How to make a transaction towards a tracking account (student loans)
What is the best way to record a payment that I'm making towards my student loans, which are in a tracking account? I realize I may have been doing this wrong for some time.
What I used to do: I created a payee category for my loan servicing company and paid them through my checking account. It took the money out of my Student Loans budget and I would rinse and repeat every month.
What I think I maybe should be doing: Should I log the payment as a transfer to my student loan tracking account? I never thought to do this because I haven't kept close tabs on that account.
What makes more sense? What is the difference really?
Pick one and stick with that.
I personally do a transfer to tracking account for my car loan. I also do a split for the transfer to the tracking account and the interest separately, so that the loan balance stays correct. So, say $25 is for interest on the loan and $675 is paying down the principal. I'll have a split transaction totaling $700, and the payee for 675 is the transfer to the tracking loan account (with a category of car loan) and the category for the 25 is interest (which is a funded line-item in my budget).
My mortgage, I was lazy when I set it up, so that one's just a transfer for the whole amount to the mortgage tracking account (categorized as mortgage) and then I do a reconciliation every so often to true up the balance due to the interest accrued.
Either way works.
In theory you could do it as a transfer to your tracking account except there is interest involved so a $500 payment from you does not result in a $500 principal reduction on your loan. The way I do similar (mortgage) is to have a normal payee-based transaction out of my checking account and then I periodically do a reconciliation adjustment in the tracking account to account for principal reduction.
Just for clarity, here's a screenshot. This is an archived budget. I literally just did a Fresh Start a couple days ago so now I'm trying to hack some of my old methods.
I've only been paying interest because I'm in school right now and technically don't have to make payments (which I'm choosing not to do until I have to, I'm saving up instead for after I graduate, which is another thread in itself.)
I am using Chrome as browser. The transfer amount from budget account to tracking account shows the reduction in overall available balance in budget and adds to tracking total correctly. However, when I look on the budget the money is still in the budget category-it does not leave the budget category. I have been working on this all day & am very frustrated. what am I doing wrong?