Managing Debt Between Jobs

ChartBy Katherine Pilnick

When you’re between jobs, making ends meet can be tough. It can feel like a balancing act between looking for a new job, paying ongoing living expenses and keeping up with minimum debt payments. And this all needs to be done with a limited budget, which may come from your emergency savings or unemployment checks.

The key to making it work is planning. You’ll need to create a temporary budget to get you through this tough time and carry you until you land back on your feet. This requires a good amount of thought and commitment on your part. Still, you’ll find it pays off to track and control your spending so that you can live somewhat comfortably even when you’re not working.

Create a Budget

Create a budget with your income and spending in mind. Under normal circumstances, the amount you earn should be more than the amount you spend. But with only an unemployment check – or possibly with no source of income at all – the process is a bit different.

Although your length of unemployment is often out of your hands, you should aim to find a job within the next three to six months. This means your emergency fund should be able to last you several months. So, your monthly budget should be no more than one-third to one-sixth of your savings. Most of your money during this time should go toward necessities such as rent and groceries.

During this time, cut out unnecessary spending like going out to restaurants, going shopping and spending money on weekend entertainment. Also consider canceling magazine subscriptions and gym memberships to save a few extra dollars each month. You can reinstate these treats once you’re back to work.

You should also make only the minimum monthly payments on your credit card debts and other outstanding loans. You’ll be responsible for paying a bit more in interest, but it will cost you less now, when you have more pressing money obligations and need to make every dollar count.

- more – Job Loss

If You Can’t Afford Your Bills

If you find you don’t have a large enough savings or you’re ineligible for unemployment benefits, you may not be able to pay your bills during this hard time. Don’t panic. You have options to help reduce your debt obligations, free up extra cash or make some money in the interim.

Consider applying for a part-time job or performing some freelance work. This may not be an ideal situation, as you may not properly utilize your skills and you won’t make a full-time salary with benefits. Still, it can help you plug the holes in your budget while you look for permanent employment.

If this isn’t an option for you, look into debt reduction strategies. Your main debt resolution option is settlement, but you can also consider bankruptcy if you’re especially tight on money and don’t see your situation changing in the near future.

Debt settlement is best done with the aid of a debt settlement firm and a professional credit counselor. A counselor at an established firm will help you set up and stick to a saving plan. Then he or she will reach out to each of your creditors one by one with the hopes of settling on a negotiation. In a successful negotiation, you’ll only pay a portion of the full debt or loan, saving you potentially thousands of dollars. This is money that can be put to better use while you’re out of work.

Katherine Pilnick is a personal finance writer, blogger and editor for, a financial help website.

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