PERSONAL LOAN

A few months ago I lent $1000 to a friend who was in a cash crunch while waiting for an insurance settlement. I created a Tracking Account named "Personal Loans"

I also created a budget category called "Loan to Mike". I entered $1000 in that category.

When I withdrew the money from my checking account, I entered  it in YNAB as a transfer TO the Personal Loans account, and entered "Loan to Mike" as the category.

A couple of weeks ago, my friend repaid the loan. I deposited the money into my account, entering it as a Transfer FROM the Personal loans account, and recording it in the "Loan to Mike" category.

In my BUDGET, I entered (budgeted) the $1K, and it showed up in the EXPENSE column as -1000.00 when the funds were transferred to my friend. 

Then, in December, in the BUDGET column I entered -1000 in the budget column, and repayment showed up as +1000.00 in the EXPENSE column.

My question: did I do that right? I want to be sure so that my numbers are reliable moving forward. 

Thanks!

10replies Oldest first
  • Oldest first
  • Newest first
  • Active threads
  • Popular
  • Karl said:
    My question: did I do that right?

     the short answer is no. You made it way more complicated than needed.  I will let one of the YNAB people jump in for detailed info but in short here’s why..

    tracking accounts DO NOT interact with your budget categories unless money is going in or out of an on budget account. So when you created a loan account as a tracking account you needed to enter a category but then as you saw you needed to create a new category too.  

    The simplest way to do this (assuming he would pay you back in one chunk and you don’t need to “track” the balance over time) would be create the new category but use a generic name like Loans to Buddies so you can reuse it when/if you help another buddy or even the same guy again. Then enter the transaction from your bank like a regular spend using the Loans category. Then when he repaid it, record the deposit to the bank as green “income” and use the same Loans category. 

    (sorry, yes this was the short answer. )

    Like 1
  • Um, actually, I don't think there's anything wrong with what you did.  It does represent reality and your numbers should be correct as far as I am imagining. Your way has the added benefit of keeping the fact that you need to be reimbursed visible in your account sidebar as well as maintaining your net worth. It could be done a bit more simply, though, if you're interested.

    Indeed, if you don't use a tracking account, then you can use the payee field for Mike's name (or other names) for both outflow and inflow. However, you were absolutely correct in categorizing the outflow and inflow to a reimbursable category as you did. 

    I do have a reimbursable - personal category (and a reimbursable - work category) that I run transactions through like this one.

    Now, if you'd like to rename it to something more generally reimbursable, you can. You can also leave the $1000 there for ease of future reimbursable purchases, or you can move it to another category.

    If you have multiple pending reimbursements, you can search for the person's name in the All Account register and select their transactions. The selected total (shown in the top right hand corner of the screen) will show you how much is owed. If you use a tracking account, you only have to search the tracking account, but make sure you put their names in the memo!

    Last tip: To easily see if you are owed anything without a tracking account, seed the reimbursable category (with your $1000, say) and put that number in the category title. If the category available is ever less than $1000, you know someone owes you money.

    I hope that makes sense! Really, there are two parallel solutions with slightly different pros/cons. 

    Like 1
  • Karl said:
    In my BUDGET, I entered (budgeted) the $1K, and it showed up in the EXPENSE column as -1000.00 when the funds were transferred to my friend.  Then, in December, in the BUDGET column I entered -1000 in the budget column, and repayment showed up as +1000.00 in the EXPENSE column.

     To make sure I understand what happened, you categorized both the inflow and the outflow to the "Loan to Mike" category, correct? Then, removed the funds from that category to put elsewhere? If so, then you should be good to go! Categorizing the inflow and outflow to the same category will zero out the spending in your reports and you can rename the category (maybe, "reimbursements"?) for any future loan scenarios. :)

    Like 1
  • Yes, what you did was fine. The important part of reimbursements is all transactions (outflows and inflows) are run through the same category. Feel free to move the funds that are now in the Loan To Mike category elsewhere in the budget.

    A simpler approach would have been to skip the tracking account. You know you put $1k in the category, so as long as the category Available is less than $1k, you are owed money. You could have put "($1k)" in the category name or notes or even set a goal for that amount as a reminder that is the "we're even" point.

    Again, though, what you did works just fine. In fact, an advantage of that Tracking account approach is that it's a little easier to reallocate a partial repayment back to the rest of the budget. You'd have to edit the category name or goal (and compute the new value yourself) if you were using just the category.

    Like 1
  • Thanks, everyone! I think I understand. But I want to check one detail:

    In December, in the BUDGET column I entered -1000 in the budget column, and repayment showed up as +1000.00 in the EXPENSE column. 

    That left a zero balance in that budget category. But reading the suggestions above, I'm thinking it was not correct to  do that. I should have accomplished getting the category balance to zero by reassigning the $1000 that appeared in the right hand column. 

    Is that correct?

    Like
      • dakinemaui
      • dakinemaui
      • 1 mth ago
      • 1
      • Reported - view

      Karl No, what you did was correct. The entry in the budget column is how you move those funds elsewhere, since they have been returned to you. (Thus the $0 balance left.)

      Some people will leave funds in the category so they don't have to move funds in the next time money is loaned. (In which case, there would not be a negative budget entry ) Your call with regard to future need.

      Like 1
      • Karl
      • KARL_NAB
      • 1 mth ago
      • 1
      • Reported - view

      dakinemaui Thank you! I've been using YNAB for a year, and think I have a decent understanding, but still worry about making errors that make the numbers unreliable.

      Like 1
  • Karl said:
    In December, in the BUDGET column I entered -1000 in the budget column, and repayment showed up as +1000.00 in the EXPENSE column. 

     This is correct.

    When you entered the loan as an expense,  -1000 appeared in the activity column

    When it returned it was an inflow categorized directly to the same category, so  +1000 appeared in the activity column

    Had both events occurred in the same month, the activity would have read 0 because -1000 +1000 = 0.

    Like 2
      • Karl
      • KARL_NAB
      • 1 mth ago
      • 1
      • Reported - view

      HappyDance Thank you! I've been using YNAB for a year, and think I have a decent understanding, but still worry about making errors that make the numbers unreliable.

      Like 1
  • You created  a category " Loan to Mike" that has $1000.00 in it. You went to the bank and withdrew 1000.00 for Mike. few days later - $1000 show up on your import. That transaction (-1000.00) should be assigned to ( Loan to Mike)(+1000 (initial Fund)-1000(Bank transaction)=0). when Mike give you the money back, it should be going to (Loan to Mike category) the final balance should be +1000.

    It was not necessary to create a tracking account  nor using transfer feature. use this feature only for credit card payments.

    I will create a general category called DEBTS and a sub category called Mike. The benefit will be to track how many times you borrow to Mike and if you borrow to other people you can add other sub categories for these people, or have one sub category called Friends and add a Memo. Now if you don't want to keep the $1000 on Mikes' sub category or Friends'Sub category, move the fund.

    Like
Like Follow
  • 3 wk agoLast active
  • 10Replies
  • 167Views
  • 8 Following