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According to the Federal Statistical Office, almost a sixth of people in Switzerland live in a household with at least one debt situation. Especially during periods of inflation and rising prices, many people experience delays in paying health insurance premiums, taxes, rent or special expenses. Thomas Kehl (34) is a financial expert and runs the YouTube channel Finanzfluss, the most successful channel about finance and money issues in German-speaking countries.
“Anyone who borrows finances the present at the expense of the future,” he tells Blick. Since interest rates are often high, there is a risk of serious follow-up costs in the long run. “In the worst-case scenario, overindebtedness occurs: those affected can no longer pay their debts.”
But Kehl also says debt doesn’t always have to be bad. On the contrary: Anyone who has the opportunity to think carefully about where and why he will get into debt can actually benefit from it in the future. It explains how it works and explains which debts are good or bad.
Debt as investment
Depending on the goal, you may view borrowing as an investment in your own future, according to Kehl. “If you earn more in business in the long run, taking out a loan for education may be beneficial.” When it comes to real estate, it can also be beneficial to borrow money as its value often increases over time.
“It’s important to always calculate how and in what time frame you can pay off your debt,” says Kehl. These calculations are always associated with uncertainty regarding future (unforeseen) developments. In any case, it is important to pay off the debt quickly: “The longer the repayment period, the higher the cost of interest.”
Consumer debt is bad debt
Kehl says the majority of all debt comes from consumer debt. “A new car, a bigger TV or a beach holiday with the whole family is often tempting.” According to Kehl, it’s not a good idea to take out a loan or overuse your credit card: “In most cases, it doesn’t pay off.” Conversely, if interest rates are in the double-digit range (as they are with many credit card providers), you run the risk of paying even less in the future. His conclusion: “Consumer debt is, in most cases, bad debt.”
Besides deciding whether you’ll be able to pay off your debt in the near future, the important question is where and under what circumstances you’ll get into debt, Kehl says. Because high interest rates are costly in the long run, even for a small loan amount. “And anyone who takes out different loans for different expenses runs the risk of losing track of their debts.”
According to the financial expert in such cases, it will always be useful to clearly list all available loans and keep an eye on them. This ensures that debts are optimized. “There is also the possibility of consolidation or restructuring of individual debts, depending on the bank.” You need to find out from the relevant banking provider whether this is possible. In the best-case scenario, unnecessary losses can be avoided, according to Kehl.
In their bestselling book “The only book you should read about finance,” Thomas Kehl and his co-author Mona Linke formulated a four-step guide to help those affected become debt-free.
- Analyze the situation: List the debts completely, sort the loans by interest amount and write down the monthly repayments.
- Optimize your debt: Try to lower the interest rates on one or more loans. Debts can also be consolidated if necessary. What is possible depends on the individual credit situation and the bank’s conditions.
- Use special payments: It is recommended to repay loans with the highest possible amounts as soon as possible. With some bank providers it is possible to repay more than the set rate with a special payment. Additionally, any additional income (bonuses, Christmas bonuses, tax refunds) should be used to pay off debts.
- Stay debt free: Having an emergency amount in your savings account will help you avoid high loan interest rates from the start and thus remain debt-free in case of unforeseen expenses in the future.
In their bestselling book “The only book you should read about finance,” Thomas Kehl and his co-author Mona Linke formulated a four-step guide to help those affected become debt-free.
- Analyze the situation: List the debts completely, sort the loans by interest amount and write down the monthly repayments.
- Optimize your debt: Try to lower the interest rates on one or more loans. Debts can also be consolidated if necessary. What is possible depends on the individual credit situation and the bank’s conditions.
- Use special payments: It is recommended to repay loans with the highest possible amounts as soon as possible. With some bank providers it is possible to repay more than the set rate with a special payment. Additionally, any additional income (bonuses, Christmas bonuses, tax refunds) should be used to pay off debts.
- Stay debt free: Having an emergency amount in your savings account will help you avoid high loan interest rates from the start and thus remain debt-free in case of unforeseen expenses in the future.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
