Surviving a layoff with your savings intact

The layoffs that you've been hearing so much about have swept through your company. You've been booted from your cubicle. You're out of a job.

It's financial crunch time. So act like it. It's time to get serious about the money you have and the money you won't have once that final paycheck gets cashed.

Don't leave empty-handed
First off, you want to make that last paycheck as big as possible. Negotiate the best possible severance package that you can. Work the guilt.

"If you've been a good employee, they probably feel a little bit guilty," says Ginita Wall, a certified financial planner and co-founder of the Women's Institute for Financial Education. "Try to get some sort of golden parachute."

Ask for everything you can. Ask for more money, for continued use of a company car, for help with health care coverage. You won't get anything if you don't ask. So speak up. It's worth a shot.

Don't forget to apply for unemployment.

"You've paid for it. You may as well use it," Wall says.

Who couldn't use an extra couple hundred dollars a month after a job ends?

"If you walked by a couple of hundred dollar bills lying on the ground you'd pick them up. It's not just peanuts," Wall says.

Time for a cash diet
The next step is poring over your budget. It's time to make some serious adjustments.

"Really take a cold, hard look at what you've got coming in," says Howard Dvorkin of Consolidated Credit Counseling Services in Fort Lauderdale, Fla.

Also take a look at what money is going out and why. Decide what monthly expenses you can live without. Do you really need call waiting and three-way calling on your phone? What about all those extra cable channels on your TV?

"Look at your budget and cut back all unnecessary expenses," Dvorkin says.

"You'll be amazed at how thrifty you can get," says Catherine Williams, vice president of financial literacy for Money Management International."There's just tons of things we can do without."

Prioritize your bills. Make a list of monthly expenses that absolutely have to be paid. Topping the list should be your mortgage or rent, followed by utility bills, auto payments and insurance bills.

"We never want anybody to stop paying insurance. Because when they do that's when they have an accident," Williams says.

And don't forget about food. Everyone has to eat, although you should probably pass on any fancy restaurant dinners for a while.

You'll also want to keep paying on your credit card bills even if it's just minimum payments. If you're unable to pay a bill, contact the creditor as soon as possible. Don't wait until you're late.

"Always call before the payment is due. Creditors have more tools available to them before you miss a payment than after you miss a payment," Williams says.

Follow up the phone call with a letter.

"In a short, simple, less than a paragraph note, tell them what happened and ultimately what you want to do," Williams says.

"If you say 'What can you do for me,' they'll say 'Make your regular payments.' Have a number in mind that you can meet."

Say your minimum credit card payment is $50. Offer to pay $30 instead. Be realistic and be sure to pay this amount by the due date.

Emergency calls
If you've got an emergency fund, this is the time to raid it. "This is the emergency you've been saving for," Williams says. "This is the rainy day."

Liquidate low-interest earning investments such as money market funds and certificates of deposit. You may also want to sell stocks and mutual funds. The aim is to free up as much cash as possible to make up for the paychecks you won't be getting for awhile.

Think twice about cashing out a 401(k) or other retirement account. This is not the place to look for quick cash. Tapping into a retirement account should be an absolute last resort."You're going to owe taxes. You're going to owe penalties," Wall says. "People should consider working part-time rather than tapping your retirement account."

Just say no to those little plastic cards. This is not the time to charge up your credit cards. "You must, must cut down and completely avoid using your credit card," Dvorkin says. "Unfortunately, most people do just the opposite. They start using credit cards to live."

Try living off stockpiled goods, instead. Chances are, you've got more food in your pantry and more clothes in your closet than you realize. "Clean out the pantry. Make a meal out of what you find there instead of going out for a hamburger," Wall says.

Really take a look around your place. Do some digging. You may be surprised at what you find. There may be enough for a good garage sale.

"Have a garage sale," Williams says. "That generates a couple hundred bucks no matter what."

Waiting for the shoe to drop?
What about people who are employed but worried that a layoff may be headed their way?

Start building up an emergency fund. Most experts suggest stashing away three to six months living expenses. Do the best you can.

One way to free up more cash is by reducing your contributions to your retirement account.

Avoid making any big purchases. Rein in daily expenses as well. It could be something as simple as taking a packed lunch to work.

Homeowners may want to apply for home equity lines of credit. It will be much tougher to qualify for a loan once you've lost a job. So get a line now just in case you'll need one later.

A good strategy for two-income families is to try to make ends meet on one salary. The second salary could be socked away into savings.

"It's easier said than done," Dvorkin says. "But at the end of the year you'll feel a whole lot better."