In these financial times, layoffs are a possibility nearly everyone thinks about. They hope it won’t happen to them. But what do you do if you are the one laid off? Smart financial planning from Day 1 will help ease the pain as you move from one job to another.

Ideally, planning for a layoff will begin before trouble is in sight. Every month, set aside a little money in a special savings account for emergencies, till you have enough saved for a few months expenses. This money is your insurance policy, not only against layoffs, but sickness, car trouble, or other unexpected events. Trimming down on unnecessary expenses early can further provide a cushion.

Even after a layoff, however, there is still a great deal you can do for your finances. Sit down right away and make a list of your income. Be creative, since your main income is gone or going. Include things like unemployment, severance, tax return, any second income. Start thinking about hobbies that may make money for you, or skills you could hire out on a freelance basis.

Next, make a list of all your expenses, such as credit card bills and bank statements to get a true picture of what you’re spending. Prioritize your expenses, and start cutting whatever you can right away. Take a look at your debt, as well. If possible, work with your creditors to stop trouble before it starts by adjusting payment plans or consolidating debt to make fewer monthly payments.

The emotional punch that comes with a layoff can be devastating, but it doesn’t have to damage your life or your family. Try to be positive and look for the new opportunities that come with sudden freedom from your old job. Use it as a time to learn thrift, and teach it to your children. The good habits you pick up will follow you, even when you have a new job.