What you can do to avoid getting into debt in Switzerland

In Switzerland, every second household found itself in debt at least once during 2020. According to the Federal Office for Statistics, 7.5 percent of the Swiss population lived in a household with at least one arrear on tax and 5.5 percent and one on health insurance premiums. Arrears on rent or mortgage interest, on the other hand, were less common (2.3 percent).

Here's how to avoid finding yourself on the wrong side of that statistic.

Contact debt counselling

First of all, if you are in debt it is recommended to speak to your cantonal debt counsellor as soon as possible. You can find their contact details either on your resident canton’s website or Schuldenberatung Schweiz/Dettes Conseils Suisse.

The counselling itself is free of charge and will tell you if you are entitled to financial support and if so, what kind (reduced premiums, social assistance or care vouchers). Your cantonal debt advice office can offer guidance on any issues related to debt, from helping you create possible payment plans to debt restructuring and checking the legitimacy of certain claims. They can also assist you in negotiating with creditors and give advice on bankruptcy.

Organise

While this may sound simple, losing track of your finances can make you spiral into debt at the speed of light. It is therefore vital to organise your paperwork - including receipts, invoices, and pesky reminders - to help you get out and stay out of debt in the future.

While reminders can quickly pile up, they are essentially (serious) duplicates and can be filed in the same place sparing you a further headache. The smartest way to sort your paperwork is by filing your most important invoices in order, i.e., what must be paid urgently, such as rent, health insurance, etc.

READ ALSO: Why do nearly half of Swiss households have debts?

Budget

In Switzerland, insurance, housing costs and taxes account for a good half of household expenses – so they are a great place to start when putting together a budget spreadsheet that will help you get your finances under control.

When creating a budget spreadsheet, you will need to first write down both your regular and irregular income – the latter can be found on your income tax return. Remember to also note any additional income you may have, such as child and unemployment benefits or tax refunds.

Secondly, you will need to go through your fixed monthly expenses. Grab your annual bank statement and write down your regular outgoings, such as rent, phone bill and insurance premiums. Thirdly, deduct your fixed expenses from your monthly income to get your monthly budget for everyday expenses. This is what you can spend on the fun stuff (shopping, cinema, drinks).

If you’re unsure how to optimise your budget, you can bring this up with your cantonal debt counsellor too. Alternatively, you can download the Swiss budget apps BudgetCH and Buxfer which will help you keep track of your personal finances and expenses. The latter is also supported by Swiss banks UBS, Raiffeisen Schweiz, St. Galler Kantonalbank, PostFinance,
Graubündner Kantonalbank and Cornèr Banca.

Limit spending

If you’ve found yourself in debt and are struggling to earn more money, you may want to look at limiting your spending where possible. Swap that weekly takeaway meal for a homecooked alternative – there are ample ways to save money on groceries in Switzerland as covered in this article by The Local.

In today’s world, credit cards and mobile payment methods often lead to impulse shopping and people can find themselves detached from money. It can therefore be helpful to leave your credit cards at home for the day and carry cash instead.

Another place people like to spend money on is travel. In 2021, every person living in Switzerland went on an average of 2 trips with overnight stays, which may not sound like much – unless you’re in debt. You can still enjoy amazing trips on a budget by forgoing hotels and choosing to go camping or staying at a friend's place.

Rethink your fixed expenses

It is always worth comparing your current subscription plans - be it health insurance or mobile phone - on websites such as Comparis and deinabo. In most cases, you will be able to snag a cheaper if not altogether better deal. Remember, if you're unhappy you can always swap back once your finances have recovered.

For most Swiss households, housing is without a doubt one of the biggest costs, albeit one you can’t fix overnight. Still, it may be worth looking at subletting your apartment or property for the time being, if a move to a smaller/cheaper alternative isn’t on the cards just yet.

If your rental agreement is nearing its end, however, it may be worth keeping an open mind in terms of a move to an apartment or property in a more rural town or perhaps canton with more affordable housing, such as Jura, Aargau, Solothurn or Neuchâtel.

If it is a mortgage you're struggling to pay due to a change in circumstances, don't panic just yet. In Switzerland, it is very rare for your property to be seized or for you to be kicked out. Instead, most Swiss mortgage lending institutions will try to help you, at least temporarily, to find a viable solution, including deferring of payment. However, if your inability to pay interest rates continues, you may eventually have to sell the property and pay off the debt.

READ ALSO: Six essential tips to help you save money in Switzerland

Make money on and offline

If you’ve hit the snooze button on your debt one too many times and urgently need money to pay it off, a second job could be a sound option. Freelance websites such as Upwork let you create a profile advertising your craft and are a great way of securing temporary work.

Speaking of temporary work, another great way of earning a quick buck is by applying for a job you can do without a degree (temp-stellen) as mentioned in this article by The Local.

If you happen to live near your workplace, consider selling your car and walking or cycling instead. This will pay off financially in the short term and also save you money on further expenses on petrol in the future. It's a win-win. You can sell your car risk-free with TCS, a Swiss association representing the interests of drivers in Switzerland.

Consider higher education

While working a side hustle can generate a steady income, it may not be a feasible long-term solution for you. In that case, you could look at pursuing further training or education in your chosen field to secure higher paying full-time work. There are many free higher education online courses (MOOCs) in Switzerland that can also be studied at established universities, such as the University of Basel and ETH Zurich.

Speak to the invoicing party

If you feel that the bills are stacking up quicker than you can make sense of them, it may be worth reaching out to the invoicing party directly and try to work out more favourable terms, such as extended deadlines or payment in instalments. Make sure you are well prepared for the call - you never know, they may sympathise with your plight so long as you have a valid payment plan in place.

READ ALSO: 8 ways to save money on your grocery shopping in Switzerland

Don’t be tempted by loans

Taking out a loan to eliminate your debt may seem tempting but remember that borrowing money always carries a certain risk. As a rule of thumb, you should avoid hiring commercial debt restructuring agencies altogether as they tend to be too expensive and will only exacerbate your problems. However, a loan repayment - if conditions are right - can be worth it.

In any case, the focus should always be on paying off a loan as quickly as you can since the longer you have a loan, the more expensive it will get for you. On that note, if you are already struggling financially, only extend your loan if you can't repay it.