using the Personal Finance App
In
PART 2 - MoneyFormula Wealth Goals we introduced Debt Snowballing and how it works with our wealth goals.
As a quick recap, each time you pay down a debt you free up the minimum payment amount you pay each month. For example, if you have a credit card with a minimum payment of $25 and you repay the debt, you no longer have to pay the lender $25 each month, so you have a spare $25 in your budget.
In MoneyFormula, your Debt Snowball amount refers to some or all of this minimum payment amount you choose to automatically roll into paying down the next debt.
By default it is set to 100%, assuming you will roll all minimum payments to future debts and savings goals to maximise your savings, however you can change this amount to suit your personal circumstances.
In this section we will look at how you can adjust the snowball amount and set it up globally, per goal and per debt account.
When looking at Bob & Jill's wealth goals below, we can see the default debt snowball figure of 100% at the top of the screen.
Personal Finance App Debt Strategies - Debt Snowball Percentage.
To update the snowball settings, we first have to navigate to the goal list ...
Personal Finance App Debt Strategies - Navigate to Goal List.
... and under Snowball Settings section we can find the different options available.
The first setting is the Global Settings that applies to all goals.
Personal Finance App Debt Strategies - Snowball Settings.
You can change the default to any value you want. For example, if you only want to roll half of your minimum payments to the next debt then you can Edit the value and set it to 50%.
This means every time you pay down a debt the calculations will use 50% of the minimum payment in the rest of the calculations to show you how much you will save, and assume that 50% will go back into your budget for whatever you want to use it on.
Personal Finance App Debt Strategies - Changing the Default Snowball Percentage.
TIP - If you don't want to use debt snowballing at all then simple set the percent to 0.0%
As well as changing the default snowball amount on all goals, you can also change the snowball values on individual debts and individual goals if you need to customise further.
Let's start by changing the debt on an individual debt account.
We can see below, listed under the Goal Settings, Bob & Jill's debt accounts along with the current snowball amounts being applied in the calculations.
Personal Finance App Debt Strategies - Changing the Default Snowball Percentage.
For example, the Credit Card account has a snowball amount of $25, Credit Card 2 account has $110 and the Personal Loan has $68. When all debts are repaid on the goal the total of $203, the sum of all three amounts, becomes available.
To find out how these numbers are being calculated let's select the "Details / Edit Mode" option to expand out the information.
Personal Finance App Debt Strategies - Debt Snowball Details.
Looking at Personal Loan 1 account above we can now see that the minimum payment is $68, the snowball being applied is the default 100% and therefore the snowball amount available is $68.
Let's assume that when Bob & Jill pay off their personal loan they don't want to snowball any of that repayment, instead they want it all to go back into their budget.
All we have to do is edit the personal loan snowball settings and set the Custom Value to 0%, so instead of the default $68 amount that was being applied, it will now change to $0.
Personal Finance App Debt Strategies - Edit Debt Snowball Percentage.
When we save the changes we can see that the personal loan is showing a custom 0.00% on the left and a new snowball amount of $0.00 on the right
Personal Finance App Debt Strategies - Debt Custom Snowball Amount.
We can also see below that the total available when the Crush Bad Debt goal completes has also been reduced from $203 to $135.
All of the numbers on the Wealth Goals, Debt Crusher and Debt Free Plan are instantly recalculated using the new $0 amount instead of the previous $68 snowball amount, so you can instantly see the impact of the change on all your goals.
We can do a very similar thing if we want to change the amount of snowball when the whole goal has finished.
For example, when Bob & Jill finish paying down all of their bad debt they want 50% to go towards paying down their home loan over the long term, but 50% to go back into their budget to give them more spending money each month.
If we switch back to the detail view and edit the Goal Completion snowball percent, then we can set it to 50%.
Personal Finance App Debt Strategies - Edit Goal Custom Snowball Percent.
When we save that and switch back to the Snowball Summary setting we can see the 50% being applied and the reduced snowball amount from $135 to $67.50. Again, all calculations are instantly updated so they can see the impact on their mortgage and other goals.
Personal Finance App Debt Strategies - New Goal Custom Snowball Amount.
So that's a quick overview on how to set different snowball percentages for the default, on goal completion and on individual debts so that you can customise your future money flows to your needs.
TIP - When you first start using MoneyFormula the simplest option is just to use the default value and set it between 0% (no snowball) to 100% (full snowball). As you start to set up multiple wealth goals and take control of your finances then setting snowball amounts at goal and debt level can give you that extra level of control you might need.
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