How to Avoid Debt when Unemployed

unemployment debt

With unemployment rates rising, and the downgrade disaster and associated ‘austerity’ economy woes promising to keep the misery going for the immediate future, plenty of people are struggling or will soon be struggling with keeping their heads above water without a job. While unemployment is stressful emotionally and physically, it can also be a disaster financially for obvious reasons. Many people who find themselves unemployed quickly sink into debt as they use credit cards to pay their bills. But while unemployment is traumatic and difficult, it is possible to survive a period of joblessness without accruing a huge amount of debt. Here are three tips to staying out of debt when you’re unemployed.

Change Your Lifestyle

Many people approach unemployment in denial, at least at first. Certain it will be a brief situation, they make no changes to their style of living and thus drain their savings and start packing on the credit card debt as they refuse to admit to themselves that a new job may take much longer to land than they supposed.

Instead, the moment you lose your job, start cutting back on lifestyle choices that have no immediate impact. It’s understandable that you might put off selling a home or car until you absolutely must, but your daily living expenses clothing, groceries, nightlife can be immediately reduced or even eliminated. Make a budget showing your monthly expenses and identify where you can reduce your outlay. Making dramatic changes immediately will make your saving and possible severance package last much longer.


Speaking of that budget making one right away is a good idea not just for information (because it’s best to work from a position of knowledge) but also to cut your expenditures. If you have a severance and/or savings, calculate a budget that lets you live on that for the longest possible time. Better to plan on living on a severance for a year and not need it than to burn through it in three months and start to feel some real pain.

The trick to a budget is to stick with it no matter what. Exceptions have a habit of piling up until your budget has become a fantasy. Budgeting is also in the details you can’t arbitrarily decide how much to spend on groceries. Instead, go to the market with a pen, paper, and calculator and figure out exactly what you need each week to keep yourself healthy and happy, down to the smallest detail.

Seek Other Income

Too many professionals refuse to consider stopgap income like part-time jobs or temporary positions, convinced they will soon find another job on their career ladder and that such measures are unnecessary. Instead, be open to the possibilities. Part-time jobs or freelance assignments leave you flexible enough to schedule interviews and also leave enough time for job research and other necessities.

In the Internet age, freelancing has become easy with many web sites acting as lively markets for all sorts of tasks ranging from the professional to the manual. No matter what your skills, there is likely flexible work out there, and if the pay is not quite what you’re used to, it will supplement whatever savings or severance you have and enable you to survive longer and in better shape without a job.

By being aggressive and planning ahead when unemployment comes to you, you can avoid building up huge amounts of debt while jobless. Instead of assuming it will all work out, assume the worst, plan accordingly, and then your job search will be that much less stressful.

Author Bio

Mark Quigley is the owner and director of Darcey Quigley, an independently owned debt recovery company in the UK who specialise in commercial debt recovery.

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