The best way to record intermediary transactions
Please pardon this lengthy post.
Months ago, my father asked my permission to "use" my bank account as an intermediary account, since he was on financial problems and couldn't use his own account (for simplicity, let's say that banks closed his accounts and banned him). I agreed on that, but then I had problems to record his transactions to my YNAB, mainly because there are more transactions happening than I used to have, and they are not my transactions.
Let's say my dad's brother lends him $100 to my account (hence my bank account increases by $100). Then he uses it to partially pay his debt by, say $50, buy telco credits by $5, buy groceries by $20, and so on. The transactions may occur by either of these: cash (i.e. I have to withdraw a specific amount from my bank account and give it to him), bank transfers (e-banking), or via my credit card. Later on, when he has enough money, he will pay his brother back by $100 (e-banking).
My problem is, it's not actually my money, so I can't make up my mind on how these transactions should be recorded on my YNAB. They always appear as if I am the one who do the transactions.
Currently, I'm doing this:
- I have a special category "Dad" to record his transactions.
- Every time someone sends him money to my account, I record it as incomes to his category.
- Every time he needs the money, I record it as expenses to his category, using memo as "subcategories" (e.g. medicine, telco credits, transportation, etc.)
So, for example (all recorded to Dad category):
- My dad's brother lends him $100: recorded as $100 inflow to my bank account.
- Paying his debt by cash: $50 transfer from my bank to wallet, and $50 outflow from my wallet.
- Buy telco credits: $5 outflow from my bank
- Uber: $5 outflow from my credit card
- He pays his loan: $100 inflow to my wallet, $100 transfer from my wallet to my bank, and $100 outflow from my bank
As you can see, this really complicates my YNAB. For one transaction alone, I might record up to three transactions. This affect my ability to track down my own transactions (and I stopped using YNAB for about two months when there was a lot transactions from my dad that I really lost track). Also, I always feel weird when I see Dad category is either green or red; it's not my budget after all...
To complicate things further, sometimes my dad asks me to lend my money. For example, he needs an Uber ride for, say, $3. Of course, later on he will pay his loan. On this case, I must keep track of my dad's loan so we know how much he must pay. Currently, his "balance" is 0; that's why I'm asking for suggestions now :)
So, any idea to simplify intermediary transactions in my YNAB record-keeping? I discovered Tracking account type, but from what I read from the help, it still impacts on my net worth, and I still can't think of any way to use it for my case. I don't think intermediary transactions should have impact to my net worth (CMIIW though). Or, should I ignore my dad's transaction completely? I don't think I can, considering the last case.
If you're still reading to this point and willing to answer or share your similar experience (if any), I owe you so much ;)
Thanks in advance,
Hi, Ferdi (exsharaen)
My sympathies on having a close relative in crisis. I've got one of those, and it ain't fun.
I can't help but foresee all sorts of complications and frustration coming from sharing an account (even informally, or maybe especially because it is informally) with someone in chronic financial crisis. Can you open a second account where you would keep your funds and run your transactions entirely separate from your dad's? That would be so much cleaner and easier to understand. Then you can make the account you run your dad's messy transactions through an entirely separate and off-budget tracking account. In other words, no matter how messy or busy the account gets, it doesn't affect your ability to pay your bills.
I might keep a mini-emergency fund in the account I run my relative's transactions through, say a couple hundred dollars. The mini-emergency fund would be the most I was willing to lend to my relative and could spare from my funds. Additional funds you loan would then be transfers from your on-budget account to your off-budget account. Repayments would be transfers from off-budget to on-budget.
Using two accounts also makes it easier to cut the chord eventually....hopefully....soon.
edited to add: by using a separate account for his stuff, you can exclude that account from your networth calculation, so it would not affect your numbers.
I second what Ferdi said -- both understanding how you're in a tough position, and feeling that a separate account would be ideal.
If you kept that "mini emergency fund" in the new account, the money you put in would cover any minimum balance needed and anything you loan to your dad. It sounds like you do withdraw cash from your account, so you'd need to set up the ability to do that -- maybe adding a cash account in the new budget file and keeping any cash you withdraw in a special place.
As far as your current budget, if you're always settling up with your dad, then your net worth shouldn't be affected too much. If you want to keep doing all in one account, you could set up a Tracking Account just to represent what he owes you. Here's a quick video I made on how to do that.
However you decide to move forward, simplicity is best. This complicated situation has kept you from using your budget, but we can definitely get it working for you, even if you need to work with us more one-on-one. Email us any time at [email protected] and we can view your budget, let you know what to do about specific situations, and help you get a new budget set up if you'd like. It's definitely doable!
Yes, those answers sound good to me!
One more thing to add: when you loan him money or pay for something for him, as you said, that will be a transfer from your account to the Dad Tracking Account. That transfer payee will use up the payee field, so I usually put the true payee in the memo field, for my reference.
Let us know how that works for you!