Setting up Student Loan and Debts

[Michael B. Trausch]

On Sat, 2007-03-10 at 12:23 -0800, Micah Carrick wrote:

> Hey, I'm pretty new to all of this stuff. I've read through the docs and 
> am still slightly confused about adding in my student loan as it's not 
> an asset.
> 
> I got federal consolidation loans on Oct. 5, 2006 which started with a 
> principle balance of $14,466.47. So, I created the following:
> 
> Expenses
> - Education
> - Interest
>   - Federal Consolidation Loan Interest
> Liabilities
> - Loans
>   - Federal Consolidation Loan
> 
> And now I'm trying to figure out how this part works. I *think* I should 
> create a transaction in the Federal Consolidation Loan account dated 
> 10-05-2006, transfer from Expenses:Education for the amount of 
> $14,466.47 as a "Decrease" which would result in a negative balance both 
> there and in Expenses:Education. Is that correct?


Hello,

Let me start out first by saying that I am not an accountant, but I have
been using GnuCash to manage my own finances for a little bit now.  What
I have done (and what seems to be the "standard" thing to do) is to work
in terms of a year.  So, I keep my file which starts on 1-1-2007, and no
transaction in that file are dated before that.  That means that
anything I had before January 1, I "roll over" into appropriate accounts
and take the opening balance from Equity:Opening Balances for anything
that doesn't have another transaction that is an opening balance.  That
included my bank accounts, student loans, and my delinquent debt.


> 
> And another question... I have several outstanding debts (mostly turned 
> over to collection agencies) that I would like to keep track of. Should 
> those be liability with maybe another Expense account for "Debt" or 
> something? And if I settle with a collection agency-- how do I handle 
> that change it balance?
> 
> Any help is appreciated. Cheers!


What I did was this:  I created the delinquent debts as Liabilties,
under Liabilities:Delinquent Debt:Name of Creditor

I then populated them with initial balances.

I setted one of them (at 55%) about three weeks ago or so, and I learned
that when you do such a thing, for tax purposes, the part that you did
not pay is considered to be income.  So, what I did is created the
settlement transaction, reducing balance appropriately; then, I created
another transaction that transferred the remainder of the balance to
"Income:Settlements" so that I can remember that I "created" income that
I will have to report this year.  If your delinquent debt is small, I
don't know that it will greatly impact you, but if it is large it can
have quite an impact on you'll pay in income taxes.

What I currently have are five base "trees," Assets (which includes my
checking account, PayPal account, savings, and other assets that are
things that are valuable but not liquid, such as my car and other things
that I could sell and convert to money, in theory), Equity (which only
have Opening Balances), Expenses (broken down as detailed as I care to
get), Income (also broken down, but not as much as expense), and
Liabilities, where I include my loans and delinquent debts.

The hardest part for me was understanding how to keep transactions that
were "split" among different accounts, while keeping them related.  When
I first started playing with the software in mid-2006, I just created
different transactions for everything, but that quickly became a pain in
the rear to manage.  Whenever you have something that is "logically" one
transaction but several different things happen (a settlement; or a
regular paycheck, which can be four or five different splits if you
track everything on the paycheck and not just net income) it is quite
nice to be able to split them.

    HTH,
    Mike

--
Michael B. Trausch
                    fd0man at gmail.com
Phone: (404) 592-5746
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                    fd0man at gmail.com
              fd0man at livejournal.com
Demand Freedom!  Use open and free protocols, standards, and software!
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