In this training, we walk through two ways to model a debt snowball strategy in Voyant. First, we demonstrate how to apply a client’s surplus income to pay down debts in a defined sequence. Then, we explore how to model sequential extra payments toward specific debts.
Transcript:
Modeling a Debt Snowball in Voyant
In this training, we’re going to review how to model a debt snowball strategy in the Voyant software.
We’ll use a plan for Lily and Todd Mullins, who have three major debts they want to prioritize paying down over the next several years. I’ll show you two different ways to model a debt snowball approach in a What-If plan so you can compare the outcomes against the client’s current strategy.
Scenario 1: Sweeping Surplus Income Toward Debts
We’ll start by creating a What-If plan.
Go to What-If Plans, give the plan a name, and create the new scenario. This creates a copy of the base plan where we can model different debt repayment approaches and compare the results side-by-side.
If we look at Year 1 in this scenario, we can see the clients have a projected surplus income of $54,483. This represents the difference between their estimated needs and their projected income inflows.
In this example, we want to sweep that surplus income toward their debts.
Configure Default Surplus Accounts
Go to the clients’ Default Surplus Accounts and set up the sweep options.
We’ll prioritize the debts from lowest balance to highest balance:
- Joint credit card debt
- Student loan debt
- Mortgage
This setup tells Voyant to sequentially apply surplus income toward each debt until it is fully paid off before moving on to the next one.
Repeat this setup for both Lily and Todd so that each client’s surplus income follows the same repayment order.
Click Done to save your changes.
Update Calculation Settings
To ensure the surplus income is transferred correctly:
- Go to Plan Settings
- Select Calculation Settings
- Enable the option to transfer excess or surplus income to the default surplus accounts
Once enabled, Voyant will automatically direct surplus cash flow toward the prioritized debts.
Review the Debt Chart
Open the Debts Chart and turn on Details.
You’ll now be able to see the impact of the debt snowball strategy:
- The credit card debt is paid off in the first year
- Only $2,838 remains on the student loan after that
- The mortgage continues to be paid down aggressively each year
- By ages 50 and 54, all debts are fully paid off
You can then go to Let’s See > Compare Plans and compare the debt charts between:
- The base plan
- The debt snowball strategy
This provides a clear visual comparison for clients.
Scenario 2: Debt Snowball Using Specific Payment Amounts
Next, we’ll create another What-If plan from the base plan.
This scenario assumes the clients cannot sweep all surplus income toward debt, but they can commit specific additional payment amounts over time.
Create a new What-If plan called:
Debt Snowball – Specific Amounts
Step 1: Increase Credit Card Payments
Go to the Debts & Loans section and open the revolving credit card debt.
Enter the projected monthly payment amount the clients want to make. Voyant will automatically calculate the payoff timing based on the new payment amount.
Click Done to save.
In this example, the clients want the credit card debt paid off within two years.
Step 2: Increase Student Loan Payments After the Credit Card Is Paid Off
Next, open the student loan debt.
The current payment shown is the minimum monthly payment. Once the credit card debt is paid off, the clients want to redirect that payment toward the student loan.
To model this:
- Go to Steps
- Select Add Step
- Increase the monthly payment to $2,000
- Set the timing for two years in the future so the increased payment begins in Year 3
Click Done to save the step.
Review Progress
Turn on Details in the debt chart again.
You’ll now see:
- The credit card debt is eliminated in Year 2
- The student loan balance drops significantly afterward
- The student loan is fully paid off in 2029
- The mortgage remains outstanding
Step 3: Redirect Payments Toward the Mortgage
Once the student loan is paid off, the clients want to apply those freed-up payments toward the mortgage.
Open the mortgage and:
- Go to Steps
- Select Add Step
- Enable the payment option
- Increase the monthly payment to $5,000
- Create a timing event in 2029 called:
Step Up Mortgage Payment
Set the event as the step timing and click Done to save.
Final Review
Return to the debt chart and review the updated results.
You’ll now see the mortgage fully paid off in 2039.
Once again, you can go to:
Let’s See > Compare Plans
This allows you to compare:
- The base plan
- The debt snowball strategy using specific payment amounts
This is a great way to visually demonstrate the impact of different repayment strategies for clients.
I hope this has been helpful. If you have any questions, you can always reach out to us by clicking the client name in the top-right corner of the screen, selecting Request Support, entering your question, and sharing client access.
Thanks for listening!