Based on recent economic data, the chances that you're going to be laid off are higher than they were just a few short months ago. That's reason enough to be proactive about having a plan so that you can get by until you land another job.

You can buy a beginner's toolkit at Home Depot, and a first aid kit at CVS, but no retailer sells a severance survival kit. That's something you're going to have to make on your own, so here's how to do it.

List your severance package demands

Getting laid off can throw you off your game. You know you're supposed to negotiate with your employer for as much as you can get, but the stress of the situation can make it tough to think clearly. You don't want to end up arguing to keep your office calculator while forgetting to ask about your vacation time. Plan ahead by making a list of the things you'd want to fight for in a severance package. Be prepared to argue your case by proving the value you've brought to the company. Also, check to see what the policy is on cashing out vacation time and sick days, and if there's a formula for calculating severance pay. In some states, employers are mandated to pay out your vacation time in cash, but you'll usually have to say goodbye to your accumulated sick time.

Plan your cash flow

Assess your cash reserves and how long they'd last. If you can, start increasing these reserves while you're still earning a paycheck. Think about how you'd pay the bills if your cash runs out before you find another job. Try making an ordered list of resources that you can tap into, such as: cash reserves first, then a HELOC, then your rich uncle, etc. Consider your retirement accounts as off-limits; depleting your 401(k) will backfire on you down the road.

Filing for unemployment

If you've always had a job, you aren't going to be familiar with the process of obtaining unemployment compensation. Find out now, so that you can (if necessary) file soon after you get the bad news. You should qualify for unemployment benefits even if you receive a severance package. These checks won't be much in comparison to your former salary, but they'll help ease the blow.

Plan for health coverage

Don't expect to wing it without health insurance until you get a new job. The risk of disaster is just too great. Instead, price individual health policies; most households can get by with a high deductible plan in the short-run. That will protect you and your family against major catastrophes, while keeping the premiums to a minimum. You would be entitled to roll over your current policy into a COBRA plan, but it may be too expensive for your limited budget.

As depressing as it sounds, it really is a good idea to build your personal severance toolkit before you actually need it. In these turbulent times, you just don't know what may happen tomorrow.

    Published on August 1, 2008