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Successful budgeting
What does it mean to be in debt? Why do people fall into debt? What role do consumer loans play and how can you avoid debt? Find answers to these questions and more here.
Content:
The debt ratio of Swiss private individuals is among the highest in the world. According to the Federal Statistical Office (FSO), just over 12% of households in Switzerland were in arrears with at least one payment in 2022. When all types of debt are combined, the figure rises to almost 41%.
The reasons for getting into debt vary a great deal. According to Debt Counseling Switzerland, in 56% of all cases (2023), the trigger is usually an unforeseen but significant event such as illness, accident, separation or divorce.
Experts from debt counseling services also see – across the generations – fast, digital payments as a problem. In this context, they speak of the “preference for the present.”
The preference for the present describes the tendency of people to prefer the value of current comfort over future benefits. Thus, we prioritize short-term rewards over long-term and well-considered investments.
In a nutshell: emotions prevail while reason falters. However, this is not a real victory, because it is often very difficult to escape the downward debt spiral.
The fact that we make irrational purchasing decisions and even get into debt may also be related to marketing. In other words, we are only too happy to succumb to the allure of advertising.
And it’s not just discounts and special offers that increase our willingness to buy. Boredom and buying into the sales or marketing message are just as much reasons to buy as attractive packaging and presentation.
Last but not least, there is now a lot of talk of “FOMO”: Fear Of Missing Out. This phenomenon from market and consumer psychology refers to the pressure to experience something.
Whether you are in arrears or have excessive debt – in Switzerland, debts often accompany you for the rest of your life. Unlike in some other countries, there is no automatic statute of limitations here, so financial obligations can remain with you for the rest of your life.
Imagine telling your friends and family that you have overdrawn your account or have not yet paid your taxes – what would the reaction be? It would probably just be a shrug of the shoulders.
In short: depending on the nature and extent of the debt, debt is an accepted phenomenon. What’s more, certain debt obligations are even tax-subsidized. For example, we can claim interest on debt as a deduction from our income on our tax return.
Whether acceptance among young people is equally high is uncertain. According to the study “Ohne Geld geht gar nix ... Jugendliche in der Konsumgesellschaft” (“You can’t do anything without money ... young people in consumer society”) the young generation is driven by the idea that money is the only way to achieve something. However, they hardly talk to each other about this topic.
Consumer loans make it possible to bridge financial gaps and make purchases that would otherwise not be immediately affordable. However, their easy availability can lead to higher spending. And the fact that the interest over the term of the loan causes high additional costs is often overlooked.
Since 1 January 2025, new maximum interest rates of 12% on cash loans and 13% on overdrafts have applied in Switzerland. Up to 140,000 new consumer loans are granted every year, with a total loan amount of 8.4 billion Swiss francs (as of 2022).
Additionally, the longer the term of a loan, the more expensive it becomes. Anyone taking out a loan should therefore take care to ensure that the term is as short as possible and compare different providers.
Caution is particularly important when consumer credit is used to cover ongoing costs such as health insurance premiums. If your personal situation changes unexpectedly, for example if you lose your job, the financial burden can quickly become unbearable.
Last but not least, high credit obligations limit long-term financial options. People who finance their consumer spending through loans have less scope to build up assets or save for their retirement.
Seek assistance from organizations such as or Caritas if your debt becomes overwhelming. Even better, seek support before it gets to that point.
Professional support will help you gradually get rid of the entire debt. Together with the debt counseling service, you will draw up a budget and get to the bottom of the causes of your indebtedness. You will also receive useful tips from the debt counseling service tailored to your individual situation, including money-related topics and how to deal with the corresponding creditors.
The most efficient and effective rule is not to spend more than you have available. Draw up a budget so you have an overview of what you need to spend and above all how much you can afford to spend.
By both planning and monitoring your income and expenses you will utilize your money efficiently, identify ways in which you can save, and thus reduce unnecessary expenditures.
The following eight tips will help you keep a better eye on your income and expenditure:
Debt affects us all and we can get into debt more quickly than we imagine. A wide variety of reasons can lead to debt, often as a result of a misfortune. However, it is better to sit down with your partner or the whole family at an early stage and discuss the situation. Don’t be afraid to contact a debt counseling service. However, it is best to avoid getting into debt in the first place by spending only what your budget allows. Ideally, you should put something aside each month so that you are prepared for the unexpected.
Arrange an appointment for a non-binding consultation or if you have any questions, just give us a call.