loan to family using a credit card

I made a loan to my daughter via a credit card which she will pay off by paying money directly into the credit card account.  I created an Asset Account for the loan.  I was able to transfer the transaction from the credit card to the asset account.  However, now YNAB wants me to categorize the expense.  Obviously since the items were purchased for her.

Please explain what I need to do from here.  I am confused.  Also, what do I do when she makes a payment and it shows up on the credit card as a payment?
 

Thanks in advance for any help you can give me to clarify how to handle this.

 

Jeanne

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  • Hi, Spring Green Welder

    Any time you spend, it needs a category. And it doesn't matter if the spending was for yourself or if you expect to be repaid, it still needs a category. You might want to treat it like you do reimbursable expenses.

    I am/was helping a family member through an unemployment and underemployment crisis for a couple of years. I created a category for that activity as a subcategory in my Life Happens master category, named the category Crisis Fund,  and used funds from my emergency fund to seed the category in advance of making the transfers. When I sent my relative money, I would record the expense as a transfer from my chequing account to the tracking account I created to track all those funds, tracking account named Family Loan and all the transfers were categorized to the crisis fund category.

    As my relative pays me back, I record a transfer from the tracking account, Family Loan, to my chequing account, and I record it as Inflow: To Be Budgeted.  Originally, I had planned to record the returning funds directly back to Crisis Fund rather than as a new inflow. This is the method I use for reimbursements for health insurance claims and office expenses, but I soon changed my mind on that.  My family loan situation required multiple loans over two years and the payments back will be stretched over many payments, so I see the returning funds as income. 

    Hope this helps.

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  • Hi Spring Green Welder !

    I second HappyDance's suggestion of handling this like a reimbursable expense. You can create a Family Loan or Daughter Loan category and categorize the transaction there. Since you used your credit card, you can leave that category as overspent rather than budgeting for it - which will reflect that you don't intend to use your funds to cover the debt.

    I know you mentioned creating an Asset account for the loan, but when you say you transferred the transaction there do you mean you entered it as a transfer (sending money from the credit card to the new account) or that you moved the transaction so that it appears to have taken place in the Asset Account? You'll want to leave it in the Credit Card account for proper reporting, but you can still categorize a transfer to a Tracking account to a Daughter Loan category (or something of that nature).

    As your daughter makes payments, they'll import on the credit card and you can categorize them as Inflow: To Be Budgeted - this will adjust the balance on the credit card without affecting other areas of your budget. 

    You can also take a look at handling Reimbursements for a bit more insight! :)

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