Find £100 Extra A Month To Be Safe

To stay solvent and prosper despite interest rate rises, one Fool claims it pays to be him...You won't hear THAT very often.

Unsurprisingly, interest rates have just been raised to 5%. I'm not going to dwell on the obvious. (Expect your mortgage rate to rise soon, look out for better savings accounts - blah blah blah). Instead I'm going to consider how to stay solvent and prosper during a prolonged period of rising interest rates.

As I wrote recently, we may see the cost of borrowing rise a whole percentage point from 4.5% back in July this year to 5.5% by this time next year. To counter this, I reckon that if we all reduce our spending by £100 per month everyone will get through it OK. If you don't get a pay rise, you may need to reduce it even more.

This is easier said than done I know, but there are some things I do and you can do, too. So here they are:

1. Be boring

When was the last time you shopped around for car or household insurance? Exactly. Having worked in this boring industry as a consultant, I know that not shopping around for these insurances after just one year costs most people £40 or more. If you haven't shopped around for longer it could easily be hundreds of pounds a year that you're throwing away.

Comparehomeand car insurancethrough The Fool.

2. Every big helps

If someone told you that you could save £20 on that new cardie you wanted by driving to a town half-an-hour away, you'd do it, wouldn't you? Well, I wouldn't. I can't stand shopping. However, I'm perfectly happy to read small print. Since you've spent one hour travelling to save this £20, why not spend just a few more to save thousands on your mortgage.

Take the headache out of re-mortgaging: get no-fee, whole-of-the-market mortgage broker London & Country, our Foolish partners, to find the best deal. Visit ourmortgage centrefor more.

3. Hate debt!

Citizens Advice said recently that consumer credit debt, such as credit cards, store cards, charge cards, unsecured personal loans, bank and building society overdrafts, and catalogue and mail order debts, remain the biggest problem area by far.

My policy is to avoid nasty debt altogether, but if you're in it already, here's something to consider. If you're just paying off the minimum amount of debt, you might get caught out. Rates could easily continue to rise over the next few years by a few percentage points, so when you finally decide to tackle your debts you may find it's an awful lot more expensive. This means you don't want to have high levels of debt in a few years.

Firstly, get your money off your expensive store cards immediately. Even your current credit card will probably charge just half the interest. Look for a cheaper place for your debt; a place where you can start actually paying it off on a monthly basis, rather than just covering the minimum. Unsecured personal loans are a good way to go, as they force you to budget and pay off your debt, plus they're a lot cheaper than credit cards.

Compare personal loans through The Fool.

4. Good habits

I've used several different providers of gas and electricity. Looking at cheaper prices is a routine now. But many of you probably can't be bothered to switch. Think about it though, as you could save £100 easily. That's five cardigan's-worth of discounts.

Compare utilities prices.

A few hours work, but lots of money saved. That'll keep you ahead of interest rate rises.

Of course, I could have said it pays to be me because I'm handsome, witty and a genius (all true), but who's ever read an article with five points? That would be insane.