As the recession continues to deepen, what should you be doing with your discretionary money at the end of the month, after your basic living expenses are paid? Conventional advice has, in the past, touted the benefits of paying off high-interest debts as quickly as possible, then dividing your money to pay off debts and set some aside for savings. But in today’s economic slump, there are certain scenarios in which you may want to consider a different approach.

If there’s a chance you could lose your job …

Let’s face it, there probably aren’t many jobs that are 100% secure in this economy. If you have reason to believe you’re likely to get laid off, the best thing you can do for yourself is pay off debts. When you’re laid off, your income will be reduced to the amount of unemployment benefits you’re eligible for, and chances are you won’t have access to additional credit. Paying off as much debt as possible before you’re laid off will increase your available credit line in the event you need to access more money than you receive through unemployment benefits.

However, if the worst happens and you do lose your job, some financial advisers recommend reducing all debt payments, including those on high-interest credit cards, to the minimum only. When you’re unemployed, it’s more critical to make the rent or house payment, plus utility bills, before throwing extra dollars toward credit card balances.

If the debts you have are “good debts” …

Some people try to pay their mortgage off early. Typically, though, it’s better not to make additional payments on low-interest, tax-deductible debt like a fixed-rate mortgage unless you have a lot of extra money, because the IRS refunds part of the interest you pay on a home mortgage when you itemize your tax deductions. If your only debt is a home mortgage, you’d be better off saving for retirement or your kid’s college than you would be paying your mortgage off earlier.

Another source of “good debts” are student loans (usually). They often have lower interest rates than other sources of debt, and qualifying interest on school loans can be written off at tax time for as many years as it takes you to repay the loans. Make your monthly payments, but use any additional money to invest or save for your future.