Lending money to friends & family
happy to take part in this great forum,
from your experience using new YNAB, can you suggest a simple way to manage lending money to friends and family...
Thanks in advance.
I use an app called Splitwise (YNAB, you need a companion app like this). With this app, you invite the person via email and then, when you add money lent, it emails them of their "balance due" to you (and you can send reminder emails to nudge them). I also create a Splitwise Category Group and when I lend money to someone, I create a new category in that person's name and track that way. When they pay back, I add the inflow to that category to zero our their balance due to me.
I have a Category Group named "Reimbursable Expenses" and I have in there some bills I pay for my mom (who then direct deposits into my account), business expensese (I do an expense report monthly) and I could see adding a friends group here too. I pre allocate money to these categories. And then I true up when I get "paid"
Disappointed that the overspent category no longer remains overspent in the next month. I know why, but for this purpose it's a nuisance. I like the category method, it's simple and quick, and it's intuitive. Using a tracking account instead of a budget category is so much more trouble.
For one thing, finding Transfer: Loan Account in the payee dropdown is a lot more trouble - after typing the first couple of letters of the person's name, it's right down the bottom instead of at the top.
But worse, the main way I lend to anyone is in my son's allowance. I pay him a monthly amount, of which most is categorised as Allowance, but £10 is my contribution to his mobile which I have always categorised into the phone bills category. If he overspends (eg buying a phone case through the mobile provider, which has my bank details so that's where the payment is taken from), then I put that into the category with his name, within a category group called Loans - just like YNAB4.
Now for the first time I have lent him money that wasn't paid back in the same month. We're doing this for a few months and he will pay me back when his new job starts. It's only now that I discover I can't continue doing this the way I always have.
I tried setting up a tracking account as recommended, but this screws the monthly allowance, which imports as a single payment to the mobile company but needs to be saved as two separate transactions, one to the mobile company and one to the "faux" account for tracking the loan. Loadsahassle.
So... will this work? - If, I keep the category method, and at the beginning of each month, I look at the overspend from the previous month and budget that to the loan. For example in June (simplifying amounts for the example), my son overspent on the mobile by £2 and I lent him £50 as a "real" loan. That was an overspend of £52, which is "wiped" when the month rolls over - so in July I budget £52 to his loan category. This is still a nuisance but less bother than any other way that I can think of (especially with a category note to remind me to do this). Is there a way this will mess things up, that hasn't occcurred to me?
I wish there was an automated way as this DIY budgeting defeats the purpose. I suppose it would have to be a loan category that didn't work the same as other categories when overspent - in the way that the credit card category works in its own way.
... Oh! Would adding my son as a credit card work? Hm... I'll come back to that when my brain's less tired, or what does anyone else think?