Emergency FundIt was a Friday night in April. Somewhat serendipitously–but mostly because I was craving cheap drinks and potato skins–my boyfriend and I were planning to go to T.G.I. Friday’s for dinner. But first, I had to do my taxes.

    The year before, I’d started my freelancing. I gradually transitioned from a full-time employee to a full-time freelance writer. Who knew you had to pay your own taxes?  Not me, so I didn’t give Uncle Sam a dime that entire year, and, by the time I finished my taxes, I thought TurboTax was pulling my leg.

    “I owe thousands of dollars,” I said out loud, to no one in particular. “There must be some mistake.” And there was: I took on a freelancing career without knowing jack about how taxes work. In one night, I drained my entire savings, my whole nest egg, which had taken me years to build. It was official: I was broke. 

    That was only 3-4 years ago. My finances are in better shape these days, and while I felt desperate and vulnerable at the time, it only took me about a year to rebuild  and get back on my feet. Over at Lifehacker, I wrote about this experience and what I learned from it. You can read the full post for more detail, but if you drain your emergency fund or entire savings like I did, here are the basic steps it takes to rebuild.

    Draft an Emergency Budget

    After my tax mishap, the first thing I did was review my budget. Okay, that’s a lie: the first thing I did was go to T.G.I. Friday’s, because I was in denial. And I learned an important lesson: potato skins don’t taste as good when you know you can’t afford them.

    After coming to my senses, I logged onto Mint, reviewed every spending category, and then I cut back. Mercilessly. Yes, it’s important to give your budget breathing room. But remember: this is an emergency budget, not a forever budget. It’s a pared-down, lifestyle-deflated spending plan that you’ll stick to during this stage of financial emergency. When you start saving and your situation gets a little more stable, you can gradually reinstate those pedicures and happy hours.

    Until then, you need an emergency budget.

    Related: How to Budget When You Have No Clue What You’re Doing

    Seize Opportunities to Save

    One major habit that helped me rebuild: I became laser-focused on finding opportunities to rebuild. Everything was a chance to save: cash back on credit card rewards, extra work, crap I could sell on eBay. I utilized my resourcefulness and looked for every chance to regrow my finances.

    Tighten Up Other Safety Nets

    Remember two paragraphs ago when I told you to make an emergency budget? There’s one expense you should absolutely not cut back on when you’re in emergency mode: insurance.

    As tempting as it can be to ditch your renter’s insurance or switch to a high deductible, low premium car insurance plan, that can be particularly dangerous when your savings are at zero. Think about it: you’re already in emergency mode; another emergency could absolutely ruin you financially. If anything, now is the time to tighten up your safety nets. Make sure you’re properly insured and prepared for any other potential setbacks.

    Related: How to Get Cheap Renter’s Insurance

    Find Ways to Earn More

    Easier said than done, I know. But the thing that helped the most in rebounding from my financial disaster was focusing on how I could earn more money. This includes:

    I also started investing and maxing out my retirement and doing all the things you’re supposed to do in order to reach financial security. Three or four years later, I can safely say I’m financially secure and can have potato skins anytime I damn well please.

    Related: A Beginner’s Guide to Investing Money

    My experience is also a good reminder that Certified Financial Planners have a purpose. Had I consulted a CFP before switching careers, I could’ve saved myself a lot of headache. These days, I write and research money for a living, but I’ll still talk to a professional for any major life milestones. You never know how much you don’t know.

    Photo: Rafael J M Souza.