YNAB Personal Budget Software & Finance Forums

[kitkat]

Hi all,
I'm having trouble figuring out how to record an outbound personal loan in my YNAB. The person might be paying me both in cash and in kind.

When she pays me in kind (say, $46 of groceries got for me), I want YNAB to show that she owes me less money on the loan, and I want my "groceries" category to still show me as having "spent" that $46.

I'm thinking it would involve "accounts," not just "categories," but I haven't been able to get the vision for exactly what structure would work.


No matter what, am I going to have to double-log in-kind loan payments, cash loan payments, or even both?

Is there any way to make everything work w/ just one register line per loan payment (whether in kind or in cash)?


Thanks!

[adamholte]

Sometimes I do this because we buy something for my in-law's, then they buy something for us. So, when we buy something for them (a loan if you will) I categorize the transaction as an outflow for their category. If they buy us something, I'll usually enter two transactions in the uncategorized account, one being an inflow into their category, and one being an outflow in the category of what they bought us.

Maybe this will help explain it.

When we buy something for them :
(say we pick them up some good sales at the grocery store we shop at)
Checking account
Payee: Grocery Store; Category: In-laws; Amount: $30 outflow

When they buy something for us:
(say they pick us up a hammer)
Uncategorized account
Payee: In-laws; Category; In-laws; Amount: $20 inflow
Payee: In-laws; Category; Household tools; Amount: $20 outflow

Let's say they pay us the rest in cash:
Cash Account
Payee: In-laws; Category; In-laws; Amount: $10 inflow

--------------------
Hopefully, this helps you. I realize this is how we work with short term loans that we make (and take). What you have sounds like a long term loan, and I can't quite think of how to handle that right now, but if I think of something I'll post later.

[Patzer]

I'm thinking it would involve "accounts," not just "categories," but I haven't been able to get the vision for exactly what structure would work.

The fundamental question is whether you regard the act of loaning the money as an expense that must be budgeted for. If the loan is not really an expense to you, it looks like this:

1. Create an account for the loan. It might have a title like, "Loan" or "Receivable." If you're doing this with multiple people, you might have "Receivable--John" and "Receivable--Marsha."

2. Say you loan $200 to Marsha. Create a transfer from Cash or Checking (wherever the money came from) to Receivable--Marsha. There is no budget impact. Your money has just shifted from being in your pocket or in your checking account to being in Marsha's custody. But it's still your money.

3. If Marsha gives you $50 cash as a payment on the loan, you record a transfer from Receivable--Marsha to Cash. If Marsha writes you a check and you deposit it in your checking account, that's a transfer from Receivable--Marsha to Checking.

4. If Marsha buys $46 worth of groceries for you (either she gives you the receipt or you agree on the value), you record the transactions as an outflow in the Receivables--Marsha account, with payee of Grocery Store and category of Groceries. That reduces the balance of Receivables--Marsha (i.e., you show that she owes you less) and shows the money as spent from your groceries category.

5. If you're charging Marsha interest, you would record the interest as Income (supplemental or primary, according to your tastes) in the Receivables--Marsha account. Everything else would be as described above.

This should be pretty clean as long as you don't loan out so much money that it gives you cash flow problems with your own expenses.

If you regard the act of extending a loan as an expense, it gets more complicated. As I think about it, that has some different scenarios depending on how often you loan money, whether you want to use the budget to limit how much you loan, and so on. Let us know if that's the road you want to take, and I'll try to figure it out for you. But from your initial description, I think that this is not where you want to go.

Patzer

[ginger]

I do what Patzer suggested, except I use one receivables account called "To Be Reimbursed" and use comments on the register entries to distinguish who owes me what. (After all, John and Marsha are truly destined to be together ). I describe my use of this account in this thread about tracking reimbursements:

http://www.youneedabudget.com/forum/the-rules-f1/topic2540.html#p30301

So when occasionally my doctor owes me more money than my next visit costs, I "spend" that money from the To Be Reimbursed account to reduce the amount my doctor owes me.

[kitkat]

Thanks, everybody!

Patzer, that was sort of the cleanest idea I'd had--the initial transaction takes up 2 register lines (transfer between accounts), any actual checks or cash handed over to pay off the loan each take up 2 register lines (transfer between accounts), and payment in kind only takes up 1 register line.

(I just wasn't sure if I was overlooking something better.)

Funny thing is, I look freaking rich when I see the subtotals of "Inflow" & "Outflow" on the "Overview" tab because of these double transactions. But I never looked at those to learn anything about myself, anyway, so that's no problem.

I will do this system, since it's what I came up w/ on my own and it's what a 2nd person came up w/ on his/her own. (Patzer--you came up w/ words that justify/explain the account much better than I did.) Must be right!

Thank you!

[kitkat]

Hi Patzer,
Over here you mentioned that you wrote your post above w/ Pro in mind.

I guess the one scenario I don't see in your post above (maybe I skimmed too much) is what to do when, in the context you described above w/ Marsha, I buy Marsha something, and when we talk about what I owe her and what she owes me (big and small), she doesn't want me arbitrarily adding the groceries I picked up for her to the balance of the big loan I made to her.

I suppose I could use "Receivable--Marsha" for the big loan and for the groceries I owe her. It makes sense to do that, I think. Do you agree?

My only hesitation is if she asks me what I owe her on the loan, and I glance at "Receivable--Marsha" w/o checking the inner workings of it, and she's like, "That's not the number!" and bristles at the concept of me rolling those groceries into her "big loan" in my books.

Is my best solution to just get over that worry?

And, just to double-check, I record any groceries I buy for Marsha as a (e.g.) $73 transfer from that bank account to "Receivable--Marsha," just like I did w/ the initial "big loan," right?

Thanks!
-Katie

[WairereRose]

Katie, could you make two categories for her? One for the big loan, and one for the small receivables? That would solve her needing to bristle because you could give her two numbers at once and they should both reflect what she's expecting them to.

[Patzer]

I guess the one scenario I don't see in your post above (maybe I skimmed too much) is what to do when, in the context you described above w/ Marsha, I buy Marsha something, and when we talk about what I owe her and what she owes me (big and small), she doesn't want me arbitrarily adding the groceries I picked up for her to the balance of the big loan I made to her.

As Rose notes, you could use multiple receivable accounts to address that need. If I had a situation like that, my first inclination would be to make an Excel spreadsheet to track the piece-parts instead of mucking up my YNAB budget with more receivable accounts; but either way would work.

My only hesitation is if she asks me what I owe her on the loan, and I glance at "Receivable--Marsha" w/o checking the inner workings of it, and she's like, "That's not the number!" and bristles at the concept of me rolling those groceries into her "big loan" in my books.

Is my best solution to just get over that worry?

Personally, I think the *best* solution is to disentangle the relationship to where neither of you owe the other one anything. But we're talking about your life, not mine. If it's a given that this sort of relationship and financial arrangement will be ongoing, you need to figure out the least bad way to deal with what is inherently a messy situation.

And, just to double-check, I record any groceries I buy for Marsha as a (e.g.) $73 transfer from that bank account to "Receivable--Marsha," just like I did w/ the initial "big loan," right?

That works in the context of making the software (YNAB Pro or YNAB 3, and presumably Basic as well) function correctly. The relationship issues are tougher.

Patzer

[kitkat]

Thank you, WairereRose & Pazter!

(By the way, we had an Excel spreadsheet, but I kept saying, "It's not YNAB-friendly this way!"

Thank you for your advice on both fronts. Have a great night and a happy new year.