The best way to record intermediary transactions

Hello everyone,

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,

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  • 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.

    Like 2
  • 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!

    Like 1
    • Thank you Jen  and HappyDance for your suggestions! Sorry for my late reply, I was busy searching venue for my wedding (it's settled down).

      From what I can conclude, it's best for me to create a second YNAB account. For others to be able to learn from my case, allow me to continue the conversation here.

      I've watched your video and I can understand it, but let me test my understanding of applying it to my case.

      Instead of creating a category in my bank account, I should create a new tracking account (say, Dad). The initial amount in this account represents how much he owes me. When he pays my loan, I record it as a transfer from Dad to my account and I mark it as inflow (to be budgeted). Am I correct?

      What's not in the video is the other case: when I lend him money after the tracking account is set up. How should I record this? Does it work like this: I record as transfer from my account to his, as an outflow? If yes, in which category should I record it? For example, this happened two days ago. With 0 "available" in his category, he asked me to cover a credit card payment for a small amount we miscalculated (say, $10). I record it like this:

      Transfer to Dad account, category Dad, outcome $10

      This still leaves a -$10 in Dad category, so YNAB thinks I overspend in that category. So, the only way to cover this overspend is either by allocating money now or wait until he pays it, isn't it?

      As for intermediary transactions, I roughly do the same thing, right? Let's go back to my original example. Say his brother lend him $100 through me. With his tracking account now set up, are these correct transactions?

      • To record the loan: in my bank account, category Inflow (to be budgeted), inflow $100
      • Immediately I move it to his tracking account: category transfer to Dad account, outflow $100

      This way, I will have $0 in my YNAB bank account (while the money is actually still in my bank account), so no changes to my net worth, and he will have $100 more to spend (and pay later). When he pays the debt, it's the other way around. If he needs to know his detailed usage, I can record it in Memo section. Contrary to the video, I don't think I can't close the tracking account once it reaches 0, since in the future there's still another possibility that I have to lend my dad a hand (and some money).

      I see that there's no way to simplify things, so I guess it's purely on my motivation then to record these. The wish farm has got me back on track though, and hopefully it will always get me motivated on YNAB.

      Best regards,

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      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 2 yrs ago
      • Reported - view

      Ferdi (exsharaen) 

      Same situation, different relative.

      Yes.  When paying your dad, record it as a transfer to the tracking account, both for the flow-thru funds from his brother or loans from you.  I use a Crisis category (a subcategory under my emergency fund master category) for all things related to my relative.  I hope to be able to be done with it one day and just hide it.

      The Crisis category allows me to budget funds I'm giving her as loans or gifts. If I receive funds from other family members, it gives me a category to flow-thru the funds. When I receive those funds, I don't categorize them to income to be budgeted. I categorize them as inflow categorized directly to the crisis category. When I transfer funds to my relative, either to her account or in cash, I record the outflow as a transfer (from my wallet or chequing) to the off-budget tracking account, categorize to the crisis category.

      There is no guarantee she will pay me back on time or ever, so I deal with loans by proactively budgeting those funds into that category before loaning or transferring. I do not allow any overspends to live in my budget. If/when she pays me back, I inflow back to the crisis category, and then (only then) can I put those dollars back to categories I want to spend from.

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      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 2 yrs ago
      • Reported - view

      Ferdi (exsharaen) 

      Also, for flow-through funds that you hold on to until he needs them. You can let them sit in the category you use for these loans.  I currently have $200 sitting in my crisis category, a gift from a family member, that I am holding on to until they are needed. I won't transfer those funds to my relative's account or record it as a transfer to the off-budget tracking account until those funds leave my account.  Until that happens, the $200 just sits waiting.

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  • 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!

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