When people lose track of their payment obligations, they risk falling into the debt trap. With the help of a structured approach and comprehensive budgeting, they can reduce their debts. The prerequisite for this, however, is always that they get an accurate overview of their finances and plan their expenses and debt settlement well.
FAQ: Reduce debts
Start by listing all debts accurately – sorted by creditors and claims. Also, document all income and expenses and use this as a basis to determine what budget and how much money you have available to reduce debt. In the next step, you can create a debt settlement plan in which you explain exactly how you want to pay off your debts. Present this plan as a proposal to your creditors.
Who will help me pay my debts?
Contact a debt counseling center in good time. The advisors are trained and experienced and will work with you to develop a strategy for paying off your debts.
How can I get rid of my debt quickly?
This requires a lot of discipline and perseverance. Reduce your expenses as much as possible and try to get additional sources of income to have more money available for debt reduction. Tips for doing this can be found here.
Get rid of debts without personal bankruptcy
To pay off your debts, you need enough money. You can get this by reducing your expenses and/or increasing your income. However, you need to know beforehand exactly what amount you can spare each month for this purpose at all. Because rent, electricity & co. want to continue to be paid and the refrigerator continues to be filled. You cannot reduce debt without a financial overview.
- Document and review all your income and expenses in a budget plan. This way you always know what money is going into the account and what you are spending how much money on. This will keep you in control and allow you to set a fixed monthly or weekly budget.
- Also, list all creditors and their claims in a table. In it, also note the due date, the amount of the debt and, if applicable, any payments already made.
- Now determine how many euros you have left each month to pay off your debts. Consider this item a fixed cost and adjust your budget accordingly. Use reserves and savings, if necessary, if you want to reduce your debt faster.
Reduce debt: Tips to give yourself more money
If your income is not enough or if you want to pay off your debts even faster, you must either see that you spend less money or take more in. The following overview shows how this works.
Reduce expenses:
- Take your budget book and question your expenses.
- Take a closer look at your consumption behavior.
- Cut unnecessary expenses. Cancel z. B. Subscriptions and similar services.
- Leave the EC card at home and pay cash. How to avoid expensive impulse purchases.
- Compare electricity, gas, insurance and cell phone rates. Switch to a cheaper provider.
- Cars are real money guzzlers. Switch to public transportation or bicycling.
- You can reduce your debts with the savings achieved in this way.
Increase income:
- Check whether you are entitled to government benefits, such as housing allowance.
- Negotiate with your employer for a pay increase.
- Look around for a job that pays better than your current job.
- Take a part-time job if you have the time and energy to do so and your employer agrees.
- Become self-employed on the side – after consulting with your employer.
- Check with your landlord to see if you can temporarily sublet a room.
Debt settlement plan for debt reduction
You now have in front of you, in black and white, to which creditor you owe how much, and you know what amount you can raise monthly to pay your debts.
Next, you need a concrete plan for your debt reduction, especially if you have multiple creditors to serve. It is very important that you take into account all creditors, because only in this way you can completely reduce your debts. This plan includes the following points:
- Comprehensive presentation of your financial situation: how much of your income is attachable? Are you obliged to pay alimony?
- List of all creditors and open claims
- Amount of money available for debt settlement
- Repayment rate: what percentage of the debt you can pay each creditor? This rate should be higher than the insolvency rate that creditors would receive in the event of personal insolvency.
- Terms of debt repayment: Is there a one-time payment or do you pay in installments? How much is the one-time payment or. The respective monthly installment and when exactly you will pay it?
- Other arrangements, for example, creditors waive enforcement measures as long as the debtor pays on time
The debt settlement plan thus forms a proposal to all creditors on how you intend to reduce your debts. On its basis you negotiate with your creditors. If they agree, all you have to do is stick to these arrangements and pay off your debts step by step.
Let a debt counseling center help you with the creation of the plan. Their employees have experience in this area and will find the right solution for you – and your creditors.