Tracking Account Interest?

Just getting started with YNAB.  I connected a personal loan as a "Tracking Account" with a starting balance of $8,861.69.  I noticed today that it says I had an online payment on 2/5 of $200 to approve.  I approved the payment and the tracking account's balance dropped to $8,661.69.  I confirmed via my bank's website that there was a transaction for $200 on 2/5 but only $150.01 went to principal and $49.99 to interest (I can't wait to pay this mo-fo off 😒), so the bank's balance is actually $8,711.68. 

I have tracking accounts for my mortgage as well and I just confirmed that the same thing happened (balances don't match), so I guess this is normal.  How should these be handled so the balances match ... enter a manual "Outflow" to add the interest back to the balance?  Change the amount of the payment transaction so it only reflects the amount going to principal?

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  • In the account register, click the Reconcile Account button (top right corner). It will say, Is your balance $8,661.69? and you will click No. Then it will ask you to fill in the correct balance ($8,711.68) and then you click OK. This will create a reconciliation adjustment and get your account to the correct balance.

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      • Moki
      • unclemoki
      • 2 yrs ago
      • Reported - view

      jenmas Thanks for the reply.  Not sure what I expected YNAB to do - maybe try to read the transaction's break down (assuming my bank broke the payment down nicely) OR see that the online balance differs from YNAB and prompt me to account for it (I guess that's what reconciliation does, except I have to enter the bank's balance).   I just wanted to make sure there wasn't a better way before I go inserting manual adjustments.  Not that I'm too lazy to enter the adjustments, I just want to make sure I'm using YNAB the way it was intended.  Thanks again.

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    • Hi Moki !

      An automatic break down would be great! Sadly, this is dependent on the bank and most don't offer such a break down. Some banks charge interest as a separate transaction, which can make keeping track of that balance easier, but there's usually some adjusting needed at some point.

      Here's a quick video of what Jenmas described in action. The reconciling button makes it a bit faster than manually entering a transaction for the difference. :)

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      • Moki
      • unclemoki
      • 2 yrs ago
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      Faness at YNAB Thanks.  I had seen that video and it does make things fast & easy in terms of reconciling.  However, I thought it would interesting (maybe motivating) to see how much I'm paying in debt interest.  To accomplish that, I added outflow transactions for the interest amounts.  My mortgage payment also includes impound escrow (to cover property tax and insurance) so I had to add that as an outflow too.   A bit more manual work but not too bad.  I was just hoping all that would be automatic .

      Like 2
    • Moki I prefer manual, too! I understand the extra time it takes (it's how I handled my car and personal loans) but I enjoyed seeing that progress. If you select all of your interest transactions, YNAB will give you a total in the upper right hand corner so you can see just how much interest you're paying. Fair warning - this number can be depressing, but also a good source of motivation for paying off debt all the faster! :)

      I see WordTenor mentioned not tracking those loans, which is also an option. It's actually suggested in this blog post: https://www.youneedabudget.com/why-you-think-you-want-to-track-your-car-loan-in-ynab-but-you-dont-really-w/

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      • Moki
      • unclemoki
      • 2 yrs ago
      • Reported - view

        Ok, I get it ... and I may just be convinced to remove the loans and after that read.  Good points all, thanks.

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    • WordTenor
    • I have the honor to be your obedient servant
    • WordTenor
    • 2 yrs ago
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    Psst. Another option is just not to track an installment loan. YNAB is actually not the world's best net worth tool. And tracking a balance, no matter how motivating you think it is, is unlikely to make you make different choices in the moment. You're not going to look at your tracking account balance while at the movie theater and think, "Better not have the large popcorn." You'll make your decision about how much to send to the loan all at once, when you're budgeting. And you can execute that decision just as easily with a category. 

    Counting my mortgage, I have three installment loans I pay. Each of them just has a category with a monthly funding goal. If I were trying to pay one down, I would just budget extra to its category. Simple and straightforward and no extra steps to reconcile an account that doesn't really do anything for me in my budget. 

    Like 1
      • Moki
      • unclemoki
      • 2 yrs ago
      • Reported - view

      WordTenor That's good practical advice.  I may scale back to just use YNAB for budgeting.  I too have multiple mortgages (multiple properties) and one installment loan (a bit of a foolish purchase I knew I'd pay off this year) so making 5 manual adjustments a month might get tedious.  I thought I'd give YNAB a chance to help me see Net Worth so I connected the mortgage accounts and installment loans and added offline accounts to see investment balances and property values and was thinking I'd just update the offline accounts quarterly or whenever I felt like it.  Using YNAB isn't perfect for NetWorth but it's better than NOT seeing it (which is what I had before) ... and still less work and more efficient than what I was doing in Excel.  More importantly, it's all in one spot and accessible anywhere.

      Side note:  This one exercise revealed just how much my debt interest I'm paying.  Holy schnikes!  We knew it was a lot but quantifying it in terms of a percentage of monthly income was quite educational.  I can think of MUCH better things to do with that money!

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      • WordTenor
      • I have the honor to be your obedient servant
      • WordTenor
      • 2 yrs ago
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      Moki I use aggregators to see my net worth--Mint and Personal Capital. It keeps YNAB focused on the stuff that matters. And interest as a percentage of your monthly budget only matters with respect to what your earnings are on investments, especially if a lot of the interest is being paid on mortgages. 

      Just pointing out that if you're just getting started, putting everything in is a really good way to accidentally not learn to actually use the YNAB method. You'll spend a lot of time learning how to do software things like entering interest instead of learning behavior things, like using your categories instead of your account balances. The latter things are why people will tell you YNAB changed their lives, and it'd be a shame to miss that. 

      This is actually one of my biggest critiques of the web-based software.  I think it encourages people to spend a lot of time fiddling with the software in the goals and tracking this and that other account that they can connect directly,  and a lot of people never actually understand the fundamentals of the four rules.  It's very easy to get caught up in all of the software stuff and end up just tracking your finances instead of budgeting.  Tracking leads to a little bit of change, and so a lot of people go "yay my money is so much more in control!"  but a lot of times I run into someone on Facebook or elsewhere who has been using the software for a year and they've never realized they need to cover overspends or they're resistant to moving money ahead of spending. 

      Don't miss the forest for the trees. 

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  • WordTenor said:
    ...if you're just getting started, putting everything in is a really good way to accidentally not learn to actually use the YNAB method.

    Appreciate the admonishment to stay focused.  I also appreciate the advise about using YNAB to budget and consider looking elsewhere for net-worth tracking.  I debated about that exact thing but figured I'd try to see what YNAB can do.  

    Looking back at the 4 YNAB goals, I think we were almost there, but had the order backwards.  I've always had something I called a, "budget" and stuck to it using a combination of spreadsheets, whiteboards and check book registers.  But I always thought budgeting meant:

    • Identify your obligations/goals. Be ready to pay/fund them at least 1-month ahead (YNAB Rule 4 and a bit of Rule 1)
    • Don't spend more than you have.  If you use credit cards for their convenience, track your spending so you'll be able to pay the balance each month. 

    All of our obligations/goals were intentionally over funded so we always had a lot of wiggle room so got lazy about YNAB Rules 2 & 3 since our original rules meant we always had money to cover our spending.  So our issue wasn't debt or making ends meet, it was our lax version of Rule 1 ("Groceries" cover everything) and our lack of making proactive decisions about what to do with the money that's left over after the goals/obligations were met (YNAB Rule 2).  YNAB addresses those shortcomings by forcing me to be more deliberate about the goals - meaning creating NEW specific goals to fund (like Emergency, Kids College, Replacement, Clothes, Allowance).  I just want to be smart about how I set those up (not too much or too little) ... so I appreciate the pragmatic advice I've been receiving from YNAB users like yourself.   I also like that YNAB is in my pocket so my wife and I can both record and track spending in real-time AND make sure we are spending within budget ... and knowing YNAB Rule 3 allows us to move stuff around if needed.

     

    BTW - I never thought much about Net Worth until I connected my mortgages and saw a huge negative net worth.  I added the real estate values to offset and I feel better now :).  I'd be interested in seeing how the other tools like Personal Capital or Mint do a better job of calculating net worth (I have accounts with both).

    Like 1
  • WordTenor said:
    You'll spend a lot of time learning how to do software things like entering interest instead of learning behavior things, like using your categories instead of your account balances. The latter things are why people will tell you YNAB changed their lives, and it'd be a shame to miss that.

    BTW - Now that I've loaded my interest in one place (even if only as a test to see how to do it if YNAB and may never do it again), you better believe it has affected my budgeting categories and behavior.  Seeing it all at once for the first time is quite shocking and good motivation.  But I do get and appreciate your point and will keep that in the forefront of my mind as we move forward.

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  • Something else you can do. It is probably safe to assume your loan balances in YNAB will only differ from the reality because of interest payments. Then you could use the reconciliation process and then search for the reconciliation payee (I forgot the exact name). The total of the reconciliations will be the total amount paid in interest. No need to calculate it by hand

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