A second emergency fund you never spend?
I ran across this idea in a book by some financial guru years ago. The book was packed with an odd mix of obvious and kooky ideas, of which this was one of the latter. For some reason, though, this kooky idea has stuck with me: Have an extra emergency fund with money that you'll never spend, even in an emergency.
A second emergency fund provides a two advantages, both primarily psychological.
First, there's a psychological effect on yourself that comes from knowing that you're not broke. No matter how bad things get, you've got a few hundred--maybe a couple thousand--dollars that you could put your hands on in a day, if you had to.
Second, there's the psychological effect on others that comes from being able to see that you're not broke. There are whole categories of con games that use "show money" as part of the scam, to make the con man seem trustworthy--or at least not too desperate for money. The point here is simply to use the same psychology that works for scammers.
For this to work--and the book emphasized this at some length--you never spend the money. You don't spend it to keep your health insurance, to keep your car from being repossessed, or to keep the electricity on. You don't spend it to keep from being evicted. (Which is worse--being out on the street broke, or being out on the street a month earlier with $1000 in the bank?) And, as long as you never spend it, you're never broke. You might not be living any better than someone who's broke, but you're not broke.
As I say, it's a kooky idea, but it's a kooky idea that has stuck with me.
For this particular purpose, I think savings bonds might be a uniquely appropriate vehicle. For one thing, savings bonds give you a handsome piece of paper that looks like it has some value, but that you can't just spend--you have to take it to a bank first and cash it in. The prepayment penalties on savings bonds are quite small, but are more than zero, which gives you an excuse for not wanting to tap the savings bonds, in situations where you are using them as "show money."
Would I do this? I don't know. I suspect, like most people, I'd be too optimistic. I'd go ahead and keep the power on, keep the sheriff from the door, hoping that one more month would be enough time to turn things around. If this idea works at all, I think it's not the psychological effects of having a little cash, but rather by helping you abandon a losing strategy before you're too far under. If you're not going to find work, then maybe you need to do something more drastic: Move back home with your parents, or into your brother-in-law's basement. Move to a bigger city, or out to the country. Those are hard measures to take, but if you have to take them, then sooner is probably better than later. This might help you take them sooner. But it's still a kooky idea.