smart spending

5 ways to outlast deflation

2. Build emergency savings 

Most financial experts recommend consumers have a rainy day fund of three to six months of living expenses in cash tucked away for emergencies, such as a sudden job loss.

With unemployment rising, some advisers are raising that target to six to nine months.

Switching to a saver's mind-set may be a challenge for some spenders.

"It's a huge culture shift," Greenwood says.

But for many people, the process is under way already. Consumers are being more cautious as a result of the drop in the financial markets and heightened fears of a deep recession.

Holding tighter to your wallet now actually can pay off later. For example, financial planner Francis says, people who spent less during the holiday season are likely to reap the benefits of sales in the first part of the new year.

"There are going to be unbelievable deals to be had," she says.

3. Take control of finances 

Getting a firm grip on your financial situation can help ease fears that rear up when headlines turn unrelentingly bleak.

"There's not a lot that we can control, but we can control what we spend," says Francis.

Most financial experts advise consumers to draw up a budget if they don't already have one. This reveals where spending is going and helps consumers make adjustments.

If you don't like budgets, there are other ways to get your finances on track.

Save for specific financial goals by setting up automated transfers from your main bank account to a second account. Money in the second account can be earmarked for specific goals, such as college funds for your children, a retirement nest egg or vacation money.

Software -- such as Microsoft Money and Quicken -- and online sites such as can help you track where money goes. These tools tie together your accounts and offer a clear picture of your financial bottom line.

"Even those individuals who have the most plush emergency-fund cushions underneath them … are looking at their everyday expenses using these great online resources to give themselves a little bit more wiggle room and a feeling of financial security," Francis says.

4. Become indispensable at work 

Deflation can take a toll on jobs. Should your employer need to make cutbacks, you'll want to be last in line.

Try to make yourself indispensable at work. Don't show up late. Be on top of things.

"Make sure that your employer knows that your talents are definitely needed," finance professor Cherin says.

What's more, keep your eyes open for opportunities elsewhere. If your job is eliminated, you'll want to have another place to go to help make a smoother transition.

Start renewing your network by meeting with former colleagues and other contacts for lunch or coffee. Join social networking sites such as LinkedIn or Facebook, which can help you stay in touch with people.


Refreshing your network can help you keep an ear to the ground for job openings, as well as keep you current about areas in your industry likely to grow.

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