A reader (let’s call them Alex) recently wrote to me with a fun question involving shared expenses, multiple categories, and — bring on the extra challenge — multiple funding sources!
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Reader’s Situation
Alex splits expenses with a housemate/significant other. When settling up at the end of the month, Alex ran into this situation:
[He] paid the Internet bill (my half is $34) and the rent (my half is $575). Then I paid utilities (his half is $63.88). When we settled up I gave him a total of $545.12 (34 + 575 – 63.88).
I’m finally understanding how to enter split transactions into YNAB but then I remembered I paid him $500 on my debit card and $45.12 in cash. So now I’m beyond confused!! Please help!!
So, a triple-whammy split transaction challenge:
- multiple categories
- inflows and outflows in the same transaction (Alex owes money; money is owed to Alex)
- net balance paid with a combination of cash and a debit card
Solutions
My first thought was, “wait, how’d you use a debit card to pay the housemate?”
Since Alex didn’t provide details, I made some educated guesses and assumptions based on my own experience and the situations I see with clients.
Imagining that both Alex and the housemate make use of mobile technology and the more common non-traditional banking options available these days, I offered two solutions based on the numbers Alex provided.
Solution #1: 3rd-party P2P debit transfer (PayPal, Venmo, etc)
The most common way a person might “pay” another person with a debit card is through a 3rd-party P2P (Person-to-Person or Peer-to-Peer) service like PayPal, Venmo, CashApp, GooglePay, or AppleCash (links are informational only, not endorsements or affiliate links).
These 3rd-party cash transfer services require users to provide their debit card information when registering for an account. If the sender has a positive cash balance in their account, the payment will be funded using those existing funds. If the sender doesn’t have a sufficient balance to cover the transfer, the service will draw against the sender’s checking account balance — running a debit card transaction the same way a store vendor would run a debit card purchase.
Alex indicated that $500 of the total owed in shared expenses was paid with a debit card. That implies that Alex didn’t have a $500 balance in their P2P account. In fact, it implies that Alex didn’t have any cash balance in the account. Therefore, Alex created a zero-sum “pass-thru” transaction — the payment was initiated in the P2P account but since all of the funding came from Alex’s checking account via their debit card, the balance in the P2P account did not change.
The transaction will show up in Alex’s P2P account but it will not affect the account’s balance (zero sum).
Although the funds are coming from the checking account, this transaction should be created in Alex’s P2P cash transfer account (e.g. AppleCash, CashApp, GooglePay, PayPal, Venmo) in YNAB.
1st Line (net or header line):
- Payee: housemate/significant other’s name
- Category: Split [mobile] or Split (Multiple Categories) [web]
- Outflow: Left blank – no inflow or outflow
- memo: settling up household bills with housemate/significant other
2nd Line (first split):
- category: Internet
- outflow:
$34.00 - memo: my share
3rd Line (second split):
- category: Rent
- outflow:
$575.00
4th Line (third split):
- category: Gas & Electric
- inflow:
$63.88(it’s a credit back to this category; will reduce the total activity amount for this category this month, in effect putting money back into the Gas & Electric envelope) - memo: significant other’s reimbursement; I paid the bill
5th Line (fourth split):
- Payee: transfer: Cash – Piggy Bank
- category: (not needed; will be greyed out by YNAB)
- memo: partial payment with cash
- inflow:
$45.12
6th Line (fifth split):
- Payee: transfer: Checking
- category: (not needed; will be greyed out by YNAB)
- memo: Venmo (or PayPal, etc) payment funded by debit from checking
- inflow:
$500.00
Any time a transfer is entered in YNAB the other half of the transfer is automatically generated in the respective account. That means the transfers on lines 5 and 6 of the split transaction entered in Alex’s P2P cash account will automatically generate corresponding entries in Alex’s cash/wallet and checking accounts, respectively.
The next time Alex reconciles, the $500 debit withdrawal (initiated in the 3rd-party P2P account) will be reflected on their checking account statement. And Alex’s actual physical wallet or piggy bank should contain $45.12 less than it did — matching the balance shown in YNAB. [I strongly encourage you to reconcile all of your accounts regularly including wallets, piggy banks, etc.] Additionally, Alex’s P2P account history will list the $500 transaction but that account’s balance will not have changed (started at $0, remains at $0).
Solution #2: bank-to-bank debit transfer (Zelle, etc)
Zelle is a bank-to-bank service. It’s quick, easy, and secure and seems to be the transfer option offered by most US banks. When you initiate a Zelle transfer, the funds go straight from your bank account into the recipient’s bank account. So technically these are debit transfers, not debit card transactions.
If Alex used Zelle (or a similar bank-to-bank debit transfer method), then the transaction would be entered in the checking account in YNAB. The main portion of the transaction is occurring in this account and Alex needs the net outflow (debit transfer) to match up with the bank’s activity log in order to reconcile the account.
1st Line (net or header line):
- Payee: housemate/significant other’s name
- Category: Split [mobile] or Split (Multiple Categories) [web]
- Outflow:
$500.00(this is the amount of the debit that will appear on Alex’s checking account statement) - memo: settling up household bills
2nd Line (first split):
- category: Internet
- outflow:
$34.00 - memo: my share
3rd Line (second split):
- category: Rent
- outflow:
$575.00 - memo: my share
4th Line (third split):
- category: Gas & Electric
- inflow:
$63.88(it’s a credit back to this category; will reduce the total activity amount for this category this month, in effect putting money back into the Gas & Electric envelope) - memo: reimbursement from housemate; I paid the bill
5th Line (fourth split):
- Payee: transfer: Cash – Piggy Bank
- category: (not needed; will be greyed out by YNAB)
- memo: partial payment with cash
- inflow:
$45.12
As described in Solution #1 above, the other half of transfers entered into YNAB are automatically generated in the respective account. In this case, an entry will be generated in Alex’s Cash – Piggy Bank account as an outflow. This reduces the balance of the cash account without having to assign a category; all necessary category assignments already happened in lines 2-4).
Bonus Solutions:
Bonus Solution 1: cash plus debit card less partial cash app balance
While the 3rd-party P2P debit card transaction example (Solution #1) above involved a number of splits, the funding sources were relatively unmessy. Alex didn’t have a cash balance in Venmo so the debit card portion of the transaction was a nice, clean round number.
But what if Alex’s Venmo account had contained a balance?
The way Venmo (and other 3rd-party P2P services work) is to first drain any existing account balance and then draw the balance of the payment as a debit card transaction. If Alex’s Venmo account had contained any balance at all, Alex would need to reflect the amount withdrawn from Venmo bringing that account’s balance to $0 and then show that only the remainder was paid with a debit card.
For this example, let’s suppose Alex’s Venmo account contained a cash balance of $58.73.
1st Line (net or header line):
- Payee: housemate/significant other’s name
- Category: Split [mobile] or Split (Multiple Categories) [web]
- Outflow:
$58.73(the entire balance of the originating cash app account) - memo: settling up household bills
2nd – 5th Lines (first four splits):
- all exactly the same as the previous 3rd-party P2P example (Solution #1)
6th Line (fifth split):
- Payee: transfer: Checking
- category: (not needed; will be greyed out by YNAB)
- memo: Venmo (or PayPal, etc) payment funded by debit from checking
- inflow:
$441.27
As always, the other half of each transfer will be automatically entered into the other associated account. In this case, YNAB will enter an outflow of $441.27 from Alex’s checking account. That transaction will match up with the withdrawal made by Venmo the next time Alex reconciles.
Bonus Solution 2: scraping everything together – funding from every possible source
In the interest of being truly useful, let’s imagine a scenario where Alex is scraping together little bits from every possible funding source. I’ve been in the position more than once myself.
In this example, Alex has small cash balances in Venmo ($58.73) and in PayPal ($16.92). In addition, Alex raids the piggy bank ($45.12) and empties their wallet ($60). After adding up all the little piles of cash (paper money, coins, and the virtual cash in Alex’s 3rd-party P2P cash transfer accounts), the debit card portion of the transaction is down to $364.35.
As with any solution involving a 3rd-party P2P cash transfer, in YNAB the transaction should be entered in the account that will initiate the transfer of money out of the checking account. In my example, I’m sticking with Venmo.
1st Line (net or header line):
- Payee: housemate/significant other’s name
- Category: Split [mobile] or Split (Multiple Categories) [web]
- Outflow:
$58.73(the entire balance of the originating cash app account) - memo: settling up household bills
2nd -4th Line (first three splits):
- three category splits for expenses – Rent, Internet, and Gas & Electric
5th Line (fourth split):
- Payee: transfer: Cash – Piggy Bank
- category: (not needed; will be greyed out by YNAB)
- memo: partial payment with cash
- inflow:
$45.12
6th Line (fifth split):
- Payee: transfer: Cash – Wallet
- category: (not needed; will be greyed out by YNAB)
- memo: partial payment with cash
- inflow:
$60.00
7th Line (sixth split):
- Payee: transfer: PayPal
- category: (not needed; will be greyed out by YNAB)
- memo: partial payment w/PayPal balance
- inflow:
$16.92
8th Line (seventh split):
- Payee: transfer: Checking
- category: (not needed; will be greyed out by YNAB)
- memo: Venmo (or PayPal, etc) payment funded by debit from checking
- inflow:
$441.27
And there we have it – two different solutions for a split transaction using more than one funding source. Plus two bonus scenarios just in case the funding sources are even more complicated.
I’ll gladly admit that I still run into transactions that feel daunting in their complexity and I have a moment of panic thinking, “how am I going to piece this together in YNAB!?” I’ve learned to take a breath and simply tell YNAB the truth of exactly what I’ve done. YNAB is non-judgemental that way — and resilient! It can handle the truth. 🙂
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