If you’re faced with a layoff, here are some things you can do to prepare:

• Prepare a written budget. This clarifies your cash-flow situation and helps you with the following strategies.
• Dump debt. Extra debt beyond the home mortgage and perhaps car payments—especially high-interest credit card debt—can weigh very heavy if you are laid off. Pay off as much debt as you can while you still have a job.
• Build a cash reserve. Ideally, you already have an emergency fund in place for just this sort of possibility, preferably with at least three to six months of cash to cover bare-bones expenses. If you don’t have such a fund, or it’s not well funded, put cash in it now while you can afford to.
• Cut expenses. To free up cash to pay off that extra debt, feed the emergency fund and perhaps even to test run a bare-bones budget in the event you are laid off, tighten your financial hatches as much as possible. Look at what expenses you could do without or reduce if you were to become unemployed, such as entertainment, clothing, and meals out. Surprisingly, many unemployed workers try to maintain their employment lifestyle, often by piling up credit card debt, dipping into retirement savings, or running through their lump-sum severance package.
• Start scouting for jobs. This includes not only outside firms, but positions that may be available inside the company. As odd as it may seem, even though the company may be laying off workers in some departments, it may be hiring in others—often from the inside first. Keep looking for work once you are laid off. Amazingly, it’s common for unemployed workers sitting on top of generous severance packages or lump-sum retirement payouts to postpone looking for work for months. Take your layoff as a good opportunity to upgrade your marketable skills.
• Negotiate an exit package. If the pink slip arrives, you may be eligible for a substantial exit package. You may have options, such as taking a lump sum or taking a salary continuation package that might include company funding of a health care plan or your retirement account for a while beyond severance. You also may be in a position to negotiate a stronger exit package than initially offered. Review any exit package options with your CERTIFIED FINANCIAL PLANNER™ practitioner.
• Continue health insurance. Don’t go without! If the company’s exit package doesn’t continue your group health insurance, consider continuing the coverage under COBRA. This is a federal law that requires many employers to allow unemployed workers to continue group coverage, usually for up to 18 months, as long as the worker pays the premiums.
• Don’t count on unemployment insurance. It won’t begin to make up for your lost wages, though every little bit helps. Keep in mind when calculating your post-layoff income that unemployment insurance income is taxable and it’s short term.
• Don’t touch your retirement funds. Try to avoid borrowing or withdrawing funds from your retirement accounts, or spending lump-sum retirement payouts from your former employer. The layoff probably will be temporary, but retirement isn’t. Pulling funds out early could cost a lot in taxes, penalties, and lost growth opportunities.

This article was submitted by the Financial Planning Association, the membership organization for the financial planning community. FPA members are dedicated to supporting the financial planning process in order to help people achieve their goals and dreams. Submission of this article does not imply an endorsement or recommendation of the Financial Resource Center site