The economic downturn is certainly taking its toll. Even successful entrepreneurs and well-paid professionals have been forced to tighten their belts. Here are a few practical suggestions to avoid further financial difficulties:

1.  Cut down on debt. It is easy to fall into the trap of using plastic to pay for discretionary expenses. But this can quickly mushroom into a financial catastrophe if you don't rein in your spending habits. Do your best to keep credit card purchases within reason while you chip away at the debt. You may want to consolidate debts into a single monthly charge if you can obtain a relatively low rate. Note: Personal interest expenses are generally not tax-deductible.

2.   Put yourself on a strict budget. This means figuring out how much you spend on a monthly basis and how you can reduce your cash outlays. Perhaps you might decide to forgo a few nights out at expensive restaurants or pass up that extra latte every morning. Obviously, this requires great discipline on your part, but you will notice positive results over time. To help pinpoint saving opportunities, try tracking your budget on a spreadsheet so you can see exactly what you are taking in and what you are spending.

3. Protect yourself against inflation. Even though inflation has not been much of a factor of late, some economic commentators believe that it could return. They point to the $750 billion stimulus package, a proposed federal budget of $4 trillion (up from $3 trillion in the previous year) and billions more in other rescue packages. In addition, short-term interest rates are near record lows. These factors could be the kindling that eventually sparks a rapid hike in inflation. For protection, you should refine your investment portfolio to include inflation hedges.

4.  Develop a sound stock-market strategy. Many investors have been sitting on the sidelines since the stock market tumbled in 2008. But that is not necessarily the best thing to do. Consider building a diversified portfolio that takes into account both the inherent risks of the market and the potential rewards for smart investments. Of course, your time horizon is a critical factor in these decisions. If you are near retirement or have already retired, you should generally adopt a conservative stance, while younger individuals may be more aggressive. Consult with a professional adviser for an overall viewpoint.

5.  Keep more of what you have. Learn your lessons from recent economic developments. You cannot rely on bull markets and escalating home prices to provide security for the future. Be aware that the value of assets typically rises and falls over time. Build yourself an emergency cushion to see yourself through tough times. Financial experts usually advise individuals to maintain cash reserves that could last for six months in the event of a job loss. If that is beyond your means, do what you can.

Rely on your professional advisers for guidance in this area. They may provide other recommendations pertaining to your personal situation.