What to expect when expecting to get ... laid off!

Prepare thyself for unemployment
If you’re smart, you’ve been stashing money in an emergency fund ever since you got your first paycheck. Yeah, we haven’t been religious about it, either. So let’s get smart already! Financial responsibility starts with not spending everything you make. You need to save money from every paycheck, and you need to be doing this whether there’s a risk of layoffs or not. Michael Rubin, founder of financial education company Total Candor and author of Beyond Paycheck to Paycheck: A Conversation About Income, Wealth, and the Steps in Between (Wachtel & Martin, $24.95), says an emergency fund should contain enough money to cover three to six months of expenses. (If that sounds like a lot of cash, remember: Six months of expenses isn’t six months of income—it’s rent, monthly bills and food.)

Getting laid off is definitely an emergency, but usually people get some advance warning when their company or industry is in trouble. (Hint: If you work in finance, real estate or the media, you may be in layoff land soon due to the crappy economy.) Rubin says this forewarning is a good thing—take it as a nudge to start saving more. “You never get into trouble because you save too much,” he adds.

Easier said than done? Not really. Rubin suggests starting small: Think twice before eating out; make those special occasions count. (If that hurts too much, at least start bringing lunch to work.) Review your cell-phone bill to see if you’re paying for more minutes than you use. Then take a bigger bite out of your expenses: If you rent and your lease is up, move to a cheaper apartment.

Finally, spend some money. You read that right. “If you go on such a spending diet that you’re living a life of austerity, that doesn’t work,” Rubin says. Take stock of what you can spend, what you need to save and, finally, what you can splurge on. If it’s a $3 cupcake every week, it’s just a $3 cupcake.

What to do with the money you’re saving? Emergency funds should be put in a high-interest savings account (ING’s online Orange savings account, ingdirect.com, offers one at 3 percent).

But if you’re planning to make manual transfers into savings every month, you’re kidding yourself. Set up an automatic transfer; a good day to transfer is around payday. That way, Rubin says, your money is “already saved before [you] have time to spend it.”

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