checking (real account)
  • Debt account: [Virtual] Investments
  • Envelope: 2019 Savings Goal (linked to the debt account)
When I convert to some paycheck money in my checking account into ETFs in my brokerage account, I would:
  1. Manually record a "Debt Transaction" as an all-principal payment to "[Virtual] Investments"
  2. When I import my bank transactions, I match up the debit in "Checking" with the debt payment.
It still has the following downsides:
  • Poor tracking of annual goal for same reason as option 1
  • It seems that I can only link 1 envelope to a Debt account. What if I have multiple long-term savings goals like "Retirement Savings" and "College Savings for Kids". I would have to set up separate debt accounts.
Overall though, I like this option a lot. It is similar to my second proposed method, but more transparent as I'm not just "disappearing" my money to some special Payee; I get to track it in the debt account. Also, the "at-a-glance" summary remains correct! My net amount across all accounts and debts has the right amount and sign.

My suggestion for your dev planner/feature tracker would then be:
  • Feature: add "goals" to a debt envelope. As in, "this year I plan to pay down $X on this debt" and show progress towards that goal separately from the current balance of the envelope.
  • Feature: Allow multiple envelopes to be linked to a debt account.

Photo of Alex Park

Alex Park, Official Rep

  • 367 Posts
  • 71 Reply Likes
Hi stoanhart,

What you've written above all looks correct to me and I think you've understood precisely what I was suggesting. I also agree that the second option is the neatest -- that's actually the one I go with in my personal Goodbudget household as well. As you noted, it's not perfect, but in the current structure I think it does well.

I've noted the suggestions you gave in our tracker for future development consideration. Let me know if you have any further thoughts or questions!
Photo of Telt1910

Telt1910

  • 47 Posts
  • 24 Reply Likes
stoanhart:  One suggestion. Instead of having a separate envelope for each year's savings, why not have a 'Current Year' savings envelope that you clear out by year's end, and then rename it to the new current year?  This way you don't have all these ghosts of past years, so to speak.  
Photo of stoanhart

stoanhart

  • 4 Posts
  • 0 Reply Likes
That could work, but how do you "clear it out"? Where do I transfer the money in the envelope? Record it as a spending like in my second proposed method?