“Healthy” Debt & Debt Consolidation


A normal, healthy debt, as long as you can meet his payment obligations, is fine. But what is “normal and healthy”?

In business administration (BWL), vertical and horizontal rules refer to financing rules, static and dynamic levels of debt, sometimes even a golden rule of the bank, accounting rule and financial rule.


All terms that confuse business students in their studies, not to speak of how a normal person should cope.

Unfortunately, what applies to businesses also applies to households. Anyone who is over-indebted goes bankrupt. It does not help to push everything on causes such as unemployment, illness and divorce or separation from the partner. Over-indebtedness remains over-indebted, no matter in which context.

However often (very often!) It is possible and worth thinking about before it is too late and to pull the brakes in time.

In this article, I explain the practical application of financial rules and business ratios for private debt management in a generally understandable way, for the non-specialist. However, I ask the reader to prepare a headache tablet. It will certainly be exhausting! It is not an easy topic?

Dynamic debt ratio

Of all the many business terms that I have mentioned above, “Dynamic Leverage” is most likely to be most relevant to a private individual in order to extricate himself from the debt trap. Here is the formula:

In the case of the dynamic debt ratio, all borrowed capital is compared with the cash flow. This key figure calculates the repayment period of the borrowed capital based on the freely available cash flow ( debt repayment period ).

It is important that the future cash flow can be generated at least at the same level and used exclusively for debt repayment, not for “special expenses” such as TV or holidays.

The remaining debt repayment period is considered to be 3 years.

I had in my article How to get out of red numbers – Check your bank behavior, as an example of a friend of mine with a monthly income of € 3,200 and a total debt of 25,000 € attached. We will continue with his example.


Very, very important is to contrast all the debt with the cash flow, not just a part. Debt capital, translated into private language, are all possible debts (also private debts to family and friends ), loans, bonds, etc. € 200 borrowed from a friend is foreign capital. A refrigerator purchased for 800 € on installments is debt. A leasing contract for the car (the sum of all lease payments) is debt. Sum, everything you’ve ever bought or borrowed, which is not your own money, and you’re about to pay back, is debt. You can not fool yourself.

It is absolutely everything, even a short-term credit line, even if you think that you will pay off in the next few months.