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How to cope with Debt during job loss

How to cope with Debt during job loss

  • By Saral Credit
  • June 24, 2022

The recent past has taught us the biggest lesson of life, i.e., time and money are completely uncertain. You can't time money hence it's always important to save money for the future. You should especially save money for the bad times.

During the COVID19 period, numerous people experienced job loss. Some of them even underwent pay cuts to secure their jobs. People have their ongoing EMIs, school fees, transportation charges, etc. Some people have a packed budget that makes it tough to face such pay cuts or job loss. In short, losing your job will turn your life overnight.

In today's blog, we will discuss a few effective & practical tips that will help you cope with your debts during a job loss.


The first step toward managing your debts during a job loss is managing your budget. You must prepare the budget that helps you maintain the cash inflow for a few months till you get a job and your financial situation comes on track.

Take a closer look to revise your monthly budget and settle it in such a way that makes it easy for you to meet your NEEDS and maintain enough funds for the coming months.

In revising your budget, you should start by analyzing your monthly expenses and savings. With the available information, you should now find new opportunities to reduce your existing budget and limit to NEEDS only. Every amount you save by limiting your budget will help you save a few bucks for the coming month. Below are some practical tips that will help you prepare an effective budget.

  • Calculate your current income (In case you have pay cuts)
  • Track your spending
  • Set realistic goals
  • Make a plan
  • Adjust your spending to stay on budget
  • Review your budget regularly


If you deeply look into your current monthly budget, you will definitely find its bifurcation into three categories, i.e., Needs, Wants, and Savings.

You can't survive after skipping your NEEDS. Hence, needs are necessary to stay in motion and maintain a healthy lifestyle alongside increased savings. SAVINGS are also a crucial part of your budget that you should never compromise as it will help you in bad situations (like the ones we are discussing now). Hence you only have the option to settle with, are your WANTS. Wants are often considered optional expenses that don't harm your lifestyle. It is only what you want to enjoy in life without affecting your current lifestyle.

This brings in the list of optional expenses you can compress from your existing budget and boost your savings for the coming months. This saving will help you collect enough funds to continue paying the debts on time.

Every missed EMI, credit card bill, etc., comes with high-interest charges and penalties. Moreover, it also has a direct impact on your credit score. Hence, you must take your debts seriously and do your best to cut down your options expenses to settle the debt amount till everything comes on track and you gain your income source back.


You undoubtedly undergo mental stress when you struggle with job loss or pay cuts. However, you must stay motivated and find freelance work that can help you compensate for the monetary loss. Numerous online portals can help you find freelance work matching your skills. Some of these websites are:

  • Upwork
  • Designhill
  • Toptal
  • LinkedIn and LinkedIn ProFinder
  • We Work Remotely
  • Behance
  • SimplyHired
  • Dribbble
  • Fiverr

It's crucial to note that these websites provide work for online skills like website design, digital marketing, content writing, video editing, etc. There are offline tasks that are tough to find on online platforms.

If you are one of those candidates who lost the field job, your connections (online and offline) will help you find some part-time jobs to compensate for your monetary loss.

You can match your current monthly salary depending on your skills and working hours. With freelance work, you get two benefits. First, you get to work to beat the financial crisis and manage your debts on time. Secondly, you can continue sharpening your skills and stay updated. It will help you draw a new job without being outdated.

NOTE: Numerous companies consider your freelance work as an experience. Moreover, freelance work will help you build a strong portfolio.


An emergency fund is highly recommended for everyone who has started their professional journey. From the first salary, you must prepare an emergency fund to build a financial back for up to 6 months. You should use your emergency fund when you can't find any income option to manage your debts and continue with the edited budget.

Yes, an emergency fund is a liquid asset that will manage your financial troubles away and maintain your debts (EMI, bills, etc.) repayment on time. An emergency fund has enough to handle from six to twelve months. The fund can help you meet your NEEDS and Debts without a break.

It's important to note that when using your emergency fund, you can't find an amount for saving; as you are already consuming your liquid asset. Hence, an emergency fund is only to maintain your living till you rejoin any company and start earning as before.

Financial experts always recommend dividing your emergency fund into two categories, i.e., Liquid funds and cash funds. Liquid funds are often parked in mutual funds or FDs. The remaining amount is often saved in banks. You will require paying an exit load when redeeming your liquid funds from mutual funds. However, the amount depends upon the duration of the savings.

In case you have a salary cut, you can pause your WANTS and SAVINGs for the time being. If your current salary isn't matching your needs, you can start using your emergency fund to some extent. However, you must first prefer using your pay-cut amount to meet your end needs and save the emergency fund for the future. Yet, if you have lost your job, you depend entirely on the emergency fund for living.


This is an important lesson that everyone must follow when they have lost their job. Nowadays, everyone is financially educated and has built an emergency fund to help them in bad times.

However, you must learn how to use the emergency fund and ensure it doesn't become a burden. When you have a large emergency fund, redeeming the entire fund in your bank account is never a good idea. Firstly, you should always find alternative income sources that can help you pay for the budget without consuming your emergency fund.

Once you are only left with the emergency fund, you should prefer redeeming the amount via a systematic withdrawal plan. It's better to start with money saved in your savings account. Once you have consumed your savings funds, it's time to move to the liquid fund. Here you should withdraw the exact amount required for your monthly budget.


During your financial crisis, you should strictly ensure not to take any new debt. You already have a few debts in the budget that require a one-time payment. Hence, you should find ways to pay the debt without any delay to avoid late payment charges/penalties.

Banks and lenders aren't aware of your financial situation; hence, some will approach you with a personal loan to survive a job loss. Instead of taking a personal loan, you should prefer consuming the emergency fund and putting your efforts into finding an appropriate job.

Taking any type of loan when you are already under debt and facing a monetary shortage is never a great idea. Instead, it will add to your debt and create more hurdles to repaying it on time.

You can put your efforts and predict when you can get the desired job, but losing your job is uncertain. It means it is entirely dependent on uncontrolled factors (COVID is a recent example). With these tips, you can cope with the debts during a job loss.

Once you get a job, you should focus on recreating the emergency fund for at least six months. If possible, you should make a fund for one year to give you enough time to stay stress-free and find the most relevant job.

Moreover, it will take time to bring your finances on track after getting a job. You should find new opportunities to add up your funds quickly during such a period. Working part-time or freelance jobs can help you collect funds quicker than usual.

Another crucial point to consider after getting a job is clearing your debts. Yes, debts are the most problematic task you need to handle during a financial crisis. After you are financially stable, start clearing your dues (if you own more than one). Debt Avalanche vs. Debt Snowball is the two common options that you can decide to clear the dues on time.

With that said, stay positive, manage your funds wisely and search for a good job to bring financial stability back.