Tracking small loans in PocketSmith
If you are interested in tracking small loans or informal loans to or from someone, then this is the guide for you!
This is particularly useful if there is no specific loan account associated with the loan, as you would have with a bank. We will take a look at two examples, one where you have loaned someone else $1000 and another where you have received a $1000 loan from someone.
In this article
Our recommended approach
We recommend tracking these funds in your PocketSmith using the Assets and Debts feature on our Net Worth report (Reports > Net Worth).
Debts and Assets in PocketSmith are different from bank accounts in that they do not contain transactions, and their value is updated, either manually or automatically by transfer budgets.
You can find more details here: Managing your assets and debts, but read on for the steps of tracking these loans!
Tracking a loan to someone else
For this example, imagine you loaned $1000 to a friend, and they were going to pay you back $100 per week.
- Head to the Net Worth (Reports > Net Worth) page
- Create an Asset called Loan to Friend with a current balance of $1000, adding an interest rate if desired. See: Add an asset to Net Worth.
Tracking regular repayments with a transfer budget
If the repayments are going to be regular, on a consistent schedule for the same amount each time, follow the steps below:
- Create a transfer category for the repayments called Loan Payments Received.
Set up a transfer budget to match your friend's $100 weekly repayments.
This transfer budget would be an expense from the asset to the bank account that receives these payments, as you would be decreasing the Asset balance, not adding to it:
The transfer budget will automatically adjust the asset's balance accordingly:
To learn how to create a transfer budget for an asset, see: Creating a transfer budget for an asset.
Tracking irregular repayments
If the repayments are going to be irregular, follow the steps below:
- Create a transfer category for the repayments called Loan Payments Received
Use the Calendar to manually update the value of the Asset each time your friend pays you or you loan more money.
Check out the steps for this here: Updating the value of the asset from the Calendar page.
On the Calendar, navigate to the date you want to show this change in value and change the balance on that exact date.
Categorising transactions associated with a loan to someone else
Any transactions associated with a loan to someone else should be treated as transfers so that these don't appear as income or expenses as part of your day-to-day spending. However, it's best to separate the repayments from the intial loaned amount as this allows for the most accurate reporting.
- Assign any income transactions repaying the loan to your Loan Payments Received category
- Assign any expense transactions where the funds are being loaned out to a separate transfer category, eg. Loan to friend
Tracking a loan from someone else
In this example, imagine you have borrowed $1,000 from a friend and were going to repay it at $100 per week.
- Head to the Net Worth (Reports > Net Worth) page
- Create a Debt called Loan from Friend with a current balance of $1,000, adding an interest rate if desired. See: Add a debt to Net Worth
Tracking regular repayments
If the repayments are going to be regular, on a consistent schedule for the same amount each time, follow the steps below:
- Create a category for the repayments called Loan Repayments.
Set up a transfer budget on this new Category to match your $100 weekly repayments.
This transfer budget would be an expense from the bank account that makes these repayments to the Debt, as you would be reducing the Debt balance:
The transfer budget will automatically adjust the liability balance accordingly:
To learn how to create a transfer budget for a debt, take a look at: Creating a transfer budget for a debt.
Tracking irregular repayments
If the repayments are going to be irregular, follow the steps below:
- Create a category for the repayments called Loan Repayments.
Use the Calendar to manually update the value of the Debt each time you make a repayment, or if you borrow more money.
Check out the steps for this here: Updating the value of an asset or debt from the Calendar page.
On the Calendar, navigate to the date you want to show this change in value and change the balance on that exact date. The historical balances will be left untouched.
Categorising transactions associated with a loan from someone else
Any transactions associated with a loan from someone else should be treated as transfers so that these don't appear as income or expenses as part of your day-to-day spending. However, it's best to separate your repayments from the initial loan amount received, as this allows for the most accurate reporting.
- Assign any income transactions representing the initial amount loaned to you to a separate transfer category, e.g., Loan from friend
- Assign any expense transactions repaying the loan to the Loan Repayments category associated with the debt.