CRYSTAL LAKE, Illinois (CNN) -- Karin Kubacki no longer buys clothing or toys for her 7-year-old son, Max.
Karin and Chris Kubacki are cutting back to make her severance and unemployment pay last a year.
She avoids driving her 8-year-old Honda Civic unless absolutely necessary and has no plans to repair a second vehicle, an 11-year-old Ford F-250.
Bubble baths and Hershey bars are now her few luxuries.
These are among the cost-saving measures Kubacki is taking to make her 13 weeks of severance pay last a full year.
Kubacki, the family breadwinner, was laid off July 1 from a job she loved -- software project manager at Accenture, where she had worked for 15 years. At first, she was stunned. "I had this impression that someone had grabbed a big vacuum and sucked all the air out of the room. It was like I couldn't get my breath," she said.
Her husband, a former schoolteacher who is a stay-at-home dad and a woodworker, feared for the family's financial future.
"At first there is the panic, 'Oh my gosh, we are going to lose the house tomorrow and live in a cardboard box,' " Chris Kubacki recalled. Watch the Kubackis discuss how they've handled Karin's job loss »
Yet his wife was determined to make her loss an opportunity to spend more time with the family while taking time to find another job she would love as much as the one she had just lost.
So the Kubackis are trying to make Karin's severance, unemployment checks and some extra cash Accenture provided to pay for an extension of her health insurance last a full year. They are determined to keep paying the mortgage on their home in Crystal Lake, Illinois, a Chicago suburb, and not dig into savings -- all on an expected pre-tax income of $54,000, a little less than half of the family's normal earnings.
Do you need to economize? To find out, analyze your emergency fund, savings and debt. Here's how:
Emergency fund: This is ready cash in case of a job loss, disability or other crisis. It should equal six months worth of essential expenses.
Savings ratio: Divide your annual savings, including employer matches, by your annual income. (If fully employed, you should be doing better than just meeting your expenses.) This ratio should be .10 or higher, meaning you're saving at least 10 percent of your annual gross income.
Debt ratio: Add up your monthly debt payments and housing costs, including mortgage principal, interest, insurance and property taxes, and divide the total by your monthly gross income. The result should be .36 or lower, meaning you're spending 36 percent or less of your income on debts and housing.
Are you spending too much and saving too little? Follow these steps:
Monitor spending: Track your spending from credit card and banking statements, and itemize your spending for a month.
Categorize spending: Is it a necessity, discretionary or a luxury?
Decide what you can give up.
For more money-saving tips, go to CNNMoney.com
"We have been frugal people, and we have tried to save as much as we can, and that is one of the reasons why I have been able to stay home with Max," said Chris, who builds wooden toys for his son.
But never have the Kubackis been as frugal as they are now.
For the first time, the family is living by a strict budget. They are saving by:
• Biking and walking rather than driving, whenever possible
• Rarely going out to restaurants
• Finding enriching community activities for their child that cost little or nothing
• Taking out books from the library
• Purchasing only absolute necessities and buying what's on sale.
"There are no luxuries now. Before, we had a lot more where we could say, 'Let's go do this.' Now it's a lot more careful," Karin said.
"When I had a job, when I shopped, I would make impulse purchases. Now, no way."
Not only is diminished consumption not as painful as it might seem, the Kubackis say, but the change has also brought a fuller and more enjoyable lifestyle than at any time when Karin was earning a regular paycheck.
"We can have all kinds of fun doing things that don't cost anything," Chris said.
Chris concedes he has felt internal pressure to get a job, but the couple agrees that for now, they prefer to avoid that to be able to spend as much time together and have Chris available for Max.
After adopting a frugal lifestyle, the Kubackis say they now really appreciate life's little luxuries.
"If you pick just a couple of luxuries like Hershey bars, then you really enjoy 'em. And if you have a lot of luxuries, then they become necessities. But if you only have a couple, boy are they terrific," Karin said.
Even though neither Karin nor Chris now hold jobs, they are still giving 10 percent of Karin's unemployment check to their church. Living only a few doors from the neighborhood food pantry, they see frequent reminders of their blessings.
"So I don't have a job right now," Karin said. "We've got a house. We've got cars, we've got food. We have nothing to complain about."
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