Here’s my special report for dealing with potential unemployment. You’ll learn what the warning signs are; how to prepare for a layoff; what to do if you lose your job; and if starting a business is right for you.

No one wants to be blindsided by bad news, especially when that news means you don’t have a job anymore. If you’re worried about job security, keep your eyes and ears open for the following signs:

Your employer is facing financial trouble.

Pay attention to the company’s financial targets and whether your company is meeting them. Declining profit margins, revenues, or stock prices are potential indicators of a problem. If your firm is acquired, remember that acquisitions often mean layoffs as the merged firm eliminates redundancies.

A new emphasis has been placed on cost cutting, including routine expenses.

Have training and travel budgets been cut, or office supplies not ordered? Worse yet, have staff members been asked to take a pay cut? It is prudent for companies to cut back, but be aware that when easy costs have been eliminated, the next way for companies to reduce expenses is to reduce payroll.

People are treating you differently — and not in a good way.

Your boss won’t look you in the eye, your workload has been reduced, or you’re not being included in new projects or important meetings. Being asked to cross-train co-workers is also a bad sign.

A hiring freeze is in effect.

Even if the company hasn’t instituted an official hiring freeze, pay attention to whether new positions are being advertised or filled. If HR staff members seem really busy despite a hiring freeze, that’s not good. They could be gearing up for layoffs.

Other friends in the industry are losing their jobs.

If many of your friends with similar positions in similar industries have lost their jobs, maybe you should be worried about yours, too.

The rumor mill is in overdrive and all the higher-ups are busy in closed-door meetings.

Office gossip isn’t nice, but it can serve a purpose at times. If you’re hearing rumblings of potential layoffs, don’t ignore them, especially if you’re seeing other signs.

How to Prepare for a Layoff

Prepare your family.
Discuss the family’s finances with your spouse and kids — anyone old enough to understand the conversation — and let them know a change in lifestyle might be needed. Try to make it a positive: Turn cost-cutting into a game and see who can come up with the most ideas to save money. Alter current practices — borrow DVDs from the library instead of going to the movies or subscribing to cable TV. Talk often and openly so each member of the family can contribute and feel like a part of the solution. Open communication also lets family members provide emotional support when one person gets upset.

Increase your cash reserves.
Start living as though you’ve already been laid off. Take the newfound cash and bank it. Aim for at least a year’s worth of living expenses — and 24 to 36 months’ worth is even better.

Examine your credit.
Apply for new lines of credit — both home equity loans and credit cards. Do it now, while you still have an income. If you have credit card debt, try to lower your rates now.

Use your health insurance while you still have it.
That means going to the doctor or dentist if you’re due for an exam. Have treatments — including surgery — that you have been putting off. Tell your doctor that you might lose your job, so he or she will agree to give you a 90- or 180-day supply of prescription medication before you lose your coverage. After you lose your job, you may have to pay for your own insurance for a long time, so be sure to budget for those premiums.

Make yourself more valuable.
Take on more responsibilities at work to show the company your true worth. Keep a positive attitude even if you’re feeling lousy. And — whatever you do — don’t act as though you’re too important to be laid off. Everyone is fair game — even CEOs.

Continue to fund your 401(k) plan.
But never borrow from it. If you’ve made the huge mistake of borrowing from your plan, repay that money immediately, even if you must borrow the money elsewhere. If you do get laid off, you’ll have 30 to 90 days to pay it back or face taxes and IRS penalties on the unpaid balance.

Plan to negotiate severance.
Since you suspect it’s coming, take the time to research what a fair severance package would be and determine how you will negotiate for it. Start high, based on your experience and years of service, and be willing to compromise.

Postpone nonessential spending.
If you have a vacation, renovation, or other nonessential expense planned, cancel it.

Take time off.
If you’re convinced that you’re about to lose your job and you’re unlikely to be compensated for unused vacation or personal days, take those days off now — and use that time to start seeking other work.

Keep an eye out for other opportunities.
Refresh your resume and develop your network. Start the job hunt.

Remember that you are not your job.
People lose jobs all the time. While a job loss is stressful, it shouldn’t feel like a death in the family. Don’t become too emotionally attached to the company you work for, and don’t link your self-esteem to your job. Business is business. Your new job is getting your next job.

What to Do If You Lose Your Job

There’s an old joke about the difference between recession and depression: A recession is when your neighbor loses his job, and a depression is when you lose yours. Unfortunately, there’s nothing funny about getting laid off. If that’s happened to you, these tips can help you.

1. File for unemployment benefits.
Unemployment insurance benefits are paid to eligible employees who, through no fault of their own, lose their jobs. Each state sets its own benefit amounts, eligibility requirements, and benefit length. (Most states offer benefits for up to 26 weeks, though many have recently extended benefits for several more weeks.) To apply, contact an office of your state unemployment agency. It generally takes two weeks for benefit payments to begin, the first being a “waiting week,” which is not reimbursed, and the second being the time lag between eligibility for the program and actual payment of the first benefit.

2. Examine your finances.
Let your financial planner know you’ve been laid off so he or she can help you evaluate your situation. First, identify your sources of income, including severance, unemployment benefits, and cash reserves. Your planner can also show you how to generate income from your investments to reduce any gaps between your income and your expenses. And you don’t need us to tell you to reduce spending, right?

3. Evaluate your health insurance coverage.
Find out how long your former employer will maintain your coverage. See if your spouse has a plan you can join, and explore buying an individual policy. If you worked for a company with 20 or more employees, you’re eligible for COBRA, a law that ensures you can continue coverage for 18 months, but you must pay for it, and it’s expensive. Thanks to one of President Barack Obama’s economic stimulus programs, the federal government now covers 65% of COBRA premiums for nine months, and this benefit helps those laid off as long ago as last September. To learn more about COBRA, contact your planner or visit
http://www.dol.gov/ebsa/cobra.html.

4. Transfer the money in your employer’s retirement plan to an IRA.
If your employer is experiencing financial trouble, get your money out of its retirement plan. Most employer plans have limited investment choices, so you can likely build a better portfolio — and secure greater ease of access to your funds — by moving the money to an IRA. Done correctly, there should be no fees or taxes for doing so.

5. Follow up on employer termination benefits, including references.
Losing your job is traumatic, and you may not have paid much attention when you were told about all the benefits available to you. Go back to your employer for a complete list, which often includes career counseling, job placement assistance, and references.

6. Realize that your new job is to get a new job.
No matter how generous your severance package, it is finite. That means you must start looking for work immediately. Update your resume. Tell everyone you know that you are looking for employment. (Don’t be embarrassed that you lost your job — nearly one in 10 Americans is out of work.) Your search might take time, so use the eight hours of free time you now have each day to search for your new job.

7. Consider a new career.  
Losing a job is an opportunity to move to the career you’ve always wanted. Go beyond your field and consider jobs that can exploit your skills. Talk with friends and family about the possibilities — they know your strengths — and write a resume targeting those fields.
Consider hiring a career coach to help you.

8. Know when to lower your expectations.
If you’re not having luck with your search, you may need to compromise. Create a series of drop-dead dates: one for when you will settle for less than your dream job; a date for when you will lower your salary expectations; and a date for when you will accept any position so you don’t run out of money. It probably won’t come to that, but you’ll feel a little better knowing you have a plan.

9. Enjoy your time off.
Consider yourself on a forced vacation. You have a guilt-free opportunity to spend more time with your family, recharge your batteries, and support the community through volunteering. When an interviewer asks you what you’ve been doing since you lost your job, he or she will be impressed with your outlook and your positive attitude.

Feeling embarrassed about being a ‘government welfare’ recipient? Good!

That attitude will help spur you to find work quickly. But in this economy, losing a job and finding the next one can both be beyond your control, so don’t feel that being out of work constitutes personal failure on your part. And remember that your employer has paid unemployment taxes for just this reason. Pride matters, though, so if you don’t need the money, it’s equally fine not to take it.

Is Starting a Business Right for You?

Frustrated job seekers often fantasize about starting their own business. The opportunity to be the boss, succeeding or failing by their own talents, is a powerful draw.

But the truth is that few are meant to be entrepreneurs. At least one-third of new businesses do not survive past two years, and 56% don’t make it past five years, according to the Small Business Administration.

The Bureau of Labor suggests that anyone looking into going into business for him- or herself should ask the following questions:

• Will becoming self-employed meet my career goals?
• Am I willing to work long hours each day?
• Do I have skills in a profession, trade, or hobby that can be converted into a business?
• Does my idea for a business effectively use my skills and abilities?
• Am I a good planner and organizer?
• Can I make my own decisions?
• Am I willing to postpone my plans in order to get more education, if necessary?
• Does my family support my endeavor?
• Can I afford the financial and emotional risks if the business fails?

Starting a business is risky. For starters, you need capital because it may be years before you start producing revenue and enjoying profits. In the meantime, you’ll spend hours developing your business — many of them on mundane tasks like bookkeeping, cleaning up, and paperwork.

So if you’re turning your photography hobby into a business, know that you’ll do a lot more than take pictures: You’ll market to customers, schedule events, and bill clients. You’ll have to pay for your own insurance, you’ll enjoy no paid vacations or time off, and you’ll spend lots of money on attorneys and accountants. And instead of getting rid of your boss, or being your own boss, you’ll now have dozens, even hundreds, of bosses: Every customer is your boss, and you’ll do what they all say.

Still interested? Independence comes with a price. You’ll have to dedicate more time to your business than you did to your old job. Your family must be on board, since they’ll have to make sacrifices, too — you’ll see less of them and it may be a while before you make any money. You’ll have to be decisive; success (or failure) hinges on your decisions. If you decide to start a business with a partner, you’ll have to make sure you’re in sync and have plans for breaking up, which is inevitable (if only due to death or retirement).

This is not to discourage you from opening a business. Entrepreneurship is part of the American dream for many — myself included. Just be sure to go in with your eyes open and your sleeves rolled up.