How to get the most from your household budget

10:31am Tuesday 8th July 2008

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AS turmoil at major British firms such as Marks and Spencer, HBOS, Barclays and Taylor Wimpey has shown with alarming frequency, boardroom bosses on vast salaries were no better prepared for the slowdown in the British economy than families gamely trying to balance household budgets.

But while big companies go cap-in-hand to City backers or sovereign funds in oil-rich states to restore their finances, piecing household budgets back together again is a more mundane task.

With more than a million people coming off fixed-rate mortgages this year and the cost of borrowing soaring, many families have to act fast to ensure they have enough to fill the petrol tank and pay energy bills set for another surge this winter.

Andrew Hagger, of Moneynet.

co.uk, says that with little sign of oil - or much else - getting cheaper in the medium term, it is vital to "look at ways of reducing monthly expenditure in order to balance the books".

Here is his checklist to boost your spending power: ● If mortgage repayments are a problem, see if your lender allows a temporary switch to interest-only terms. Anyone with a £140,000 mortgage at six per cent who does this for three months frees up £200 a month; on a £220,000 loan, the saving is £320 per month.

● Go food shopping once a week and plan your meals in advance. Only buy what you need, and save money by avoiding regular trips to the corner shop.

● Before making any big purchases, check online price comparison sites such as pricerunner.co.uk or kelkoo.co.uk to be sure you are paying the going rate.

● Try to cut interest charges on credit card borrowing; anyone paying 16 per cent plus, not uncommon in today's market, should consider switching to a balance transfer for life card.

● Buy petrol and food on a credit card with a cashback - the American Express platinum moneyback credit card pays five per cent cashback for the first three months (maximum £200).

If food and petrol cost £500 per month, you could recoup £25 per month for three months.

● Work out annual costs for car tax, car service and MOT and Christmas and birthday expenses. Divide it by 12 and pay this amount into a savings account each month.

This avoids having to pay a large bill from one month's wages, and earns a bit of interest in the meantime.

● Personal loans are getting pricier, with one of the cheaper providers, Yourpersonalloan.

co.uk, funded by Co-Op Bank, lifting its rate from 6.9 per cent to 7.3 per cent.

● If you haven't reviewed your gas and electricity supplier for a couple of years, check to see if any dual fuel or online tariffs available would be cheaper than standard offers.

● Earn extra money by filing in online surveys at sites such as valuedopinions.com ● Gumtree.com is a useful website, which enables you to type in your nearest city to find things for sale locally.

You might even be able to arrange a car-share or find things for free.

● Don't leave too much money in a savings account earning minimal levels of interest.

Budget correctly and then switch excess cash to a savings account paying more than the standard 0.1 per cent on credit in many High Street current accounts.

● Review home and contents insurance - not only by looking for cheaper cover, but also by reviewing the quality of the cover you have. There may be scope to save money from cheaper premiums affording the same level of protection.

● Finally, make the most of a sunny weekend and take unwanted DVDs and children's clothes to a car-boot sale.

Three hours of hard work and willingness to make an early start to reserve a good pitch can earn £100 cash, taxfree.

"There are no easy options here," Hagger admits.

"It's been a tough six months for our bank balances and things won't get much easier unless we act now."