5 ways to outlast deflation |
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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, Francis says people who spend 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 Web sites such as Mint.com 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," 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.com or Facebook.com, 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.
5. Look for opportunities
Consumers who have secure jobs, emergency funds set aside and sound financial plans may find that a deflationary economy is a great place to scoop up bargains.
Falling prices already are creating opportunities. Some first-time homebuyers are finding homes selling for 25 percent less than sellers were asking a year ago.
People beginning to build an investment portfolio now have a chance to buy stocks of solid companies at bargain basement prices.
Deflation also can offer opportunities to save on smaller purchases. For example, travelers may find trips offered at big discounts.
"During the Great Depression, there were a lot of millionaires created. These were people who took advantage of the opportunities that were in front of them," says Doug Lockwood, a Certified Financial Planner at Cornerstone Wealth Management, a consulting firm in Auburn, Ind.
By investing in assets when prices are low, consumers can use an episode of deflation as a rare opportunity to build wealth, Lockwood says.
"Ten years from now, we'll have a large number of people sitting back and saying, 'I wish I would have,' or 'I wish I could have,' and they're going to be talking about right now," he says.
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