Loans to friends and family

If you find yourself in a situation where you loan money to friends or relatives, here’s the best way to handle that in YNAB.

Step 1:  Create a new category called “Loan to friend” (or whatever makes sense to you.)  In the category title, enter the amount of the loan. This will help you spot it quickly.

Step 2:  Budget the amount you plan to loan your friend to that category.

Step 3:  When you loan the money, record an outflow in the account you paid them from and categorize to your “loan to friend” category. The balance on this category will now be zero.

Step 4:  When your friend makes a payment to the loan, record the inflow in whatever account you deposit the money to. Categorize it to your “loan to friend” category. 

This is an important point:  Do not categorize this inflow as income.

The category balance will grow.

You can keep an eye on how close they are to paying you back by checking the growing category balance against the total amount they owe you (which you included in the title of the category).

When the category balance matches the amount in the title, you’ll know they’ve paid you back in full.

Step 5:  Once the loan is paid back, you’ll want to remove the money from that category so you can budget it somewhere else.

Budget a negative number in the budget column in the loan category to make the money Available to budget.

You can move the money back to the available to budget number at any time, you don't need to wait for the loan to be paid in full.  Another way you can see how much they've paid you back is to search for that category in the account register.

Step 6: When the loan is paid back in full, hide the category you used for that purpose.  Right click on the category name to hide the category.