An emergency fund is a very important tool in your quest to be debt free, staying debt free, and your overall financial fitness.  It shows that you CAN find money to save and it also prevents you from going back into, or further into, debt.

Start small, save one months expenses before making any more than the minimum payments on all bills.

The emergency fund should only be used for true emergencies.  Examples would be furnace needs repair, car needs repair, etc.  This should not be used for new toys for yourself or even for gifts for others when you come up short.  Those types of items should be budgeted for in your monthly budget.

The best thing that saving a months pay will do for you is protect you from either going back into debt, or putting you further into debt when trying to get out.  This will give you some protection to help aid in your quest to becoming debt free.

Ideally, your emergency fund should eventually be at least 6 months pay.  After saving your first months pay, pay off all other debt besides your mortgage and then start building you emergency fun.  The monthly expenses to calculate the 6 months expenses should include everything from your mortgage to your cable TV bill.  Anything that you are not willing to cut should be included.  Obviously if times do get tough enough, canceling cable TV would be a wise idea!  Basically take a look at your budget.  Everything listed there should be included in calculating your emergency fund.