This suggestion would not work for everyone, but I lost my job in December of 2010. I received a generous severance package and insurance for one year. The first thing I did was to eliminate all my debt. I took a portion of my 401K and paid off the house, second mortgage and credit card.
I then use the severance for monthly expenses, including food, utilities, etc. We eat out less. We did not buy season tickets to the Little Theater this year and we are keeping close tabs on all spending. With any luck, the severance package will cover 18 months instead of the year it was intended to cover.