# Entering Debt in the Projections

When entering annual spending in the **After-Tax Spending** column, **do not **include debt annual payments as those are already factored in automatically based on the debt you have entered on the **Debts** page (as shown below).

You can access the Debts page from the Scenario Setup section.

Add a new debt to the table by clicking **Add Debt**. Complete the data entry with specifications such as the balance, interest rate, monthly payment amounts, whether the debt is joint, and more as indicated by the column names shown below.

**In Snap, the interest rate on all debts is nominal and compounded monthly.**For short-term loans, you may need to convert your interest rate for more accurate results. For example, fixed-rate mortgages in Canada are compounded semi-annually (twice a year), so if you take that interest rate and enter it into Snap without conversion, the results will be inaccurate: the effective rate will be slightly higher and the amortization period will be longer than it should be.

If you have a nominal rate with a different compounding period, you should convert it to an effective rate, and then convert the effective rate to a nominal rate compounded monthly. For example, if a nominal semi-annual mortgage rate is 5.00%, the rate in Snap should be 4.95%. You can use a financial calculator or an online calculator such as Wolfram Alpha.

However, according to FP Canada's Projection Assumption Guidelines, "it is also sensible to use a long-term borrowing rate assumption when projecting the impact of debt on a client’s financial position over the longer term". Instead of entering the loan's current interest rate, use a long-term borrowing rate. Click here for details on how to use these projection assumption guidelines in your scenario.

On the **Planning** page, the annual debt payments are displayed under the **Debts** column. For jointly owned debts, each spouse is assigned half of the annual payment. The **Amount Owing** is the amount owing at the end of the year.

When you enter a debt, the annual debt payments are automatically subtracted from the client's cash flow.

Here is a simple example of a debt of $41,000 which is paid off within the first few years of the projections.

In the first year of the projections, you can see that the $900 monthly payments equated to $10,800 paid over the year. At the end of the first year, the **Amount Owing** on this mortgage is $31,038. After paying the $10,800 in debt payments, $22,701 in taxes, and $4,056 in CPP/EI deductions, John is left with $62,443 for his **After-Tax Spending **from his $100,000** Employment Income.**

**Surplus/Shortfall**and

**Cash**columns (see below).

Note: Snap will not automatically sell real assets (ex. House) to pay for the debt. Therefore, if a client is in this situation, consider running a scenario where they sell some of their real assets to eliminate the debt. For example, they can downsize into a smaller home. Here are more details on how to sell a Real Asset in a projection.