Those wishing to prepare themselves for this shrinkage, consider very seriously paying down debt. I've lowered my contributions to my 401K so that I can take the "extra" an pay against my credit cards and home loan.
When paying off debt, first pay off the highest interest, working your way down. This will help free up more money - a little at first, but more later. Since this down turn will last a while, paying down debt will often provide a better return that you could get in the market.
For example, assume you have as 12% loan but can only make 4% in the market. Paying off the loan makes more sense because it will save you money in the long run.
It will also enable you to be in a better cash flow position to take advantage of a recovery. Just my .02
You are doing the right thing. Get out of debt as quickly as you can. Debt free is the way to be in a deflationary economy. I notice how some people keep crowing about "low inflation". Yeah, well deflation is as low as inflation gets, and deflation will make you long for the good old days of inflation once it gets going. So yes, get out of debt ASAP, definitly a good thing to do.