There’s no feeling like swiping your debit card and having it get rejected due to insufficient funds. You might have been loosely keeping a budget, and thought you were on top of it, but life happens. You’re at zero. What do you do now? How do you pay the bills, feed the family, and get back on track?
Step 1: Keep the Lights On
Start by figuring out what recurring payments are about to hit your bank account. Write them down.
This might include your house payment, car payment, and other bills. If you need to temporarily disable autopay, go ahead and do so now. Use whatever money you have coming in (i.e. your next paycheck) to cover the bare essentials,
- Shelter (pay the rent)
- Transportation (keep your car payment current, and the gas tank full)
- Pay the utilities (keep your electricity, gas, and water running).
- Bare essential foods.
For the rest of your bills, such as phone, TV, and so on, try contacting the companies directly. They may allow you to delay payment of your bills by a few days without penalty. This is going to take a lot of work on the phone, and requires you to stay on top of following up, but it can be done.
Step 2: BUDGET, and Stockpile
Every dollar coming in needs to be allocated. Save every last bit of extra cash you possibly can. Having bottomed out, it’s likely that you’ll need roughly 2-4 weeks to get properly caught up. During this time, you need to not only trim back expenses, but put only the minimum required payments on any debt you have.
Use the extra cash to get a $1,000 starter emergency fund. This will be your buffer that keeps you from hitting $0 again.
Once you’ve got that in place, get the rest of your bills current and start living strictly on your budget.
Step 3: Clean up the Mess
Now you can contact companies you put bills on hold with, resume automatic payments, and get more serious about your debt. Use the budget you made to increase the amount of money you put toward your debts.
Step 4: Save an Emergency Fund
Ideally, you should have 3-6 months of cash sitting in an account that you can access anytime. This is the only way to guard against zero’ing out your account. Most people rely on credit cards – but those still need to be paid. Saving up a cash reserve protects you in case of job loss, medical bills, and other unexpected situations.