Pay off Debt while Unemployed or Underemployed

When I lost my job years back, I was angry, nerve-wracked and scared. I had a feeling something wasn’t right the week before I was let go. My co-workers, who were not the easiest crew to work with, were even more distant and when there was a meeting I wasn’t told about, I knew that was the nail in the coffin. I worked so hard to be the best legal assistant, going along to get along, staying late and arriving early. What was it all for?

Being an unemployed single woman, I did not have another income to fall back on or family members that were in a position to bank roll my life until I got back on my feet, although they would be willing to help me as much as possible.  I still owed about $25,000 on my student loans and another $1500 in credit debt so with rent to pay and keeping food stocked, it was a very uncertain time.

So I walked out (in some small way relieved) and immediately filed for unemployment. If you’re reading this right now and in a similar position just know that first, you will be OK!

Here are some tips I learned on my journey to pay off debt while unemployed/underemployed

Change Your Mindset

Much like cleaning your home and cooking a delicious meal to prepare for visiting guests, you have to create an environment in your mind to release negativity and embrace clarity. When you experience a job loss, there are a lot of emotions you no doubt feel at once: with hurt, shame and anger being the most prominent. It’s totally ok to feel these things and have a good cry but it’s not ok to stay in those feelings. Allow reason and logic to guide your decision making and not what your emotions are telling you.

Some of us have been very responsible with money and took out student loans as a necessity but panic and stress due to a situation you’ve never been in before and can lead to making some bad financial decisions i.e. going further into debt. Being unemployed or losing a job doesn’t mean that you are unemployable and that you’ll never find a job again. Many times a job loss leads to huge blessings as it’s all about perspective.

Be very self-reflective on any mistakes you’ve made with money while you were working and identify WHY you made those decisions. In my case, my overspending and ignoring debt was triggered by stress on the job, not being where I wanted to be in my career and frustration with myself for not speaking up. I had to take responsibility for my role in why I ended up in this situation. It’s always good to identify the root cause of an issue while you search for a new job so you don’t repeat the same mistakes.

Do A Financial Brain Dump

So this was very helpful as I wrote out EVERY single debt I had no matter how small along with the minimum payments and due dates. I suggest taking a pen and paper and drawing a line down the middle. Write your debts down and put them somewhere where you can see them every day.

This is not to induce stress but will serve as a reminder that your debt repayments are a priority after paying for necessities like a roof, food, clothing and dem bills!  Then list everything that you spend money on no matter how small.  This is a good way to identify the items that you can eliminate moving forward and then apply that same money to essential expenses category and debt repayment.

Have A Budget Spending Plan

Oh the dreaded “B” word! This one is pretty obvious but you would be surprised how many of us continue to spend despite experiencing a job loss. Of course we see budgets as restrictive but in a situation where you have little to no income it can be a life saver. Again, here is where it would be a good idea to write out a plan.

If you want the convenience of digitally tracking your money to boost debt repayment, there are many free budgeting apps like Pocket Guard, Albert, Mint (my personal favorite), Trim or Qapital. If you are drawing unemployment, remember that these funds are meant for your basic necessities so while you are looking for your ideal job. Don’t forget to track the money you AREN’T spending so that that can be applied to debt.


Start on Online Hustle

Granted, some of our debt balances are very high but you have to start somewhere in paying them off while unemployed. Finding ways to make money online can seem intimidating at first but there are many opportunities to maximize your talent in this space. Sites like Upwork (freelance jobs for graphic designers, Rev Captioning (transcribing closed captioning) , Belay  (virtual assistant work) or selling services on Fiverr are fun ways to earn money and gives you the time flexibility to go after the jobs you really want.  You can also sell goods you aren’t using on sites like Depop and Decluttr.

Now is also a good time to tighten up those skillsets by using sites like LinkedIn Learning (Lynda) and Skillshare. They offer some classes and training for free, in addition to your state’s free job training programs for those looking to broaden their skillset while unemployed. Also keep an open mind about a job you take. I said I would never teach but when push came to shove I signed up to be a substitute teacher through a private company and the money I earned through them helped me pay down my debt. Sometimes you gotta do what you gotta do. Legally of course.

Tackle Dem Bills and Make Nice With Your Creditors

Call all creditors with whom you have a debt service and negotiate, negotiate, negotiate. Take advantage of deferment and consolidation options with your student loans and speak with your credit card companies about possibly lowering your interest or getting your due date moved so as to make payments easier while unemployed. 

Make debt repayment fun. When I was paying off credit card debt while on long term temping assignments (but underemployed), I bought a huge board at Target and taped all of my statements to it which I labeled “credit graveyard”. Whenever I paid off a credit card, I would just write a big “zero” on the final bill which of course gave me the motivation to continue.

Plan for Contingencies

We hate to think about being unemployed or losing our jobs especially when we have a family depending on us financially but we have to plan ahead. When my unemployment ran out, I was so thankful that I had some savings to fall back on through this one strategy:


I use ING Savings (now Capital One 360) and set a certain amount to be withdrawn automatically from my checking account. I’d saved about $8000 in a year and 1/2 and I can guarantee you that I would not have had anywhere near that amount if I was saving intentionally.  I was able to eat and pay my rent until thankfully I was able to secure another position. I also didn’t really feel the money I was saving missing from my account so essentially “forgot” about it and didn’t dip into for frivolous reasons.

Just automating a savings of $20 a week for 1 year will give you about $1,040 (give or take for inflation).  So head over to your bank, credit union, Capital One 360 and begin automating not now but right now!

Just know that you are the same person you were when you initially landed that job and you have the smarts, fortitude and skills to get the job you love and make a comeback.

Additional tips to keep in mind:

  1. Avoid debt management services. Many times they make you close all of your accounts and credit cards negatively impacting your credit in addition to charging you monthly for their services.
  2. The Big Picture. What is your driving motivation to continue paying off debt even after you secure your next job?
  3. Prioritize. It’s good to narrow down your overarching debt pay off goals and then think of what that goals “supporting role” looks like. For example: I want to pay off one of my Navient student loans, so one hack would be to take the money I would have used to eat out and apply that to my debt.

Photo Via Unsplash

Leah has recently re-launched, runs and writes for Strong Fragile Finance, where she talks about behavioral finance, debt pay off tips and strategies, her debt pay off journey (almost there!) , budget fashion and mindset growth. She can be reached at

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This Post Has One Comment

  1. thanks for the tips and information..i really appreciate it..

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