It is a never ending debate: which is more important, paying off debt or building up an emergency fund. It's a good question, and I heard a great answer today while listening to J.J. Montanaro of USAA speak at this year's AWAG conference in Garmisch, Germany.
When presented with this question, he replied that the first step in getting out of debt is to stop using credit. And the only way to stop using credit is to have another way to handle emergencies and surprises. And you can't handle emergencies and surprises if you don't have some sort of emergency fund. Therefore, the logical answer is that you need to have some sort of savings as the first step in paying off debt.
It is so sensible, yet so hard sometimes. Depending on your situation, even $500 might be enough to cover you so that you don't need to use credit when faced with an unexpected expense. That number goes up depending on your situation, including whether you own a home, have the potential to need to travel to see family, and any number of other specifics.
Once you've got that foundation of savings, you can attack that debt with less chance of having a setback. And not having a setback is a huge help in making progress. In this sense, you could say that having an emergency fund, even small, is the essential first step in paying off debt.
While I've always had this thought, I've never heard it expressed as clearly as J.J. presented it today. It made quite an impression on me, and I'm glad that I have another way to explain my thoughts to others.
I'm so glad I have the chance to learn from others. No matter how much stuff I know, there is always more to learn and different ways to look at things and new perspectives to consider.