Updated: 23/02/2012

Someone recently asked us exactly which monthly outgoings it was OK to forgo, and which you really shouldn’t do without. They were considering whether it was worth risking cancelling some of their insurance in an attempt to save cash. Making sacrifices isn’t always easy, particularly when you’ve got used to a certain way of life, but to weather the current financial storm some luxuries are going to have to go.

That doesn’t mean ditching your home insurance to save £15 a month! There are some things you definitely can’t sacrifice. However, you can get better deals on these sort of essential costs. We’re going to show you how to switch deals and save money without having to risk giving up any necessary insurance.

• Assess what you need and what you don’t
• Be ruthless
• Be environmentally friendly
• Save money by switching, not ditching

Assess what you need and what you don’t

Have a good think about this. Look at the value for money you’re getting from the direct debits and regular payments that leave your account. What are they for? Do you really need these things?

Most of the time the answer will be yes – especially if you’re paying off debts or paying essential insurance premiums. However, if you haven’t reviewed these payments for a while you could get a better deal elsewhere.

Here are a few suggestions for what you might be able to cut back on:

• If you have no dependents, you may not need life insurance. Have a look at our Life Insurance article to find out more.

• If you’re paying for private medical insurance, consider putting the money into a regular savings account or other high interest account instead.

• When you make purchases such as a new mobile or computer, make sure it’s covered by your home insurance.  If not, take advantage of an insurance offer when you buy it – mobile phones, for example, are often offered with a few months’ free insurance.

Be careful though, as companies rely on the fact that some people forget to cancel it and end up paying the premium for the rest of the contract. So make a note in your diary!

Once you know exactly what you need to keep, you can consider swapping to a cheaper provider of the same service.

Have a look at our best buys section where you can compare prices for all kinds of insurance, utility bills, mortgages, loans and credit cards and get the best possible deal.

We  have lots of tips and advice on getting the best home insurance, car insurance and life insurance. All these articles are also regularly updated with the best insurance deals out there – so they’re well worth a look.

Especially important is checking your energy bills – you might be paying over the odds for your gas and electricity and switching is so simple! Read our step-by-step guide to switching for everything you need to know. We’ll take you through the whole process and you could save yourself as much as £389 a year.

Be ruthless

If you really need to save some serious money, you’ll have to be ruthless about cutting your costs:

• Do you really need two cars? You could save loads by just having one or downsizing to a smaller and cheaper second vehicle. Have a look at our article on alternatives to owning a car and see if we can change your mind.
• Do you really need all those channels you get with your Sky subscription? You could switch to Freeview instead. You can get a set top box for about £20 – that’s the only payment you need to make and you get 30 or more free-to-air channels.
• You might love your Sky movies subscription, but at £20 a month, it’ll cost you £240 a year! Why not swap it for LOVEFiLM? Following a 30-day free trial, you can subscribe to a cheap plan that unlimited access to fims and TV shows for just £4.99 a month – so under £60 a year.
• What about ditching that costly mobile contract and opting for pay-as-you-go instead? That way you’ll be able to keep track of exactly what you spend. If you use your phone all the time and really don’t think pay-as-you-go is a feasible option, make sure you’re getting the best contract for your money. Sim-only contracts are often a lot cheaper than phone contracts, it means you won’t get an upgrade each year, but you pay less each month. Have a look at our article on getting the right mobile phone deal for you.
• Downgrading to cheaper brand items at the supermarket is really quite painless. You can start by trying out a few of the budget items to see which you like. This way you can save up to 30% on your weekly shopping bill. Just follow the simple rules in our sneaky supermarket tricks article.
• Don’t forget those little day-to-day costs really add up. The average Brit spends £5 every working day on lunch, that works out at over £1,000 a year! Try taking your lunch to work more often, and bringing a flask of coffee with you.

Be environmentally friendly

Being environmentally savvy will not only help you feel good about yourself, it’ll help your wallet too!

Don’t waste food! According to LoveFoodHateWaste, we throw away a third of all the food we buy. Check out its website for loads of information, ideas on how to use those leftovers and how to save up to £50 a month.

Cut your water bills and save water. Here’s just a few ways to save litres and litres:

• Start washing your clothes at 30° instead of 40° and only run the cycle if you’ve got a full load – one cycle uses 95 litres of water!

• Take more showers instead of baths. According to Waterwise, a shower uses one third of the amount of water that a bath does (if it’s not a power shower).

• Use the dishwasher! It uses 15-20 litres of water, compared to hand washing which uses between 60 and 70 litres. This only works if you scrape rather than rinse the plates before they go in the dishwasher, and if you only run the cycle when it’s full. You can also consider investing in a smaller dishwasher if you’re a couple or a small family.
• Turn off the tap when you’re brushing your teeth. Leaving it running can waste as much as nine litres of water a minute!
• You can have a water meter installed for free – a great way to check your usage. To find out how to get one installed, contact your water company.

Now for the most important bit! According to SaveWaterSaveMoney, if you cut your water usage by 20 litres a day, you’ll save yourself an extra £25 a year.

For more ideas like this, have a look at 50 Ways to Save Money by being green.

You can also cut your energy bills by following these handy hints:

• Don’t use the tumble dryer; you can dry your clothes outside for free! Even in the winter, you can use an airer indoors.  Here at Moneymagpie, we love this heated airer from Lakeland.  It costs less than 5p an hour to run and will dry your clothes in no time!
• Don’t leave any electrical equipment on standby. This could save you an average of £40 a year according to Directgov.
• Get timers for your plugs, that way things will always turn on and off when you want them to, and it won’t matter if you forget!
• Make sure your home is well insulated. Take a look at our home insulation article. We’ve also come up with loads of quick fixes to those cold draughts in your home in our article on reducing your heating bills. You can also find out whether you qualify for an insulation grant here.

Save money by switching, not ditching

Hopefully, we’ve proved you can save yourself a fair bit of money without having to ditch too much of what you need and love.

We took a look at how much the average family could save by cutting their costs. This is the average expenditure of a family on insurance (based on research from the Office of National Statistics):

• Home buildings and contents insurance – £260 a year
• Car insurance – £215.80 a year per vehicle (or £431.60 a year if you have two cars).
• Total – £691.60 per year (of course this is higher if you have life insurance, or private medical insurance).

If you follow our advice and cut some of your other costs, you stand to save much more than this. Even if you only follow a few of the tips, your savings could look like this:

• Switch Sky for freeview – save £220 a year
• Switch bought lunch for homemade lunch – save £1,000 a year
• Saving water – upwards of £25 a year
• Saving energy – upwards of £40 a year
• Total Saving = £1,285

So, there you have it. Follow a few of the ideas we’ve come up with and you could cover the cost of your insurances for a year – and have some left over!

Useful links

• Barclays Monthly Savings Account
• LOVEFiLM
• Argos
• John Lewis
• LoveFoodHateWaste
• SaveWaterSaveMoney

Relevant book titles

• 100 Ways to Beat the Credit Crunch
• How I Lived a Year on Just a Pound a Day
• The Thrift Book: Live Well and Spend Less