Layoff in your future? Plan now.

Can we ever really be 100% secure in our jobs? Of course not. Even the most stable companies are vulnerable to downturns in the economy or unanticipated problems like floods or fires. With the knowledge that you might someday be downsized or otherwise laid off, it makes sense to plan now for that possibility.

If you or your spouse lost a job, do you have enough in an emergency fund to carry you through? Sadly, most Americans would probably say no. But it's not too late to start on an emergency fund, even if you're only able to put $50 or $100 a month into it. I have a savings account that automatically takes money from my checking account each week. The money in that savings account is untouchable, except in the case of a dire emergency.

What expenses could you cut out of your lifestyle if your income was reduced? It's important to know what bills absolutely must be paid each month, versus what you're spending on unnecessary things. I regularly update my budget to reflect the minimum amount of income I need each month to pay the bills, versus what I actually spend each month. It's easy to see that I've got quite a few expenses each month that could be cut out of my budget if my income dropped.

What could you do if you were desperate for money? If you absolutely had to get more money coming into your house, is there a job you could take or a hobby that could earn you some money? Maybe you could work part-time at a bookstore while looking for a new permanent job. Maybe you could turn your eBay hobby into a way to earn a little extra money. Maybe shoveling snow could earn you a few extra bucks to pay the bills. It's important to know that you've got some options if you need help paying the bills... so plan now for those emergency situations which might require some creative money-earning.

Will your debts put you under? If you lost your job, would you be able to make your minimum payments on your house, car, and credit cards? If making those payments would become a problem very quickly, you probably need to reevaluate your use of debt. When times are good and we're doing well at work, it's awfully easy to make another large purchase on a credit card. You'll pay it off eventually, right? But many consumers don't stop to think of the ramifications if they lose a stream of income. Think hard about your debt now, and consider trying to reduce it as much as possible before you come upon hard times.

It's important to think about worst case scenarios now. If you do experience a job loss or a layoff, emotions can be high and it may be hard to look at your finances objectively. Plus, by looking at your finances now, you might find ways to be a bit more thrifty and budget-conscious. Prepare now and you'll be much more ready if you're the unfortunate victim of downsizing or an economic downturn.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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