One of the worst things that can happen to you is to lose a flash drive.  The one thing that can is even worst than that is if teh flash drive has confidential information.

Enter TrueCrypt!

TrueCrypt is an encryption product that will allow you to create a secure file which you can access like a drive (e.g. drive G:, M:, or whatever you choose it to be).  In order to mount it like a drive you need to supply a passphrase–which you setup when you build a TrueCrypt file volume.

If you save the TrueCrypt file on a USB flash drive and access it like a drive, you can store your confidential files there.

If you ever lose this flash drive, no one can access the confidential data you have in the TrueCrypt file because they are encrypted.  That solves your problem.  The only thing you need to make sure you do now is make backups of your data so you can recover them should you lose your flash drive; and you won’t have to worry about others seeing your confidential files!