10 ways to beat the economic gloom

With a potential recession ahead, James Daley looks at various ways you can safeguard your finances
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The Independent Online

A string of bleak economic data published this week has raised fears that Britain may be heading towards recession for the first time in 15 years. With inflation already at a nine-year high, growth at a 12-year low, and the number of high street retailers reporting a decline in sales, at a 22-year peak, the statistics, at the very least, point to some hard months ahead.

Below, we take a look at 10 ways to tighten your belts and avoid the worst effects of the economy's slowdown. From mortgages to phone bills, Britain's consumers are wasting billions of pounds a year simply by not shopping around.

MORTGAGES

If a deeper economic slowdown, or recession, really is on the cards, interest rates are likely to rise. This week's news that inflation is riding at a nine-year high of 2.4 per cent is likely to set alarm bells ringing for the Bank of England's Monetary Policy Committee (MPC) - whose job is to keep inflation below 2 per cent.

If rates do rise, then the best way to prepare yourself on the mortgage front, is to take advantage of one of the competitive fixed rates which are still available. But any clear signs that the MPC is to raise rates could ensure that the best deals are removed from the market within days.

David Hollingworth of London & Country, the mortgage broker, says the best two-year fixed rates are currently at around 4.29 per cent - from the likes of Abbey, Halifax and Skipton. These all include free valuation and legal fees.

If you're looking to fix for longer, Nottingham Building Society offers a three-year fix of 4.2 per cent, while Britannia offers a five-year fix of 4.54 per cent. These also come with free legals and valuations.

Its worth using a broker to shop around for you. But make sure you find one, such as L&C, which doesn't charge a fee.

GAS AND ELECTRIC

With the gas and electricity markets privatised - and energy prices rising on a regular basis - it's worth making a habit of shopping around. Prices and packages can vary enormously.

Although many energy providers offer both gas and electricity, and promise discounts for customers that buy both together, this is not always the cheapest way. Jon Miller of uswitch.com, the comparison website, says the very cheapest bills can usually be found by using different providers for gas and electric. However, he adds that the best so-called "dual-fuel" packages are not far behind.

Websites such as uswitch.com or simplyswitch.co.uk, allow you to compare prices amongst the major providers in the market, and tell you how much you can save.

"Since deregulation in the gas and electricity markets, there are massive savings to be made by switching," says Miller. "On our site, the average saving made by users is £140 a year."

For those concerned about continued rising energy prices, Miller says that some companies, such as British Gas and npower, offer customers the option of fixing prices. However, he says most analysts believe we are now at the peak of the current cycle, warning now may not be the best time to fix.

The other way to save on your gas and electric bills is to simply be more economical at home. Turning the lights off when you're not in a room and not leaving your television and video player on standby will both help.

Also, simply making sure your house is well insulated, and turning down the temperature at which your boiler keeps your water will also help save you cash.

WATER

Although the water market is also privatised, it is not regulated in the same way as the gas and electric markets - so it is not yet possible to switch provider. However, you may be able to save by installing a water meter.

At the moment, the majority of UK households do not have them, so your bill will be calculated on an average usage basis. So if you don't have a meter, and you think your water bill is below average, it may be worth asking your local water board to install one.

Uswitch offers a tool to calculate whether you can save money by having a meter put in.

CREDIT CARDS & LOANS

If you're carrying any balance on your credit card at all, it's well worth applying for one of the numerous 0 per cent balance transfer offers - the longest of which remain interest free for nine months. Watch out for fees, however. Virgin Money tops the best buy tables with its nine-month 0 per cent balance transfer deal, but charges a 2 per cent fee. Alliance & Leicester is currently the only lender to offer nine months interest free without a fee.

If you do make a transfer, it's also important to check the interest free period also covers purchases. If not, then any additional spending on your card could be very expensive as any payments you make are likely to go towards your interest free balance transfer first.

If you're looking to pay your debt off over a longer period, at a fixed low rate, you may be better off with a personal loan. Rates start as low as 5.6 per cent from Northern Rock. However, watch out for early repayment penalties.

To find the best credit card or personal loan deals, visit one of the comparison websites such as moneysupermarket.com or moneyextra.co.uk.

TELEPHONES

Keeping tabs on the latest mobile phone tariffs and deals can be hard work. However, for those who use a contract, its worth getting into the habit of shopping around every year before you renew your deal.

The best offers tend only to be for new customers, so its worth getting some quotes from other providers, and showing them to your existing provider to get the best deal. Anthony Ball of switching website, onecompare.com, says the best way to get a good deal is to work out how often you use your phone, and what sort of calls you make.

As well as showing the best deals direct from different networks, Ball says onecompare's service also keeps user up to date on the best deals on the high street.

There is also plenty of money to be saved by switching your home phone provider. Although previously you could only switch providers if there was a cable company in your area, it's now possible to keep your BT line and switch to one of the growing number of competitors just for your calls. With companies such as onetel and Talk Talk you keep your BT landline and pay BT a line rental for it. However, you pay TalkTalk or onetel for your calls.

"For an average user, with BT option 1, we find people saving around £100 a year by switching," says Ben Wooltorton at simplyswitch.

BROADBAND/CABLE TV

With a number of new providers having entered the broadband market over the past few years, there are plenty of savings to be made. The best deals will provide hardware, and extra features such as spam filters.

Wooltorton from simplyswitch says that there are an increasing number of providers who offer telephone, TV and broadband services rolled into one. These can prove especially good value.

TRAVEL

If you live in a city, then buying a bike is an excellent way to slash the amount you spend on travel. Furthermore, if you're cycling a reasonable distance five times a week, you might find you no longer want to keep your gym membership.

If this isn't an option, however, there are ways you can save money with your car too. If you can afford the initial outlay, cars that run on Liquefied Petroleum Gas (LPG) are much cheaper as the Government levies a much smaller level of tax on the fuel. Alternatively, diesel cars tend to be much more efficient. Driving your car at lower speeds, and turning your engine off when you are stationary in traffic, can also help.

INSURANCE

Shopping around for your home and motor insurance is one of the easiest ways to save money. Insurers tend to offer attractive initial quotes, and then push up premiums the longer you stay with them.

Once again, comparison websites such as moneysupermarket.com and moneyextra.co.uk give you the opportunity to compare prices. You can also usually cut your premiums by agreeing to a bigger excess, or a smaller insurable amount. Finally, make sure you've got good locks, and burglar or car alarms to cut even more off your bills.

SHOPPING

Shopping online is increasingly easy these days, and can save you time as well as plenty of money.

Although it's important to factor in the price of postage, there are an increasing amount of websites that offer good second-hand goods if you're shopping for yourself. And of course there's the mighty e-bay, to sell some of your unwanted belongings online.

Websites such as www.kelkoo.com compare prices for most goods.

SAVINGS

If you've got any money left at the end of the month, then make sure you stash it away. If interest rates do begin to edge up, then savings rates will follow. You can already earn as much as 6 per cent, from accounts such as Cahoot's Bonus Savings Account, but this is only for a six-month period.

Meanwhile, in spite of tough times in the British economy, why not think about investing some money into other markets where conditions are looking better. Get in touch with a financial adviser for some tips ( www.unbiased.co.uk).

Reasons to be gloomy...

Economic growth has slipped to its lowest annual rate since 1993, the year Britain emerged from recession.

Consumer spending has slumped, with high-street sales falling at the fastest rate in more than two decades.

Inflation has hit a nine-year high, raising the spectre of "stagflation".

Oil prices continue to surge to new highs, hitting consumers' pockets by driving up petrol prices and fuel bills.

The housing market has slowed sharply from the boom of the past few years.

...and reasons to be cheerful

None of the shocks - surging oil prices, the housing slowdown and sluggish growth in the eurozone, the UK's main export market - have tipped Britain into recession.

The economy has delivered a record 52 quarters of uninterrupted growth.

While unemployment has risen for seven months on the trot, it remains relatively low - and employment is at a record high.

The housing crash predicted by the doom-mongers has not materialised.

Business investment has picked up - good news as there is a need for investment to take up more of the growth mantle if consumer spending does not recover.

Your questions answered

How do I know if I've got too much debt?
The measure that matters is affordability. If you're close to struggling to meet repayments each month, you've definitely got too much. If you have a mortgage, do some sums to see if you could afford it if interest rates went up 2 or 3 per cent. If not, you may want to fix your mortgage for several years now.

Should I pay debts off first, or save?
It's usually worth clearing any credit-card debt, as this can be a very costly way to borrow. Mortgages and personal loans are a different matter. Many loans have early repayment charges, so it's often better to start saving first.

I know I can save by switching electricity, gas or phone providers. Is this easy?
Changing gas and power is straightforward these days; essentially only a matter of paperwork. You can keep your phone number in most cases whether you're switching mobile or landline provider; again, it's mostly paperwork.

The Government's always talking about giving money back to families. How do I know if I qualify for some of it?
The Department for Work and Pensions website (via www.gov.uk ) has plenty of detail about the current range of benefits. Alternatively, visit your local Citizens Advice bureau.

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