3. Review your expenses
The usual advice, when you're struggling to get from paycheck to paycheck, is to trim the relatively small expenses -- the lattes, the dinners out, the cable-TV bills.
But if you've cut those and still can't make ends meet, your problem is probably your big expenses: what you're paying for shelter, transportation, utilities, food, child care and insurance, plus your minimum loan payments.
These costs make up your must-have expenses, and if you want a balanced financial life, they should total 50% or less of your after-tax income. That would leave you 30% to spend on wants (clothes, vacations, gifts, etc.) and 20% to pay down debt and save for your future.
Reducing those big expenses isn't easy, but keeping your overhead in line with your income can give you far more flexibility to handle financial setbacks. Read "The 50/30/20 budget fix" for more.
Got your budget in balance? Even if your cash is flowing just fine, it's still important to check for leaks. Jeff Yeager, the author of "The Cheapskate Next Door," conducts periodic "spending autopsies" to figure out where the money is going and what expenses are getting out of hand.
You can go old school, as Yeager does, and do this by hand. Gather bank and credit card statements from the past couple of months and add up what you spent in various budget categories. Or you can use an online service such as Mint.com, which can automatically download transactions and total them by category. Spending on groceries, entertainment, pay television and subscription services are good places to look for savings.
4. Create your survival plan
An emergency fund can help you survive a job loss or other setback, but it can take a long time to save up sufficient cash. In "The 10 Commandments of Money," I show how it can take a typical family more than two years to pile up a fund equal to three months' worth of their expenses.
That's why an emergency fund shouldn't be your priority; you don't want to delay important goals like saving for retirement or paying off debt while you laboriously build up your cash stash. Instead, try to get $500 in the bank to cover the small emergencies, and make sure you have access to at least some credit to help you meet bigger setbacks while you get on track with retirement savings and debt repayment.
Once your toxic debt is paid off, you can start funneling the money you were using to pay that debt into your emergency fund.