Lending money to friends & family

Hi guys, 

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. 

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    • Janelle
    • ynab_janelle
    • 2 yrs ago
    • 5
    • Official Response
    • Reported - view

    Hey Tan Trumpet ! Great question! Check out this video and let me know if you have any questions! 

    Like 5
      • AMS
      • YNAB-ing since YNAB 3.
      • Ams
      • 2 yrs ago
      • 2
      • Reported - view

      Janelle at YNAB thank you! This is exactly what I needed.

      Like 2
    • Janelle at YNAB  Where does the money come from? If you just create a tracking account for Person A with the money you gave them, the money you USED to possess that is now in THEIR possession (until they pay you back) had to come from somewhere.
      So wouldn't you start the tracking account with zero balance and then transfer money into it? In which case you need to categorise the money leaving the budget.
      Otherwise, if you start the tracking account with the debt as the starting balance, you still need to remove that money from your budgeted accounts. In which case you have an expense leaving the budget that doesn't link to the asset that has appear off-budget.

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      • Janelle
      • ynab_janelle
      • 2 yrs ago
      • Reported - view

      Powder Blue Sloth Good question! I think this video was created under the assumption that money had been loaned pre-YNAB, so there isn't an outflow from the budget to get things started. But you're absolutely right! If you make a loan you do need to transfer the funds to the tracking account and categorize the money leaving the budget. Excellent point! 

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      • Troy Bankhead
      • Life is 10% what you make it, 90% how you take it.
      • tbone_07734
      • 1 yr ago
      • 1
      • Reported - view

      Janelle Hi Janelle I just read your response to user Mo.Manfalouti from a year ago where you sent this person a link to a video, however the link has expired. Do you think that you could resend me that link?

      Thanks!

      Like 1
    • Hi Troy Bankhead !

      Sorry for the delayed response here! It looks like that video has been deleted. I've contacted our team to see if we can have it re-added. :)

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      • Troy Bankhead
      • Life is 10% what you make it, 90% how you take it.
      • tbone_07734
      • 11 mths ago
      • Reported - view

      Faness Faness Faness thanks :-) looking forward to it!

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    • Janelle The link you posted here leads to a "CloudApp - Not Found" page. Where can I find the content you had originally shared with OP?

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    • Tan Cartridge That particular video was removed, and we're checking to see if the team plans to re-create it. Budgeting for your spending up front, even if the loan will eventually be reimbursed, is the best way to handle reimbursements. Check out the HelpDoc for more details! Let me know if you have any questions.

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    • Janelle It seems this video is no longer alive. Would it be possible to resurrect it?

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    • Hey Menachem Hornbacher ! The video no longer exists. Sorry about that! We've asked our video team to look into re-creating it for the future.

      We'd be happy to help here, if you can let us know a little more about the loan you're trying to track!

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    • Nicole is there any real talk about recreating it or reposting the original at least? People have been asking after it for six months :)

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      • Menachem Hornbacher
      • Junior Software Developer
      • menachem_hornbacher
      • 5 mths ago
      • 1
      • Reported - view

      Nicole Thanks!

      I owed a friend some money (not money I need, don't worry) and just wanted to keep track of the payments for him in one place with the rest of my finances.

      So far my solution is to create an off-budget tracking account (that is excluded from reports) with the amount owed to me as a positive balance. Then whenever I receive a payment I make a transfer to the appropriate on-budget account.

      Like 1
    • Hi Tan Cartridge !

      Our team decided not to re-record the video that was linked above, but it essentially showed the steps Menachem Hornbacher described above. There are other options covered in our Reimbursement Help Docs, as well.

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  • Currently I make a category (found the idea here https://classic.youneedabudget.com/support/article/loans-to-friends-and-family) but this is definitely the way to handle loans to a friend/family. 

    Like 1
  • 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.

    Like 1
      • Pink Door
      • Pink_Door.3
      • 2 yrs ago
      • Reported - view

      n8vtxn i hope it will in next update

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  • Thanks very much guys,

    Very useful!

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  • 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"

    Like 1
    • mand
    • mand
    • 2 yrs ago
    • Reported - view

    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?

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      • Jannelle
      • jannelle_ynabsupport
      • 2 yrs ago
      • Reported - view

      Hi mand !

      Keeping a category for your son is your best bet! Budgeting for all your spending, even if it will eventually be reimbursed, is the best way to handle reimbursements. If that reimbursement is late (or never comes), you're covered. In all cases though, I just make a note of the amount in the Notes for that category for safekeeping.

      Temporary overspending is only recommended when the reimbursable expense occurred on a credit card, since money hasn't been immediately removed from your bank. It sounds like that's the case for the £10 contribution to his mobile, but not for the rest of the "real loan"? Would the rest of the allowance/money be in cash or on a credit card?

      If the £52 you specifically mentioned is all in cash, it would be like you're double budgeting for the £52 if you budget for it in the next month (the cash overspending deducts from your To Be Budgeted when the month rolls over). If it's spending on a credit card, use the reimbursement to cover it in the current month (if you're still in the month it occurred) or budget it towards your credit card payment in the next month.

      I'm not sure if you've read it already, but if not, an entire section of our Help Docs is dedicated to reimbursements, and it goes into detail on how to handle the reimbursement based on whether you receive it in the same month or a future month. I hope it helps! 

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      • mand
      • mand
      • 2 yrs ago
      • Reported - view

      Jannelle Thanks, and sorry to take a couple of days to reply. I'll read that article but I do understand why it's best to budget in case the money is never repaid - I'd still prefer loans to friends to be handled differently so that YNAB automates counting up how much is owed to me, but I see that this would depend on a lot of people wanting it.

      But ok, I'll keep track in a note. This of course allows for human error and I have been known to do the adding-up wrong and even type a wrong digit into a calculator... but only a little bit of hassle to correct.

      I'm surprised that the advice at the top of this thread was to make a tracking account, but you tell me it's better to use a category... is this because it doesn't crop up very often in my case? Would it be different if, say, I was lending him hundreds to be paid back on a schedule, for something like a deposit on a home?

      This year none of it is in cash, in fact; the £2 is on "my" bill for the mobile account, where he logged in and spent it but my direct debit pays it - and when I give or lend to him, it's almost always by bank transfer even back when he was living at home and standing next to me as I did it! It save me having to go to the ATM.

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    • Hi mand !

      I hope you don't mind me jumping in here! :)

      I believe Jannelle  suggested a category because you're intending to pay (at minimum) that £10 each month. Your son's allowance is an expense, so a category for it is appropriate. However, when you mix funds given to someone with funds they're expected to pay back, you can either continue to use the category (with some adjustments, like you mentioned) or go the Tracking account route.

      Using the Split Transactions option would allow you to split his monthly allowance between the mobile company and the faux account. If you loaned him an amount for a house but also continued to pay him an allowance, I'd suggest keeping a category for the allowance and a tracking account for the loan. :)

      Like 1
      • mand
      • mand
      • 2 yrs ago
      • Reported - view

      Faness Thank you. :)

      So far I have been categorising his allowance as a split transaction, most of it in the A's Allowance category and the £10 in the Mobiles category. We agreed to share his mobile bill, so this £10 represents my half of that bill. His half of the bill doesn't show in YNAB because I dealt with that by taking £10 off his allowance - my standing order puts £10 less into his bank than the amount I "really" give him.
       Then the mobile bill goes out of my bank.

      The only time I add another split for Loan is when he logs in and spends through the mobile provider, which they take out of my bank with the monthly direct debit. Say he spends £4.50 on a phone case, then I will have paid it as part of the bill and he owes me £4.50. It's these loans that are adding up over the months until he starts earning.

      I have just realised that I described it wrong in my first post above: where I said "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..." I meant it screws the mobile bill transaction, not the allowance transaction. Probably this hasn't helped people follow my reasoning! Sorry!

      But the problem is still true: if he logs in and spends something which I then pay as part of the mobile bill (monthly direct debit), then that extra bit is lent to him. Using the £4.50 as before, I import the bill as a transaction £24.50 instead of its usual £20.00. This transaction is in the Mobiles category, but I split it to put the £4.50 into Loan To Son. With a tracking account I'd have to delete the whole transaction and enter two instead, the £20 payment and the £4.50 transfer, which is just silly. But if I stick to the loan-category method, YNAB doesn't track how much he owes me after the month ends.

      I think I may have over-explained here, sorry. Kind of thinking aloud. :) I've only argued myself back to staying with the loan category, and tracking the amount of the loan manually. My worry is that I'm unreliable - between fluctuating health and a dire wifi speed (rural and forgotten!), sometimes a week or a few weeks go by when I don't update YNAB. In the past I have guessed how much he owed me or rounded it (he's honest and reasonable, and knows my income is almost as low as his, so I don't feel sponged-off). and mollifed YNAB's demands for information(!) by inventing a budget amount to bring the loan to zero. When I'm the only brain keeping track of little debts as they happen - when YNAB's brain isn't joining in - then I won't have a clue. Already, I know that I wrote off a certain amount of what he owed me a while back (special circumstances), but have no idea which month that was. Honest though he is, he doesn't make a note of the occasional few pounds as it happens.

      I still feel it would be best if YNAB somehow logged it building up - I'm sure plenty of teenagers (if not spouses) borrow in this haphazard way and it builds up - which needn't alter it returning to zero when the month rolls round, but could just do the sums instead of depending on the human for that.

      In my own case, thank goodness he'll be financially independent very soon - and even better, he has taken over his own mobile bills now and so this month's payment will be the last that goes out of my bank. I can forget about this! :)

      And sorry (again) to take a while getting back when you have offered help. The fluctuating health includes a fluctuating IQ, some days I'm really-really brainy but at other times I'm counting on my fingers for basic arithmetic and can't follow this kind of working at all. (this is also why I'm so long-winded today.) I call it having two people that show up to work; I never know whether Brany Me is going to be here or Idiot Temp. ;) I don't allow the latter anywhere near YNAB and definitely don't allow her to make any spending decisions.

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      • Jannelle
      • jannelle_ynabsupport
      • 2 yrs ago
      • Reported - view

      mand I don't mind the long winded post, I enjoy reading them! Especially the bit about Brainy you and Idiot Temp, haha! 😆 I can relate! 

       

      It sounds like you've found a way that works for you, at least as best as it can with what you've got, shoddy internet and all!  However, I'm still going to pass along your feedback to the design team, especially regarding handling situation where parents are lending to their kids. I love that!

      You're welcome to submit your idea via the Feature Request Form too!  From there it's collected in a database, and just about every day, our Design Team combs through and codes them all, asking questions like Where is this person in their budgeting journey? What problem are they wanting to solve? Then, in regular research cycles they analyze all this collected feedback to plan for what’s up next  in YNAB!

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      • Jannelle
      • jannelle_ynabsupport
      • 2 yrs ago
      • Reported - view

      mand Oh! And if you're letting those amounts roll over to the next month (where you then budget that amount in the CC Payment category or the cash overspending comes out of the next income), you can still go back to the month where the overspending occurred and it will show! Does that make sense? I'm feeling a bit "Idiot Temp-y" trying to put it into words, so here's a video explaining it instead! 😆

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      • Im In Tokyo
      • Pink_Stallion.2
      • 2 yrs ago
      • Reported - view

      Hi Jannelle ,  I'm really confused.  I started with the video at the top of this thread, and now when I increase the loan, YNAB asks me how to categorize...

      Does this way from YNAB classic not work anymore?

      https://classic.youneedabudget.com/support/article/loans-to-friends-and-family

      Like
    • Hi Im In Tokyo !

      When you increase the loan balance, that means your friend now owes you more money, correct? You'll want to create a category for that - "Loan to Friends" is fine, as outlined in the Classic instructions. When you change the Payee to a transfer to a Tracking account, you'll still need to select a category.

      When you receive payment, you'll reverse the transfer and use Inflow: To Be Budgeted as the category.

      Like 1
      • Im In Tokyo
      • Pink_Stallion.2
      • 2 yrs ago
      • Reported - view

      Faness Thank you so much!  I'll try it that way!  :D

      Like
    • Khaki Storm
    • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
    • Khaki_Storm.1
    • 1 yr ago
    • Reported - view

    Don't do it. Just give them the money. If you don't feel good about just giving it to them no strings attached, then don't loan it either. 

    Like
    • Khaki Storm if someone is asking how to do something and trying to get technical advice, an answer that suggests they not do what they want to do is not that helpful. I'm also trying to track "loans" because I have older kids and I'm trying to baby step them into adulthood and responsibility.  My 19-year-old has to pay a rent contingent on how many college classes he takes. Both kids have to contribute to their car insurance so they become aware of the cost of owning a car.  I want a way to track it so I make sure they're keeping up on their obligations.  It so happens that I'm moving the money into a savings account for them when they move out and get their own places.  However, that doesn't negate the fact that I'd like to track it in my budget.

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      • Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 7 mths ago
      • Reported - view

      Alice Blue Mixer Ok, got it. I hope you and the original poster have better results than I've had.

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    • Hi Alice Blue Mixer !

      This is an older thread, so I wanted to check to see if you were still having trouble here! If you want to keep track of those "loans", I'd suggest adding them as Tracking accounts. That way you can budget for them in your budget and transfer the funds to the loan account. It will show as an asset, since those are funds owed to you, but it will also keep the balance so you know how much you have "saved" in your 19-year-old's case. :)

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  • I feel like this be a fairly common topic.  I have read this entire thread  and am verify confused.  Can someone from YNAB provide a step by step explanation for my situation.  Please explain if both categories and a tracking account are required.  I took $2500 from a line of credit (which is listed as a tracking account in YNAB) transferred it to my checking account, then transferred it to my daughter as a loan for a move.  She will make monthly payments including the interest that I am paying.  How do I set his up the loan and record payments?

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    • Aquamarine Koala I'm not from YNAB, but I would simply reflect the reality of what happens, running everything through the same category.

      Record the inflow in the checking account with a Payee of Transfer from the LOC account and a category of Daughter Loan. I suggest you actually name this "Daughter Loan-$2500" so you know where the "we're even" point is. If the Available balance is less than that $2500 target amount, you are obviously owed money (specifically the difference).

      Record the outflow from checking categorized to her loan category, taking the category balance to $0. ($0 is less than the target, so she now owes you.)

      As her repayments come in, categorize them to her loan category, which will increase the category balance. At some point, the balance will be $2500 (matching the target amount in the category name) and she should stop giving you money.

      At that point, send that money to the LOC, categorized as Daughter Loan, payee of Transfer to the LOC account. This outflow balances the cumulative inflow in the spending report.

      If you instead want to send some of that money to the LOC early (before she pays you back completely), feel free to do that and just reduce the target value in the category name to the lesser amount that remains.

      There are, of course, other ways to handle this (for example, a second tracking account used for the daughter's debt), but I view this as the simplest and least cluttered.

      Like
  • Hi, I'd like to first thank everyone who has contributed to this thread, I admit I'm still a bit confused but slowly, I'm processing all the ideas.  I think I have a situation that is similar to some of those mentioned here, but it's possibly just a bit different that at least I'm confused and so hoping someone can help.  In my situation, I have a credit card which has offered me one of those 18-month interest free promotions on purchases made in the next 60 days.  At the same time,  I was planning to loan my son some money to help him get some videography equipment he needs.  Anyway rather than just giving him the cash, I put the equipment on my card figuring that I can pay it off as he pays me back or, if things don't go according to plan, I can just pay it off at the end of the interest free window.  So the first part of this is easy, I can record the purchase on my card and put it to a category, putting any money he gives me this month into that same category.  Problem is next month: the category will roll over to 0.  As he pays me back I can budget it directly to the card, however his are not the only purchases on that card as it's a card I regularly use, so that will get messy.  If I create an off-budget tracking account to start tracking starting next month after the original category is zeroed out, I'm not sure how to handle payments he makes to me:  I can credit them as in-flow to that tracking account, but not sure how I then move the money so that I can put the payment on the card.  If I enter a transfer transaction, won't that essentially increase the amount being tracked by the amount of his payment?

     

    Someone in a previous post mentioned the idea of possibly setting up a person as a credit card and the more I think about this, the more I wonder if it might work for my situation.  My thought is to create a credit card account with a positive balance for the amount he owes.  When he then makes payments, I log them as outflow and put the money toward to be budgeted.  I think if I set the fake card account up with a positive balance and then log the outflow, the amount  will actually increase my to be budgeted amount which I then can budget directly to the real card I actually used.  I may have all this inflow outflow stuff reversed so have to think it through more, but the main advantage would be that month to month, the amount wouldn't 0 out and as payments are made, the remaining balance would be accurate.  

     

    I'd definitely appreciate any thoughts especially as I may be over complicating everything.  :)

    Like
    • Tomato Barnacle 

      I think putting your son as a tracking account is way easier than putting him as a credit card. 

      If you put your son as a tracking account, you would do the following: 

      1. Outflow videography purchase on CC, categorized to a reimbursement category, son's name in the memo, payee is a transfer to the tracking account. 

      2. That transaction will show up in the tracking account as an inflow. 

      3. As your son pays you back, transfer that money in the tracking account (outflow) to your budget (inflow), categorized as reimbursable, son's name in memo.

      4. The transaction in step 3 will put that reimbursable category positive, so move the money to your CC payment category. 

      Doing it this way (tracking, name in memo) allows you to use the same reimbursement category, and even the same tracking account for all purchases. It's a bit unwieldy because of needing to put the payee in the memo, but I think it's the easiest to visualize the process in YNAB if you're having trouble conceptualizing it. 

      It provides clear details that you can easily check.  When the debt is paid, the tracking account will=$0. Otherwise, it will tell you immediately how much is owed.  When you become comfortable with the idea and how YNAB's software works, you can do the same thing without a tracking account and just use the payee as normal. 

      Hope that helps!

      Like 1
    • Tomato Barnacle 

      Just record all related transactions categorized to the reimbursement category. Assuming you didn't budget your cash to that category, the purchase will be "covered" with CC debt. When that reimbursement category turns green (when he pays you back), you should move those funds to the relevant CC Payment category.

      You can add on a tracking account (making all transactions categorized transfers), as Move Light Sound Life describes, which provides the remaining balance. Alternatively, I find it easier to just search for the Reimbursement category in All Accounts, then Select All to show the remaining balance, avoiding the clutter/overhead of a tracking account. Either way, the point is to understand the remaining amount owed.

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