By Grace Weinstein

It's no disgrace to lose a job—especially when the economy is contracting and entire industries are under siege. Nonetheless, it can be emotionally and financially devastating.

It may be easier to weather the financial impact if you follow this advice from the Financial Planning Association (FPA):

First, don't panic and don't make any hasty financial decisions. Instead, take a deep breath and assess your situation.

If you have received the word but not yet joined the ranks of the unemployed, think about negotiating your severance package. At the very least, don't accept an offered package without taking it home, reviewing it closely, and perhaps consulting a financial professional.

You may be offered a choice between taking severance pay over time or in a lump sum. Taking it over time, according to the FPA, may extend valuable employee benefits such as health insurance. Spreading out the payments may also keep you from jumping into a higher income tax bracket for the year.

Taking severance pay in a lump sum, on the other hand, helps avoid the risk that the company might go into bankruptcy and renege on promised payments. And, of course, you may prefer a lump sum if you want startup money for a new business.

Keep health insurance in force, if at all possible; uninsured medical costs could wipe out financial reserves. Choices may include continued employer coverage (consider this as you negotiate a severance agreement), coverage under a working spouse's plan, continuing employer group coverage (at full cost) under federal COBRA legislation, or taking a short-term individual policy for six months or a year.

Evaluate all your financial resources, including unemployment insurance; don't assume that you're ineligible because you've received severance pay. Keep severance pay itself liquid and accessible, in a money market mutual fund or money market account, so that it will be available to cover expenses until you're settled in a new job.

Consider using investment income, taking dividends and interest in cash instead of reinvesting them as you might do in better times. Consider selectively pruning an investment portfolio, but don't sell off long-term investments until you've worked out a realistic plan for dealing with your temporary financial shortfall.

Consider taking a loan from a cash-value life insurance policy. Keep in mind, however, that policy loans can have a significant impact on your policy's performance and future dividends. Also, any outstanding loan balance and interest will reduce proceeds paid to your beneficiary. And, of course, cut back on spending while using credit sparingly. Now is not the time to increase debt if you can possibly avoid doing so.

Finally, try to avoid dipping into tax-advantaged retirement funds. It can be difficult, if not impossible, to make up the income you will need in retirement.

For more information, the FPA's brochure, "How to Survive Financially After a Job Loss," is available free by calling 1-800-647-6340 or through the Web site at www.fpanet.org.