Gary Gilgen, director of financial planning for Rehmann Financial, an accounting, financial services and consulting firm based in Troy and Saginaw, Mich., also talks in terms of helping clients differentiate between needs and wants so they can make rational plans.

"I've been in this business for 33 years," Gilgen says, "and a decade ago it was recommended people have two to four months of cash on hand to live on in case of an emergency. Then it went to three to six months, then eight months, and recently people have been saying you need 12 months of cash to pay living expenses, but a lot of people just do not have that available."

Gilgen says a lot of his clients thought they would get another job within a couple of months after being laid off. "Now I have more than 30 clients who have been out of work for more than a year. They believe they will find work eventually, and it will pay what they were used to making, but in the meantime I have an $85,000-a-year engineer from the auto industry who is now making $32,000 a year, and we have to make adjustments."

He cites one situation he heard of recently where there were 165 engineers applying for one auto industry engineering job. "So some people are going to find it difficult to get a job in their field," Gilgen says.

You may have to be an incurable optimist as your clients stare down continued hardship. David Blaydes, president of Retirement Planners International in Naperville, Ill., says the current situation may actually be easier for those losing jobs because so many others are in the same boat or because the individuals have been through it before.

"It is so common now to lose a job or be downsized or demoted that it has less of a negative impact," Blaydes says. "I have clients who are on their second, third or even fourth job loss. Some are accepting reduced benefits or working longer hours, but most are just being terminated.
Dealing with the client's emotional state is the most important thing at first, he says. "You have to give them the emotional and mental ability to deal with the situation, then deal with the finances."

"I try to get people to look at this as an opportunity," says Gilgen, "although they have to make some hard decisions. If they are in a field where there are no jobs, I advise them to get re-educated if at all possible. What else have they thought they might enjoy doing?"

In the meantime, Mecca recommends that clients look at every possible way to cut expenses: that they raise the deductibles on their insurance, remove riders from insurance policies, use dividends to pay life insurance premiums, eliminate cable television, renegotiate the price of a home to lower property taxes, modify a mortgage to an interest-only plan for a few years and negotiate with credit card companies to reduce interest charges. If the clients are older, he suggests they consider a reverse mortgage.

Mecca's clients have looked at home and car insurance to see if they can raise deductibles. If possible, their payments for life insurance may need to come from the cash balance for a while.

"For their investments, we look at two buckets. Unqualified money stays in an emergency fund to live on in case it is needed," he says. "For qualified money with tax benefits you want to keep it invested, but you may be forced to take some interest and dividend to pay for emergencies. Depending on the client's age, that can sometimes be done without a penalty if it is repaid."
Others facing what they hope is a temporary hardship become inventive and develop a sideline of work to tide them over. In some cases, credit may be needed to pay expenses or a home equity loan may be advisable, but Gilgen warns clients not to spend the money as if these are continuing sources of income because the money will not renew itself. Some clients are eligible for a 72(t) distribution from retirement accounts without penalty and can use that money temporarily.