How to budget for my bank fees?
I've got a couple of bank debts and I'm wondering how to budget for things like transaction fees and interest charges.
1) On my main bank loan (only seven more payments left!!!!!!!!!!!!!!) I started off just entering the monthly payment. Then noticed the total loan balance was incorrect because YNAB assumed the payments were going entirely to the principal. I started making manual entries for the insurance and interest (which decrease every month) and I fear I'm making it more complicated than it needs to be; how to other people handle it?
2) I forgot to factor in the monthly interest on my credit card balance, so I added a budget line item for that. I also added a line item for bank fees, because forgetting about the insurance incurred some extra charges (whee). So now I've got a green amount available in my YNAB budget, but I don't know how to get YNAB to move the money to my credit card category when I make the payment. I'm out of my comfort zone bigtime here, and wonder if I should just deep-six the Bank Fees budget line and just make sure to include an estimate of my interest in the monthly goal for my c.c. I've currently got a goal of paying off my balance by the end of next year, but perhaps should scrap that so I can focus on eating the part of the dinosaur closest to me instead.
Hi Forest Green Guitar (09d39a7ed921)
You're actually right on target with how that should be handled! :)
1. For starters - congrats on your last 7 payments!!
Some banks import interest charges separately for loans, so they can be categorized. Since your bank doesn't, manually entering transactions to account for them is the next best option (it's how I handle my own car loan). You can also reconcile the account and enter a balance adjustment. Either way, the difference will be added into the account.
2. You'll see that YNAB has a default category under Immediate Obligations called 'Interest & Fees.' Since you created a category for Bank Fees, you can use that one instead. Budget for the interest on your debt there, and record the interest as a transaction against that category.
For more information, our Help Docs will walk you through how to account for interest charges when you're carrying a balance on a credit card.
I hope that helps but let us know if you still have questions!
1) For an installment loan, just make a category. Don't over complicate it. Budget for your monthly payment, and pay it.
2) For your CC interest, by default, YNAB has an interest and fees category. If you've deleted it, recreate it. Categorize your interest here. You can budget for it, in which case, the money will move to your CC payment category when you record the interest transaction. Or you can not budget for it, and it will be overspending and will be incorporated into your CC debt, and as you budget to pay that down in your CC category, you will take care of the interest as well.
I have a car loan (I know I know but I love my car!) and this is how I deal with interest.
Have the account set up as an off-budget account so it doesn't affect the budget-- it is just for tracking. Every month payment happens, and it's always the same payment. Interest varies every time. There is a "car loan" category in my budget where I budget for the monthly payment that's due. In YNAB, the payment comes through as a transfer from checking to the loan. After the payment happens, I look at my car loan account to see how much of that payment was interest, and I manually add that transaction as an outflow. After this is done, the loan balance is accurate. Here is a screenshot of what this looks like in my account. Hope this helps!
I don't have CC debt but this is what I would do. Setup a fixed monthly payment goal. I'l take my own mortgage as an example.
Each and every month I need to pay the bank. This is a split (recurring) transaction, one to interest (payee bank), one to mortgage account (tracking account). Unless you use this CC you can simplify this by just one transaction because you don't need to track the balance.
Because I always budget one amount to my mortgage I automaticly pay of more principal each month. The interest just get lower and lower. This does mean you need to update that recurring split transaction.
You could also try to offset the interest in your CC acount by setting up a recurring interest transaction and just have a (non splitted) recurring transaction. Although I prefer the split transaction in my main account.
For the loan, assuming it's a tracking account, you can make reconciliation adjustments rather than track interest and/or fees in indivual transactions.
If you want the net worth graph to be more accurate, you can look at past loan statements and do an adjustment for each month since you started using YNAB. You will have to manually adjust the date of the reconciliation transaction if you do this, because YNAB always considers the reconciliation date to be the current date.