A guide to saving

Saving money is an important part of budgeting, as circumstances can change and it is vital to have a financial safety net if this happens.

However, before putting money aside it is essential to pay off any debt as it can be expensive, particularly for those who have credit cards with high interest rates.

The first step is to calculate how much is owed – overdraft, loans, credit cards – and then consider consolidating payments into one.

Repayments must be affordable, so it is important to calculate a realistic repayment plan, and it can be a good idea to get professional advice at this stage.

Once this area of personal finance is sorted, you can begin to think about ways you may be able to cut back and save.

Keep track of spending

First of all, it's important to list all major monthly outgoings: mortgage repayments/rent, utility bills, groceries, insurance and any regular debt repayments.

It's also wise to factor in yearly events such as holidays and Christmas. It's better to set aside money for these each month, rather than end up paying a lump sum, probably on credit.

The little things can add up too, so take the time to track your exact expenditure for a couple of weeks. This means writing down everything from coffee, to lunch and newspapers/magazines. Once you see how much these small things add up, it is easier to think about buying a Thermos and taking coffee to work, rather than spending £2.50 a day on a cappuccino from your local shop. If you bought one of those every day of the working week, that could end up costing about £60 per month.

There's even the opportunity to save on petrol by finding which garage has the cheapest fuel, some have loyalty points for supermarket cards, which may be worth considering too. You could also think about cutting out any unnecessary journeys and consider walking instead.

Compare and haggle

It's easy to get complacent about insurance and utility bills but it really pays to take 20 minutes or so checking prices on a comparison site, you could end up saving yourself hundreds of pounds a year.

Likewise, it's a good idea to think about haggling. Consumer watchdog Which? conducted a survey in 2014 and found 81 per cent of people who haggled over their mobile contract came out with a better deal. Some 83 per cent who did so with their car breakdown cover saved too.

You can even haggle for holidays, and Which? found 83 per cent of people who did so managed to save themselves money.

Adding to your income

There are many ways to boost income, perhaps taking on more hours at work or considering a second job, although it's important to factor in any tax implications and time commitments, particularly if you have a young family.

Other ways to boost cash are to take part in online surveys or focus groups.

If you have a spare room, you could consider renting it out. A double room in a property in a central location close to public transport could net a considerable sum.

Ensure you have a savings fund for emergencies

A broken boiler, car or washing machine can prove costly to fix and it's important to have access to funds that you can get your hands on quickly should something like this this happen.

As a rule, you should aim to put away a sufficient amount to cover three months' worth of expenses; enough to cover all bills.

If you manage to save this, you can then consider putting money aside for other things such as moving house or perhaps a college fund for your children.

Pick the right savings account

It's important to pick the right kind of savings account. An instant access savings account is the right way to go for an emergency fund, but if you have more than five months' essential outgoings, it is wise to choose an option that will earn you more interest.

Cash Isas are worth investigating, as are high-interest savings accounts.