If you're laid off, consider
putting your house to work.

Financial Backup

You know the mantra: Experts say you should have three to six months worth of living expenses set aside in a safe, easy-to-access account, such as a money market. Indeed, cash on hand beats borrowing any day, so if you haven't already built an emergency fund, commit to doing so now.

As you evaluate your financial safety net, don't overlook your home's equity. A home equity line of credit is a great backup if you have an extended layoff or steep unexpected expenses, like medical bills.

A home equity line of credit is a flexible way to borrow against the equity in your home. Once you open up a home equity line with your lender (in a process similar to applying for a mortgage, only less involved), you can borrow from it (up to a set amount) when you decide you need to, and you'll only pay interest on the money you borrow. As long as you don't borrow anything, you won't owe any interest.

Most home equity lines come with variable interest rates, though a few offer fixed rates. And these days, lenders offer many ways for you to conveniently tap your available credit, most often by writing checks or using credit cards linked to the line of credit.

Do not confuse a line of credit with a home equity loan. With a home equity loan, by comparison, your lender doles out a lump sum and you're typically charged a fixed interest rate; you then repay the loan in fixed monthly installments. Home equity loans are best reserved for those times when you need a set amount of cash, for example, to complete a home improvement, start a business, or consolidate high-interest debt.

By contrast, a home-equity line of credit is more like a safety net: there if you need it, but not in your way when not in use.