1. Let Google store your contacts.
Many people are used to storing contacts on their phone, but allowing Google to store them for you will not only make an update easier but a complete phone change as well.
2. Backup your phone with software.
Apps like "My Back Up Pro" and "Titanium Backup" will backup user data to prevent loosing everything. Lookout Mobile Security combines data backup with antivirus protection for overall security.
3. Manually backup you contacts.
Never hurts to be too careful. So doing a manual backup of your contacts should be your last line of defense. Contacts can be exported to your SD card for later retrieval.
4. Power up