Answer: When you’re facing a layoff, you should be conserving cash. That means paying the minimums on any debt and looking for other ways to trim expenses as much as possible. Selling one of your vehicles might also be in order.

Try to avoid tapping any retirement savings, since you’re likely to incur penalties and taxes if you do so, plus you’ll lose all future tax-deferred return that money could have earned. Dip into other savings sparingly, as you may be without a job for awhile.

You need to batten down the hatches because you may be without a job for months. The median length of unemployment in July was nearly 15 weeks, up from 10 weeks in July 2008. A whopping five million people have been without jobs for 27 weeks or more. Given the environment, you should consider any job that will provide income and help you conserve your cash.

But furloughs are a far cry from vacations. You’re too worried to spend money going anywhere, but just hanging around the house can give you too much time to think–and worry even more.

If you’ve been furloughed, here are some ideas for making the most of your time off:

Create your layoff plan. Don’t stick your head in the sand: Your company’s in serious trouble if it’s furloughing workers. Review your finances and look for ways to build up your emergency fund. If there’s an expense you’d cut if you were laid off, trim it now and bank the extra cash. Read my “Survival Guide for the Unemployed” for tips about handling the worst if it happens.

Get serious about online networking. Build your profile on at least one professional networking site such as LinkedIn or Plaxo. Reach out to former colleagues, friends, old classmates. Many people find jobs not through their nearest and dearest but from “weak” connections: acquaintances, friends of friends. The bigger your network, the better your chances of uncovering your next great position.

Network offline, too. Check out professional or social organizations that might help you expand your sphere. Consider volunteering, not just for the contacts but for the sense of gratitude you’ll get. Resume expert Tony Bashera recommends writing down the name and number of every single person you know as a kind of master networking sheet, then working your way through it to let folks know you’re looking for your next post.

Build up some goodwill. Keith Ferrazzi’s book “Never Eat Alone” is the best networking book I’ve read, and he emphasizes the importance of doing good deeds for others without direct expectation of rewards. Write a glowing recommendation for someone, tell someone else about a job prospect, encourage someone who’s feeling down. This stuff is easy to put off in the rush of a typical workday but is so essential to building a strong network–and feeling good about yourself.

Tackle a (reasonable) home repair or improvement project. Survey your abode and make a list of all the projects you haven’t had time to tackle because you’ve been working too hard to save your job. Then pick the tasks that will give you the best payoff in money saved, money earned or sheer satisfaction. You could declutter the house and sell the excess in a yard sale, for example, or catch up on all those little painting and repair jobs to save yourself the cost of a handyman. Read “5 things it’s cheaper to do yourself” for more ideas.

If you elected to take COBRA — which lets laid-off workers continue with their former employer’s coverage for up to 18 months — the government will now subsidize 65% of COBRA premiums for up to nine months. The subsidy is limited to workers laid off from Sept. 1, 2008, to Dec. 31, 2009.

COBRA is not cheap. The average monthly COBRA premium for individual coverage is $388, or about 30% of monthly unemployment benefits, says the Families USA Foundation. The monthly COBRA premium for family coverage is $1,069, or about 84% of benefits. So getting those premiums reduced by 65% is a big savings.

Employers and health plans will be sending notices to former employees about the aid plan, and the U.S. Department of Labor will post updates on their Web site HERE.

The California Society of CPAs – the nation’s largest professional, non-profit state association of about 33,000 CPAs – suggests going through this checklist of questions when deciding what to do about COBRA:

1. Can you get coverage through your spouse or domestic partner’s employer?
2. Can you continue your coverage through COBRA?
3. Find out if your state has any laws or programs that can help you
4. Find out if you are eligible for Trade Adjustment Assistance and the Health Coverage Tax Credit that comes with it
5. Ask if you or any family members are eligible for Medicaid, the Children’s Health Insurance Program or VA coverage
6. If you can’t afford COBRA and can’t get help through any public programs, shop carefully for insurance on the individual market
7. And finally – realize that you may not be eligible for COBRA. (If your employer had fewer than 20 workers or went of out business completely and no longer has a plan – you don’t qualify.

Check out some of my previous columns on this topic:

• A survival guide for the uninsured

• Job at risk? Save your insurance

• How early retirees insure their health