Arsene Wenger has declared people are in "dreamland" if they expected Arsenal to break the bank during the January transfer window, and warned football was not immune to the credit crunch.
The Gunners head into the new year already behind in the Premier League title race - back in fifth, some 10 points off leaders Liverpool - while also without key men like captain Cesc Fabregas and England winger Theo Walcott because of injury.
Wenger is expected to look to strengthen his depleted squad, most likely in midfield, this month.
Russia playmaker Andrei Arshavin continues to be linked with a £20million move away from Zenit St Petersburg, but Wenger today played down reports Everton's Spain international Mikel Arteta was another target.
However, given the current economic downturn, the Arsenal boss maintains acquiring a new man will not be at any cost - and only if an "exceptional talent" can be found.
"We have a specific budget which is not as big as I have read in the newspapers, some ridiculous amounts of money that are completely crazy. But we will try to use it wisely and well if we can," he said.
"This team is together, getting stronger and stronger - but what we need to focus on is continually developing and not live in dreamland where we are linked with players of £30million or £40million because that is not realistic.
"We have a very, very good squad and we will go for an exceptional talent only - but if it is just to have one player more, we will not do it."
Wenger added: "At the moment, people in football are not conscious of what is facing us economically.
"People still think we are in a bubble, but we will be hit like anybody else in this economical crisis, I am convinced of that.
"You will have a much more cautious market than you expect it to be and one of the isolated powers you could have are Manchester City.
"That will be one of their strengths because they will not have quite as much competition as they would have had in normal circumstances."
Arsenal have a long-term debt commitment following the move to their new, 60,000-seater home at Ashburton Grove - and Wenger maintains the Gunners must continue to live within their means.
"What is most important is the club has built a new stadium and we live in a very strong and healthy situation financially," he said.
"You look how many clubs have done that and we play at the top. "How many clubs have managed to build a new stadium, have a good financial situation and continue to play at the top?"
Wenger continued: "It is not that we do not want to spend.
"We have gone for a policy that is to develop our young players and we have to show some character and strength, not listen to everybody who comes out everyday with a new name."
Wenger maintains there are very few clubs in the Premier League who can simply buy their way to success.
"Chelsea have not built a stadium and they lose £100m per year - how do you imagine you can deal with that at Arsenal Football Club without going bankrupt? We have to be responsible," he said.
"I do not understand how you can compare with that. The other clubs, except for Manchester United, lose money."
Wenger does not expect any of his players to leave this month - including defender Kolo Toure, who had a transfer request, lodged in the wake of a disagreement over team selection, firmly rejected.
"The situation is that Kolo is a player who has two-and-a-half-year contract and will remain with us," said Wenger.
"I am happy with players who are committed and Kolo is a big example.
"There was a minor incident that you can multiply by 20. It happens every day in every club which is sorted out. Kolo is happy here.
"We have a very young and compact squad and I don't expect anybody to leave."
Arsenal's last trophy came when they won the FA Cup in 2005, and they face Championship side Plymouth in the third round at Emirates Stadium on Saturday.
"The FA Cup is one of three trophies that we go for with regular players," said Wenger.
"It is one of the major priorities of the season."