Clean up your clutter!

If you want to make financial gains without pain, then get shot of the junk that is holding you back. These ideas will get you started.

When I give someone a money makeover, I scour all aspects of their personal finances, looking for potential savings. Sometimes these can be considerable, such as the £2,500 tax rebate I secured for one lucky reader. At other times, I can see that someone finds it hard to make ends simply because s/he is spending too much on life's little luxuries.

When I make someone over, my goal is to boost my target's disposable income by as much as possible. Even for someone who is very financially disciplined, the savings can easily exceed £1,000 a year. So, without further ado, here are eight ways that you can cut back on your spending without living like a hermit (in A-Z order):

Before you begin, you first need to find out exactly where your money goes. So, dig through your paperwork and pull out all of your financial records: bank statements, credit-card bills, receipts and so on. If this is too much of a pain, then download several months of statements via online banking.

1. Boiler/heating cover

Going through the bank statements of an elderly relative, I noticed that she was paying close to £200 a year to British Gas for one of its HomeCare heating/maintenance contracts. Thus, over the course of a decade, these monthly premiums would pay for a new boiler twice over!

If you believe that you need boiler/central heating insurance, then don't buy it from your energy supplier. Instead, shop around for independent cover from the likes of Direct Line, Domestic & General, HomeCallPlus, Homeserve and so on. Otherwise, cancel your cover and stash the savings in your emergency fund and then pay for servicing and repairs yourself.

Read This rip-off preys on your fears for more information.

2. Extended warranties

As a rule, extended warranties for electrical and household goods are a shocking waste of money. They are so massively over-priced that some chain stores make more money from selling warranties than they do from selling their core product range. Avoid shop-bought warranties at all costs and, if you must have this peace of mind, then shop around and buy it separately.

Ed Bowsher thinks that extended warranties are occasionally worth buying.

3. Gym membership

In London and the South East, monthly gym fees can easily exceed £50. What's more, gyms make millions each year from punters who sign up for a New Year's resolution, but only turn up two or three times in January.

I know one City worker who has been a gym member for aeons, but hasn't been even once in the past four years. Time to cancel that wasteful expense, folks!

4. Your ‘latte factor

The hardest spending to track is that which doesn't leave a paper trail -- your ‘petty cash' spending. Alas, these everyday expenses can add up to an absolute fortune over the course of a year. A fancy coffee and a doughnut first thing in the morning can add up to £1,000 over the 240 working days in a year.

5. Lunchtime luxuries

Again, it's all-too-easy to spend a fiver a day on sandwiches, snacks and drinks at lunchtime. This adds up to £100 a month, or £1,200 a year. Why not do as our American cousins do and have a ‘brown bag' lunch which you choose, prepare and bring to work each day? A budget of, say, £1.50 a day leaves plenty of room for healthy eating and naughty treats!

6. Magazine subscriptions

In the past, I used to buy a newspaper every day. These days, I buy one paper a week (the excellent Financial Times on Saturday) and read the news online. However, I do subscribe to two of my favourite magazines, as this is about 30% cheaper than buying them individually. Then again, if you're paying for a publication which you never have the time to read, then now's the time to cancel that monthly or annual direct debit.

7. Mobile-phone and Internet contracts

Something that I see again and again during money makeovers is the huge price of having a mobile phone. Indeed, I've met people who spend £500 to £1,500 a year keeping in touch via mobile calls, email and texts. What's more, combing through people's bank statements, I've often found monthly payments for old or unwanted contracts or, even worse, extortionate mobile-phone insurance. Ditch and switch, guys, ditch and switch -- and the same goes for your home telephone and broadband bills!

John Fitzsimons looks at three simple ways to cut the money you spend on your mobile each month

8. Payment protection insurance

Being in debt is bad enough, without your problem being made worse by rip-off payment protection insurance (PPI). Check your bank, credit-card, loan and other statements to see if you're paying for this overpriced tripe. If you are, then you should save a fortune by dumping your existing policy in favour of cover from an independent source.

In addition, make sure that you're not paying too much for your mortgage and other regular bills such as home, car and travel insurance, gas and electricity, and so on. Finally, remember that often it's not how much you earn, but how much you spend that's the problem!

This is a classic article which has recently been updated.

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