The chancellor has recently revealed plans that will translate into increasing austerity for millions of Brits in the months and years ahead.  These plans include spending cuts, benefit cuts and higher taxes.

In times of recession, high unemployment and rising living costs (e.g. food and energy), it’s becoming more and more of a necessity to reduce expenditure and make savings where possible.

Below are 6 useful tips on cutting household bills and expenditure:

1. Reduce Your Utility Bills

Shop around and find the best deal. Energy costs have risen quite significant recently and many energy suppliers have increased their tariffs.  A quick and convenient way of doing this is using an energy broker or online comparison site who will search many companies and help you to find the cheapest supplier for your usage and area.  We recommend Energy Helpline who are fully accredited to the Consumer Focus Confidence Code to compare energy for domestic consumers.

2. Reduce Your Insurance Premiums

As with many things – it pays to shop around and this is particularly true with insurance.  Whether it’s home insurance, car insurance or life insurance – it pays to review your policies periodically not only to make sure you’re not paying more than you should be, but also to make sure your policies provide you with the right kind of cover – especially if your circumstances have changed since you last took out or renewed a policy.

You can use our Insurance Price Comparison Checker to help you find the right insurance at the right price.  Simply input your details and requirements and the comparison engine will search the market and bring you back dozens of results – cheapest price first.

3. Reduce Your Groceries Spend

You can save a lot of money simply by changing where you shop, changing what you buy or not buying ’stuff’ that you don’t really need.

Changing Supermarket

MySuperMarket helps you to compare prices at four leading Supermarkets (Tesco, ASDA, Sainsbury’s and Ocado) as well as offering special deals… and the thing is, it’s free to use.

Changing What You Buy

Do you tend to buy over-priced premium or top-brand products when you could get virtually identical product for much cheaper?  Research has shown that for most products, less known or Supermarket own brands are as good as leading brands – but are often significantly cheaper.

Try experimenting – just change a few top branded products in your shopping basket for cheaper brands and see if the alternatives are as good.  If they are – stick with them and then save more money by experimenting with more products.

Not Buying Stuff You Don’t Need

How many times do you walk down shop isles and get tempted to buy something you don’t really need because it’s at a reduced price or part of a special offer such as ‘buy one get one free’?  There’s nothing wrong with treating yourself or your family now and again, but stop wasting money on things you don’t need!

As a final tip, be sure to use any loyalty cards that various shops or Supermarkets may be running. The points you receive usually entitle you to a percentage off your shopping as well as access to special deals on products that you already buy.

4. Claim For A Work From Home Room

Do you work from home?  Perhaps you spend time working from home for your employer or maybe you run a business from home – either way, did you know that you can claim back a proportion of your utility bills and even rent or mortgage interest if you use a room for your work?

Here how it works in principle:

• Count the rooms in your house (not including bathrooms / cloakrooms)
• Divide one by the number of rooms (e.g. 1 / 6)
• Work this out as a percentage (e.g. 1 / 6 = 16.7%)
• Calculate what this percentage is of your annual utility (gas, electric, Internet, phone) spend
• This is the amount that can be reduced from your taxable income

If you want to claim against mortgage interest, be mindful that if you dedicate a room 100% to your work / business, this can affect the capital gains tax you might pay if you sell your home.  One way around this is to state that you use it MAINLY for your work e.g. 95%.

If you don’t currently work from home, but you are interested in earning an extra income or generating a more tax efficient income, you may be interested in starting a direct sales home-based business.  You can view a list of direct sales and network marketing businesses that offer a proven, low cost business model for a small investment in our Opportunity Listings section.

The above does not constitute tax advice and is for guidance only. We recommend you refer to the HMRC website or consult an accountant for clarification.

5. Rent A Room

If you have a room in your home that is currently not being used, you could turn it into an income generating asset.  Currently, you can receive up to £4,250 a year of tax free income from renting a room, which works out at more than £350 per month.

You can learn more about the Rent a Room scheme here.

6. Reduce The Cost Of Your Debt

This basically means reducing the interest rates you’re paying on any debt you have e.g. credit cards, loans and even a mortgage. How?

Credit Card Debt

Credit cards have notoriously high interest rates and it’s probably worth looking around to see if you can transfer the balance of your credit card to another provider.  This could be a 0% balance transfer deal, or simply a lower interest rate.  Do bear in mind that the top transfer deals are only open to people who have a decent credit rating.

To find what credit card balance transfer deals are currently on the market, simply type ‘0 balance transfer credit cards’ into Google.

If you have a poor credit rating that is making it difficult to move over to a better deal and you’re struggling to keep up with credit card payments or cannot seem to pay more than the minimum payments (which virtually all go to service interest and not reducing the balance) then you probably want to speak with a debt adviser who may be able to negotiate with one or more of your creditors to have interest frozen and any charges stopped.  You are welcome to contact our independent debt advice team here for a confidential, no obligation chat.

Loan Debt

Consolidating your debts can be useful if you have several different creditors and are paying relatively high interest – whether that’s loans and/or credit cards.  As with credit card balance transfers, this is usually only possible if you have a decent credit rating – lenders see people with poorer credit ratings as higher risk, therefore do not offer the best rates to people with poor credit ratings.  If this is the case for you, other debt solutions may be available to you such as debt management or an IVA.

Remortgaging

If you are coming to the end of a current mortgage deal, then it’s probably worth looking around for a new mortgage deal (remortgaging).  Everyone’s situation and needs are different and mortgages can be complex, so it’s probably worth speaking to an independent mortgage adviser who can find out what you need, search the market on your behalf and advise you on the options that are best for you.

The key here is to review your current arrangements and then shop around or contact a specialist who can help you. Our team of specialist advisers can offer free, independent advice in areas such as debt solutions, financial claims, mortgages, insurance and financial planning.  You can learn more about our values and how we work in the about us section.

Conclusion

If you take action on the above 6 areas, the chances are you could significantly reduce your household expenditure and save a small fortune.  Even if you just saved £100 per month, that’s £1,200 a year which could mean a nice holiday, home improvements or extra savings.

Here’s the interesting part… if you saved just £100 a month into an ISA for example (which averages a 5% annual return) and over time allowed your account to grow – in 10 years your account would be worth £15,528 tax free.  What about if you saved £200 or achieved this modest return over 20 years?  You can find out and have some fun using our compound interest money calculator.

There are other things you can do to increase your income and save money and you can probably think of at least a dozen from buying energy efficient light bulbs and remembering to switch off appliances you’re not using, to learning how to manage your money or selling unwanted goods on eBay.

Make a decision today to save money because as they say… a penny saved is a penny earned!

© 2010 Paul S Flintoft

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