How to save more of your salary

Are you determined to get into the savings habit in 2010? Serena Cowdy helps you make the changes that matter.

Despite rising unemployment and continuing economic uncertainty, it seems that many of us still aren't placing enough emphasis on saving.

The latest Savings Survey from NS&I shows that the amount Britons are saving per head has increased over the past five years. However, the individual savings ratio - the average amount that people say they are saving as a percentage of their take-home income - has actually remained fairly constant.

Are you determined to become a better saver in 2010? I'm going to examine some of the major steps you can take to squirrel away a higher proportion of your salary - without seriously impacting on your quality of life.

Make the changes that matter

In our efforts to be frugal, many of us make hundreds of little cutbacks. We'll deny ourselves all sorts of inexpensive treats, and spend hours looking for new ways to save pennies. Watch this video How to save when you've got no money for help on how to do this.

Of course, saving the pennies is all well and good - but unfortunately, however, many people still fail to tackle the 'big' issues that make the greatest financial difference.

If you want to increase the percentage of your salary that you're able to save each month, the easiest way to do it is to tackle the biggest regular drains on your pay packet. Here are three 'biggies' to deal with:

Mortgage

If you're a homeowner, your mortgage payments are likely to be your single biggest monthly expense - so it's crucial you find the best possible deal.

This sounds obvious, but in fact millions of people end up paying over the odds for their mortgage because they don't re-mortgage when they should. Instead, they stay their lender's (often poor value) Standard Variable Rate (SVR) when their original fixed rate, discount or tracker deal comes to an end.

For example, a family with a £95,000 mortgage on a £160,000 property could save £148 a month by remortgaging from a SVR of 5.5% to a market-leading tracker at 2.69%.

If you're looking for a mortgage deal at the moment, use lovemoney.com's innovative new mortgage tool to find out about the cheapest ones currently on offer.

And watch this video to find out exactly how to slash the cost of your existing monthly mortgage payments.

Utilities

If you haven't switched your gas and electricity providers in recent months, it's time to investigate your options. Winter heating bills tend to shoot up, so it's particularly important to be on the cheapest possible tariff.

According to recent quotes given out by our energy comparison tool, 90% of you could save £100 by switching suppliers, while half of quotes reduced bills by £180 or more. It takes just 10 minutes to use the gas and electricity comparison centre to find out exactly how much you could save. Act now and you could still feel the benefit of lower heating prices this winter.

To find out more about your cheapest gas and electricity options, read Cut your energy bills by 20%. Then, adopt this goal for more tips on how to slash your heating bill.

Insurance

Insurance may not be the most exciting of topics, but for most of us it's a significant monthly drain on our finances, and we simply don't give it the attention it deserves.

The single easiest way to slash your car insurance and home insurance costs is to shop around when your current policy comes up for renewal. Many people just can't be bothered, but it really can be a quick, simple and highly gratifying experience.

I managed to knock an enormous 50% off my home contents insurance by doing exactly this in late 2009!

In their efforts to steal business from their competitors, insurers very often give new customers much better deals than existing customers, for exactly the same cover. I've said it before and I'll say it again: When it comes to financial products, loyalty doesn't usually pay!

For more money-saving insurance tips, adopt this goal: Don't double up on cover

The saving exception

There is one exception to the 'save, save, save' rule. If you still have debts to pay off, it usually makes financial sense to clear these before you start saving.

That's because the interest you're being charged on debts will generally be much greater than the interest you're earning on any savings.

There are exceptions (low-interest mortgage debt, for example). However, generally speaking if you're in the red, you should make the big changes described here and use the money saved to clear your debts as quickly as possible.

Then, as soon as you're in the black, those savings can start being squirreled away for a rainy day.

To help motivate yourself, adopt this goal: Build up an emergency savings pot

Top savings accounts out now

For more areas in which to make substantial savings, read Five ways to save big this New Year.

And for everyone looking for the best place for their new-found savings, I'll end with a look at a couple of the best savings accounts currently around:

Easy access: If you're looking for a flexible, easy access account you can start from scratch, the Telephone Extra account from Birmingham Midshires is one of the best on offer.

It pays a variable rate of 3.15% AER, and can be started with just £1. That rate includes a 2.65% fixed bonus for 12 months; so you can be assured your rate won't fall below this during that time.

Just remember that the account can only be operated by phone, not over the internet.

Regular savings: If you're confident you can put a set amount away every month, have a look at the Barclays Monthly Savings Account. It pays a very decent 4.25% AER (fixed) for 12 months; and lets you save between £20 and £250 per month.

This account has some unusual benefits, too. Unlike most regular savings products, it won't penalise you if you miss monthly payments. And you're also allowed to withdraw cash whenever you like (although the interest rate you receive for that month will drop to 3.03%).

Good luck!

Get help from lovemoney.com

If you're trying to save more of your salary this year, why not have a wander over to Q&A and ask other lovemoney.com members for hints and tips about what worked best for them?

Compare savings accounts at lovemoney.com