The days of working for the same employer from graduation to retirement are history. The average worker changes jobs at least half a dozen times. In this era of corporate takeovers, downsizing, mergers, layoffs, and most recently, stunning corporate corruption, nobody is immune from sudden job loss.

You can be plunged unexpectedly into financial disaster, especially if you live from paycheck to paycheck. If you don't have an emergency fund or other resources to fall back on, you can quickly take on unmanageable debt, or you may feel forced to accept a low-paying job or a job you hate, which can take a toll on your emotional state and on your family.

Prepare for the Possibility of Job Loss

You may feel that your job is very secure and then walk in one day to be greeted by a pink slip. You don't need to be paranoid, but being prepared for the possibility of job loss will make it easier to deal with if it does happen. To be prepared, you need to know your net worth, set up a budget, save, and keep your debt low.

You should also have a feel for the stability of your job. How are your employer's competitors doing? Are they experiencing layoffs? Layoffs in your industry can be a good indication of the instability of your job, even if your employer has not yet made any cuts. If job layoffs have already occurred where you work, you should have your resume updated and be looking around for possible job opportunities that fit your skills.

Next, acquaint yourself with your employer's severance policy. Do laid-off employees receive severance pay? If so, is it based on years of service or other criteria? Will you be paid your accrued vacation balance upon termination? Knowing how much you could expect if you're laid off helps you calculate how much you need in your emergency fund for living expenses and can reduce the stress associated with waiting for the ax to fall if your company is reducing staff.

What will happen to your benefits if you lose your job? Will you be able to continue your health insurance benefits under COBRA? How much will it cost? It's foolhardy to go without at least catastrophic health insurance, so know what your other alternatives are if you can't afford to elect COBRA coverage (note that COBRA is often much more expensive than the monthly deduction from your paycheck — you have to pay the entire bill without the help of your employer). An illness or accident while you're uninsured could leave you no alternative but bankruptcy.

Update your resume and make sure it looks professional and polished and is free from typos. Compile a list of references, with job titles, telephone numbers, and addresses, and line up letters of recommendation, if possible. It's also a good idea to get contact information from coworkers, vendors, and customers so you can use it for networking purposes when you're looking for a job.

If the Worst Happens

If you get the pink slip, apply for unemployment on the first day of your layoff so you'll receive the maximum benefits for which you're eligible. Some people are reluctant to file for unemployment because they feel it's a type of welfare, but it isn't. Your employer contributes to your state's unemployment insurance fund as well as a federal unemployment fund. You earned those benefits by working. If you need them, use them.

Unemployment benefits are typically about half of your regular earnings, up to your state's cap, paid for a maximum of twenty-six weeks. Your state's cap is based on the average wages in your state. For instance, Massachusetts' cap is $362 a week, while South Dakota's is $274 a week. You'll be required to prove that you're actively seeking work while receiving unemployment benefits, and you must be ready, willing, available, and able to work. Unemployment benefits are subject to federal income tax, so you'll need to claim them at the end of the year. Be prepared for the additional taxes you may owe as a result.

During a period of unemployment, resist the urge to use your credit cards unless absolutely necessary for critically important expenses. If you can't make ends meet, contact your creditors, tell them you've lost your job but are actively seeking employment, and request an arrangement that allows you to make reduced payments for a limited time. If you have a good credit history, they will probably be willing to work with you.