It's recommended that your baby sleeps in the same room as you for the first six months, but many parents-to-be still like to prepare the baby's bedroom. This room can still be used for the baby's clothes and any newborn gifts you're given. You might also want to breast-feed, and set up a diaper-changing area in there.
Check out garage sales and eBay for second-hand baby equipment. This can be a good opportunity to buy some bigger items at a reduced price. If you do buy a second-hand crib, make sure it's certified by the Juvenile Product Manufacturers Association and that the slats are no more than 23/8 in apart. Hand-me down clothes, sheets, and towels also save money. If this isn't your first baby you may find that you have more or less everything you need, except for disposables, such as diapers (unless you are using cloth diapers-see Choosing diapers).
Although it's good to be prepared (and sometimes babies do arrive early), remember you won't be trapped in your house forever so you don't need to prepare as if for a siege. If you don't have something you need or you run out, you can always get it after your baby is born.