Five ways to save in 2010

Alison Hunt explains how to save £6,000 this year.

1. Feeling the pinch after Christmas? Here are my top five ways to save those pennies in 2010, along with five goals to adopt to help you carry them out!

1) Stop paying interest on your debt

A friend of mine recently revealed she has been worrying about her credit debt for a while. And she's right to be concerned.

With a balance of £3k on her card which charges 16%APR, and making just the minimum repayment of 2% each month, it'll take her an unbelievable 439 months (that's 36 years!) to clear her debt, during which time she'll have paid an incredible £5,342 in interest. Yikes!

However, she could reduce this pain greatly by moving to a 0% card for balance transfers and paying a bit more off each month. Switching to the current market leader, the Virgin credit card, for example, would mean she would have 16 months at 0% during which to pay off that debt, during which time she wouldn't accrue any more interest.

If she were to stash £187.50 away each month (£3k/16 months) into a savings account, by the time her 0% period is up she would have enough money to clear the balance, plus have earned a little interest on top.

Interest saved: £5,432

Goal to adopt: Destroy your debt

2) Make your money work harder

If you're the organised type that manages to squirrel away a few quid each month, that's fantastic. But don't rest on your laurels.

Dwindling interest rates means a shocking number of savings accounts now pay around 0.1%AER - and some pay nothing at all.

And yes, I realise interest rates are at an all time low, but we should still aim to earn as much interest on our hard-earned cash as we can.

If you're a taxpayer definitely consider using your annual Cash ISA allowance - up to £3,600 can be stashed here tax-free in 2009/10, rising to £5,100 in 2010/11 (over 50s can already squirrel £5,100 each year).

You can currently earn up to 3%AER with the Abbey Direct ISA. It pays 2% (including a 12 month, 1.5% bonus) on balances of £1k+ and 3% (including a 2% bonus) on balances of £9k+.

Alternatively, the Reward ISA from Newcastle BS pays 3% (including a 12 month 1% bonus) on balances of £500+. Both allow existing ISAs to be transferred in.

Stashing £3k away in one of these ISAs would thus earn you a healthy £90 in interest over a year - certainly better than nothing!

Interest earned: £90

Goal to adopt: Build up your savings

3) Don't just renew that insurance policy

January is a popular time for insurance renewal quotes to plop onto the doormat. But before you pay the annual fees (or let the direct debit ride for another year) check the details.

Close inspection of my home insurance renewal quote revealed that it had risen by a whopping 20% - despite the fact no claims had been made. Eh?

It is therefore always worth shopping around to see if you can get the same cover (or better) for less  - the good news is you usually can.

You can save time by using price comparison websites (such as the ones right here at lovemoney.com) to search for the cheapest home, car and travel insurance quotes.

And indeed, a quick search revealed that I could save £110 a year by taking out a new buildings and contents insurance policy (with exactly the same level of cover) as opposed to renewing with my existing insurer. It doesn't take a genius to work out what I'll be doing.

And remember, beating the renewal quote is nothing to shout about.

As a final note, bear in mind that most insurers tend to charge anything up to 30%APR for the luxury of spreading the cost by monthly direct debit. If you currently pay this way, you may be amazed at how much money you could save by paying annually.

Money I saved by shopping around: £110

Goal to adopt: Slash your insurance costs

4) Switch energy provider

As I haven't changed gas or electricity supplier for a year now my next task is to find out if I can save any more by switching. And it's incredibly easy to do.

Simply grab your last few gas and electricity bills and plug the details requested in one of the many energy supplier comparison sites (such as our very own at lovemoney.com). You can even do this on the phone by dialling the freephone number 0808 238 9127.

If you've never switched before you could save a fortune, but even if you have you'll probably find you can save a bit. A quick check revealed that I could save £50 a year, for example, despite the fact I switched a year ago. And a friend who hadn't switched for three years found she could save £300 - not bad!

Just make sure you check before switching that your existing supplier won't charge you a hefty exit penalty for leaving during a certain timeframe (or that your potential saving would outweigh any charges).

And if you have fewer people living in your home than bedrooms you'll probably find getting a water meter fitted (and paying only for the water you use) will save you money.

Maximum savings: £350

Goal to adopt: Lower your household bills

5) Pay less for your phone/broadband

Finally, when was the last time you examined how much your phone and broadband service actually cost you? If you signed up a few years ago you'll probably have no clue as to how much you actually fork out by direct debit each month - never mind know if you've got a good deal.

Indeed, with competition rife and suppliers providing better services for keener prices you could find you're paying twice as much as your neighbours while receiving a slower broadband service. Ouch!

First things first, find out how much you're paying each month. Next, work out what your needs are (unlimited downloads, free calls during the day/weekends etc?). The calculator in this article should help.

Once you know what you want and how much you could be paying (and if you're happy with the service you already receive) it's worth giving your supplier a call to ask if it can reduce your monthly fee, or improve your service for the same price. And to find out what else is available check out this article on broadband bundles.

Potential saving: Could be £100+ over a year

Goal to adopt: Reduce your communications bill

So there you have it - over £6,000 of savings could be made if my friends and I simply put in a little effort to shape up our finances. Isn't it worth the trouble?

Got any money-saving tips of your own? Please share them using the comments box below. Alternatively, if you have a specific question about any of the topics mentioned above, why not whiz over to Q&A and ask other lovemoney.com members for advice?

More: 5 top tips for a successful balance transfer |Choose the right car insurance policy

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