We have almost certainly all been there at some point – borrowing money,
launder loaning money, forgetting about loans, etc. Be it a small amount for drinks, because you forgot your wallet, or a bigger sum because you chose to buy something expensive that you obviously really, really, really needed.
So, how to go about tracking and dealing with the dynamics of loaning and borrowing money? Fear not, for Toshl is here for you again, not in the money loaning business though, but in the business of helping to track loans and debts – or simply Hilfespurverleihenborgengeschäft, as the Germans would put it.
Track major debt repayments
Let’s say I want to buy a new Ferarri for $3200, but I am just $3100 short for it. What do I do? I go to a guy* I heard you can get a loan from, that hangs out behind the parking garage in the shady part of town every other night (because he has kids). I ask him for a donation towards my cause and after a few laughs, I promise I would pay him back in ten months with $1900 interest. I get the money, and now I have to settle the $5000 debt in ten months, which makes for $500 per month. Because I use Toshl, the best loan app around, I know this will be a piece of cake and I will not get my legs broken in the process.
1. Add income marking the received loan
I put the $3100 in Toshl as an income, category ‘Loans’, account ‘Cash’, plus I put ‘Drago’ in the description – which is supposedly the guy’s name and also means ‘expensive’ in some languages. Just so I can be precise when I tell my grandchildren about my first Ferrari.
Ok, we got the money, we got the income from the loan marked, now to go about tracking the debt.
2. Add a new account to track the repayment of debt
I make a new account for the debt, called ‘Drago’ and set up the initial balance as ‘-$5000’ which is the total amount of the debt, including the interest.
3. Add transactions to note the debt repayments
To note the repayments as I return the money to Drago in monthly instalments, I make a transaction of $500 from account ‘Cash’ to account ‘Drago’, date it on the day of the first payment, set it up to repeat every month for ten months and set up reminders for it. Now I will be reminded to take the $500 to him every month, and the ‘Drago’ account will get out of red numbers over the ten months.
Track smaller loans to friends
Let’s take a look at another, simpler case. Let’s say I lend $4.99 to a fellow car enthusiast for a little 1:100 plastic Ferrari model.
1. Note the loan as an expense
I give him the money, put it in Toshl as expense, category ‘Loans’, account ‘Cash’.
If this is a one-off loan, I can put the guy’s name in description. If I lend to this guy often, I could also put his name in a new tag on the expense. That way I can easily sum up everything he owes me.
2. Note the loan repayment as an income
When he pays me back after seven and a half months, I just enter it as an income with appropriate tags, etc. This way I can always track borrowing and loaning entries.
Alternatively, I could just erase the loan expense, but that wouldn’t give me any insight on the loan later on.
Note the screenshot from the future
Bob’s your uncle! Use whichever method works best for you or be creative and invent your own system. That’s it for now from our secret volcano base, ta ta!
*Toshl does not recommend taking loans from random guys behind the parking garage, nor can we provide phone numbers of any specific guys providing such loans. A bank would probably still be a better bet, although their moral compasses might not be in much better shape, compared to the guy behind the parking garage.