The Annual AA, Budget Dance

[easysurfer]

I already did the annual look at my asset allocation, calculate how much I "pay myself" (that is, set up to automatically depost into my checking account from my money market) each month. Ends up, my allocations didn't drift far enough to rebalance, so the process is a bit easier than usual .

 

[bbbamI]

To show you where my head is (while sipping a Margarita), I thought this was a thread about members of Alcoholic Anonymous pinching pennies for a get-together.



Rebalanced once in May. Never had to rebalance again this year...the mkt moved too fast for me...

Now....back to my frosty bev....

 

[RockyMtn]

Easysurfer....how much does it have to drift before you rebalance? Mine too didn't go a whole lot...couple points either way so am reluctant to trigger any taxable events over such a small change.

 

[Koolau]

To show you where my head is (while sipping a Margarita), I thought this was a thread about members of Alcoholic Anonymous pinching pennies for a get-together.



Rebalanced once in May. Never had to rebalance again this year...the mkt moved too fast for me...

Now....back to my frosty bev....

Heck, no. We aren't alcoholics. We don't go to meetings!

 

[W2R]

Like others, I have started on my "Annual AA, Budget Dance". Love the way you phrased that! That's just what it is. Anyway, here are some of the things I am doing:

(1) I "closed the books" on my 2011 spending, and recorded all my 2011 dividends. I added up my spending and earnings. (If my bank clears a charge between now and midnight, that could mess up everything! Wish me luck on that one.)

(2) I plan to move the entire year's withdrawal from Vanguard MM to my bank tomorrow (minus the left over money from 2011 that is already in my bank). I figured out what I will have each month and set up some ultra-simple Excel routines to tell me how I am doing compared with where I should be, each month.

(3) Then I will rebalance, and I have already figured out how much to buy and sell of each. After my one withdrawal for the year, my AA will be 43:57 instead of 45:55; not shockingly far off, but I want to start the year nicely balanced anyway so I will. (I love being my own boss. )

(4) I am also making some major changes to my system for recording expenditures, to be more detailed and specific, and otherwise tweaked/synched as desired.

This is my favorite part of New Year's Eve/Day! Getting everything totalled up and squared away. This is the one day of the year when I give into any slight OCD tendencies and go nuts, number crunching to my heart's content.

 

[foxfirev5]

Holding pretty close to 45/40/15 so no rebalance here. Even back in the Aug -Sept period I didnt quite hit the 5% bands I'd set.

 

[unclemick]

I got old and lazy - since 2006 pretty close to full auto. Lead sled dog is Target Retirement. I have auto deduct to Prime MM(yearly) and auto deduct to bank monthly. Pension and SS are direct deposit.

heh heh heh - mad money is a few good stocks which the last of I expect to sell this year and next and move to broad based index ETF - VT, Vanguard Total World Stock. Then I need another hobby when football season is over.

P.S. In ancient times I would be across the Parrish line stocking up on fireworks to shoot off the run(pier for northern folks) at midnight.

 

[easysurfer]

Easysurfer....how much does it have to drift before you rebalance? Mine too didn't go a whole lot...couple points either way so am reluctant to trigger any taxable events over such a small change.

I've decided to only rebalance at the beginning of the year, and only if the percentage drifts are 5% or more.

The biggest drift for me, at the end of 2011 is US stocks, which about 1.75% more than my target.

So now I fight the urge to rebalance and make more work for myself than needed.

If I do rebalance, I try to do that within IRAs first, to avoid taxable events.

 

[TromboneAl]

We're only off by about 1.5%, and I haven't decided if I should move any money.

 

[Dawg52]

I got old and lazy - since 2006 pretty close to full auto. Lead sled dog is Target Retirement. I have auto deduct to Prime MM(yearly) and auto deduct to bank monthly. Pension and SS are direct deposit.

heh heh heh - mad money is a few good stocks which the last of I expect to sell this year and next and move to broad based index ETF - VT, Vanguard Total World Stock. Then I need another hobby when football season is over.

P.S. In ancient times I would be across the Parrish line stocking up on fireworks to shoot off the run(pier for northern folks) at midnight.

Looks like a sound plan. I'm sure I will eventually move in this direction when I get old. Heh heh heh. For now, continue on with a dozen stocks or so. Might take a few profits and redistribute to a couple of stocks that have not moved much. Overall AA is OK.

 

[W2R]

P.S. In ancient times I would be across the Parrish line stocking up on fireworks to shoot off the run(pier for northern folks) at midnight.

Unclemick, still plenty of people doing that. Even in my neighborhood right at this moment I am listening to the constant pop, pop, BOOM!! pa-BOOM! of fireworks and bottle rockets and such. Happy New Year.

 

[Midpack]

No rebalance required for me. I look quarterly and use the 25/5 bands, only had to make one adjustment this year. It will be harder rebalancing now that I'm not working, I will have to actually sell assets vs just putting all new $ contributions into underweighted asset classes.

I'll have to save our 2011 (Excel) budget and wipe out all the data to start recording 2012 - easy peasy, lemon squeezy...

 

[Beryl]

Thanks for starting this thread.

So far, I haven't been paying myself from retirement funds or CDs but I have been siphoning a little from my cash accounts since I'm still learning to live totally off my pension. (Thank God for that.)

Although I have an excel budget workbook that I update with assets monthly, it doesn't clearly reflect ratios. Does anyone have a template that I can use or incorporate that will do that?

 

[Closet_Gamer]

Like others, I have started on my "Annual AA, Budget Dance". Love the way you phrased that! That's just what it is. Anyway, here are some of the things I am doing:

(1) I "closed the books" on my 2011 spending, and recorded all my 2011 dividends. I added up my spending and earnings. (If my bank clears a charge between now and midnight, that could mess up everything! Wish me luck on that one.)

(2) I plan to move the entire year's withdrawal from Vanguard MM to my bank tomorrow (minus the left over money from 2011 that is already in my bank). I figured out what I will have each month and set up some ultra-simple Excel routines to tell me how I am doing compared with where I should be, each month.

(3) Then I will rebalance, and I have already figured out how much to buy and sell of each. After my one withdrawal for the year, my AA will be 43:57 instead of 45:55; not shockingly far off, but I want to start the year nicely balanced anyway so I will. (I love being my own boss. )

(4) I am also making some major changes to my system for recording expenditures, to be more detailed and specific, and otherwise tweaked/synched as desired.

This is my favorite part of New Year's Eve/Day! Getting everything totalled up and squared away. This is the one day of the year when I give into any slight OCD tendencies and go nuts, number crunching to my heart's content.

LOL. You just described what I did all day yesterday....right down the slightly OCD tinkering with excel!

Our assets are still pretty well balanced...so no changes needed really.
Expense budget is stable y-o-y.

One big change in the 2012 new money investment plan: We're still working on the FI part and have settled on one big target...the mortgage. 100% of our 2012 post-tax investable money will go into mortgage principle. We hit it hard in 2011 though last year we also squirreled money into the college funds and an IRA. Not in 2012...all guns firing on the mortgage until its done...with a little luck we'll sink it completely in 2013.

Happy New Year!

 

[Moemg]

I figured out my 2012 budget yesterday. I ended 2011 with a pretty nice excess so that is rolled over into my "use someday " fund . Every month I will withdraw some from my budget and just subtract the difference . I have been retired for four years and this simple method has worked for me . My asset allocation is only 1% off so I am not re balancing .

 

[easysurfer]

I spent about $1500 over budget for 2011. This was mostly due to an unexpected car repair (transmission rebuild and dental work. (Plus I spent more than expected on vet bills to take in two kittens). Overall, I'm satisfied with my budget keeping me mostly on track.

 

[scrabbler1]

I have to keep track of two AAs, one for my current, taxable account investments, and another for my IRA. The former covers my current expenses while the latter awaits me in about 11 years as one of my "reinforcements."

My current, taxable investment account portfolio has usually been about 65/35 in favor of bonds but has drifted closer to 70/30 with the recent runup in the bond fund NAVs. I don't mind this drift as I age. The IRA's AA has been about 55/45 in favor of stocks and it has remained very close to that over the last few years. The bond fund component of that has risen lately, too, so I do not plan to rebalance from stocks into bonds yet as I age. I did some minor rebalancing throughout 2011 but plan to stay put for now.

As for my budget, my expenses dropped a little because I switched to a different HI policy midyear. For 2012 they will drop a little more if the HI savings over a full year outweighs everything else going up. Irregular cap gains distributions drive up my income taxes but only because they drive up my income.

 

[Moemg]

Since I was working on my budget I took a sobering look back on the years since retirement . I retired in Jan. 2008 and a year later my portfolio had shed a third of its value . That was enough to make me seriously reconsider returning to work but I did not .Holding tight and making some small budget cuts allowed my portfolio to bounce back but I still get nauseated looking at those years .

 

[audreyh1]

I always have to wait until the morning of the 2nd trading day to figure out the final portfolio numbers because the end of year distributions can't be downloaded until after midnight of the 1st trading day.

As for budget, well, I just overall try to keep it within a certain number, and it all pretty much works out. I have typically monthly expenses for most things that don't vary much, so I always know I'm not exceeding my number. I also have plenty set aside for unexpected large expenses or an occasional big splurge. I more track my run rate monthly (expected annual expense projected from year-to-date spending) and that let's me know how I'm "doing". Haven't exceeded the max budget yet (knock on wood).

Audrey

 

[TromboneAl]

I decided to do the rebalancing even though the amounts were low.

I've found it very useful to make a little note in my rebalancing log as to exactly what I did. Here is this year's note (with amounts removed):

2012

We are currently at 51.6% stock, and our target will still be 53%. The total Vanguard-monitored assets are $xxx, so that means I should move $xxx from bonds to stock. I also need to sell about $30K S&P 500 stock in the taxable account for 2012 living expenses, so that means I should move $30K to the money market in the taxable, and $yyy ($30K + $xxx) from total bonds to total stock in my IRA.

That is what I did today, 2012/01/02.​

 

[Lsbcal]

This is going to be the first year we pull money from Roth's to keep the tax bite lower. Going forward we have 64% in stocks (currently no international). Life in the fast lane? That lane was pretty poor last year but hope springs eternal.

 

[Koolau]

Honestly, I haven't intentionally touched my AA this year. There have been some ups and downs and, completely by chance, the AA hasn't changed enough to worry about (other than that the total isn't as high as I would have liked, heh, heh.)

In '10, I intentionally raised my stock portion as my AA is still well below 50%. But last year ('11) I couldn't seem to get my mind around it. Too many other things crowding out the important with the urgent. You know it's a bad year when Koolau "forgets" to make a Roth conversion - actually, I "chose" to put that decision off until this year. Yeah, that's it.

I'm starting to feel a bit more in control this year, so I'm going to take another look at the whole thing and see if there are some tweeks that need to be made.

 

[Chuckanut]

I am not yet retired but am preparing to do so this year. These preparations included:

1. Moving assets about to lower current and future taxes. I sold total market index fund in my tax advantaged accounts and bought bond funds. In my personal accounts, I sold an equal amount in bond funds and bought the total market index.

2. My AA is still not where I want it, so I started a dollar cost average that will get it there by the end of this year. My AA is about 42/68 and I am looking to be at 60/40 by the end of the year.
​

 

[TromboneAl]

It's kind of nice that last year's rebalancing moved a bunch of money to bonds, which did better than stocks.

The 3-year returns sure look misleadingly good these days, since we are about three years from the recent low point.

 

[Lsbcal]

It's kind of nice that last year's rebalancing moved a bunch of money to bonds, which did better than stocks.

The 3-year returns sure look misleadingly good these days, since we are about three years from the recent low point.

Yet this recovery is not all that unusual given the market drop that came before. Here is a chart comparing our recovery to previous market recoveries. The blue line is the current recovery path which is now about 29 months old:

I'm taking bets on which path it follows going forward. Am rooting for the 1980's (red) path.