If you don't have any money in savings, then getting a $1000 between you and life could be challenge. This step needs to be done ASAP. Go crazy- have a yard sale, sell stuff on craigs list or Ebay. I learned recently that Ebay will waive the seller fees for up to 5 auctions a month. Check it out. But no matter how you get that $1000, get it as fast as you can. Also I must add, if you are behind on any bills (mortgage or utilities) get current on these bills first. Of course, I'm not talking about old, bad, charged-off debts. You just don't want to get your lights cut off, be foreclosed on or have your car repossessed in the process.
Remember, this is an emergency fund not an investment account. You can either put this in a savings or money market account at your bank or keep it in cash in a safe in you house. Some of you (especially you men) will be tempted to use this money like an investment. DO NOT put this money in a CD or retirement account. It's not there to earn interest, it's a security blanket. Wherever you keep it, the point is that you can access it easily in an emergency, but not so easily that you spend it on non-emergency things.
Now to those of you who already have this much money and then some in the bank. I am going to suggest a very radical idea and to you savers this will sound crazy. Drop your savings down to a $1000, use the rest to pay down on your debt. I know, bare with me. Consider this, if you have a paid for car would you borrow money against it just to keep the money in a savings account? Keeping a bunch of money in the bank when you have a bunch of debt sitting out there is doing the same thing. It doesn't make sense to earn at best 2% in then bank when you are paying 5-30% interest on your debts. The thing you need to remember is that this is only a temporary step because after your debts are paid off you will build up that fund again.
Here are a few cautions to go with this advice. Only do this if you are committed to the process of getting out and staying out of debt, as fast and intensely as possible. If you are going to continue to borrow money or mosey your way out over a period of many years then, don't do this. The other caveat is, don't do this if you are not in agreement with your spouse. It will create undo stress in your marriage. These issues go deeper than just the money and need to be worked through before you take action. However, if your spouse is willing to lower it some, say down to $1500 or $2000, that's a good start. As he or she gets more comfortable with the idea and you see progress, then you can drop it down again to the $1000.
One last thing. I said that this is not meant to support you if you lose your job. If the word around the water cooler is that layoffs are coming and you fear that your job is on the line then please, pile up as much money as you can to prepare for the storm. After the threat passes then you can use that money to pay down debt. Obviously there is only so much you can predict but if there are clouds on the horizon then hunker down and get ready for them.
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