It might seem counter-intuitive to focus on saving money instead of paying off debt, but having a $1,000 emergency fund in place first provides a financial cushion so that unplanned expenses, such as medical bills and home repairs, don't completely derail your debt-repayment plan.
By prioritizing their emergency fund, Cherie Lowe, author of "Slaying the Debt Dragon: How One Family Conquered Their Money Monster and Found an Inspired Happily Ever After," and her husband Brian gained the momentum they needed to pay off more than $127,000 in debt. "We had actually tried three or four years prior to try and pay off debt, and we did not have that safety net in place, so when we got discouraged or when something would happen, we just quit," Cherie tells CNBC Make It.
But putting $1,000 in the bank first created the freedom the couple needed to start funneling as much as they could towards debt.
In "The Total Money Makeover," financial expert Dave Ramsey explains that this strategy works because when people face an emergency while trying to pay off debt they often feel "guilty that they had to stop debt reducing to survive." He writes, "if you use debt after swearing off it, you lose the momentum to keep going."