Debt accounts with additional, paid-off spending?

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I could sure stand to crowdsource some suggestions/ideas here! I typically pay off all my credit cards monthly, but one recently offered a "six months--no interest" offer so I took advantage of it for a couple of scheduled but large purchases. I also have a couple of recurring charges on that card, and our daughter uses it occasionally when she's away at school. My payoff strategy is to pay 1/6 of the balance of the large purchases (so I can take advantage of the interest-free option but not think about a "balloon payment") plus pay the entirety of any additional charges. 

My current setup is to have two accounts for that card: one a "regular" account for the small monthly charges that get paid off immediately, and one a "debt" account for the extended payment plan. That works ok for day-to-day budgeting, but it's a lot harder to manage the reconciliation. Just putting all new charges in the "debt" account made it more difficult to know how much additional payment to allocate monthly. I'm currently clearing the regular account by transferring money into it from our petty cash, which we don't manage precisely. It's not ideal but it works, sorta.

Do any of you have a suggestion for a better way to manage this? I've come up with this plan through a lot of trial and error, and there are still errors (believe me!) but if anyone is doing it differently I'd love to hear your process!
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Tiffany Kucifer

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Posted 1 month ago

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Wayne Woodbury

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I like the idea of breaking it out into two accounts.  When the long-term debt is paid off, then that account can go away and you can continue to use the other account for day-to-day expenses.  I think your plan should work fine, but I can see a couple of suggestion that might make it simpler.
  • First, decide if your interest charges will be applied to the debt account or the credit card (revolving/daily expenses) account and set your budget accordingly.
  • Make separate payments for the debt reduction and your daily expenses.  Keeping them separate will help in the reconciliation process (see below).
  • If you are applying interest to the daily expenses, make sure you record a transaction for the interest that appears on your statement.  If you are applying the interest to the debt, make sure your debt transaction has the interest recorded so that your debt account has the correct ending balance.
  • Record payments and interest to the debt account before reconciling your credit card account.
  • Finally, when you are ready to reconcile your credit card account, you just need to subtract your debt balance from the total ending balance of your credit card statement and record that as the ending balance on the Goodbudget reconcile screen.  When you are done reconciling, you should have a 0.00 balance.
With all of those bullet items, I may have made it seem more complex than needed, but in summary, subtract your debt account from the statement balance and ignore any transactions or fees that are accounted for under your debt account.  If I worked it out right in my head, it should balance fine. 

If I missed something, please let me know.  I think your plan is sound and I can't think of a better way to do it.  If you split a single transaction between your credit card account and your debt account, such as a credit card payment, it will complicate the reconciliation process, which is why I recommend making separate payments.

Let us know how this works out for you.  I can see this being useful for a lot of people.

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Tiffany Kucifer

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Thanks Wayne--I think I'm doing pretty much exactly as you mentioned here and, at least for the first month, it did indeed balance on both sides. I DO make two payments; one is the "scheduled" debt payment that will have the extended balance paid off before the promo ends and the other is the "monthly" regular payment that covers those recurring charges I'm not amortizing. I don't pay or accrue any interest at all so there's no need to allocate that charge to one account or the other, but I can see how that could certainly be the case for someone using their card, for example, to cover an emergency expense. Making two payments also makes it simpler to subtract the accounts during reconciliation even though it's adding extra work.
I'm not sure what a simpler solution would even look like, and now I'm even more confident that under the current constraints of GB there isn't one, but since debt is a relatively new feature perhaps it will be a future development?
Thanks for your feedback!