Top tips for cutting costs in the New Year

The streets are littered with the remnants of Christmas – browning pine trees and binbags bursting with tinsel and shredded wrapping paper.

But as festive memories begin to fade, the financial pain from the annual splurge is just about to kick in. The average Briton spent more than £400 on presents alone last year, so the finances of many people are pinched, but the new year is the perfect time to cut costs and boost income using a few simple techniques.

Reduce mortgage costs

Kevin Mountford, the head of banking at comparison site, says switching to a mortgage provider with a rate even just a fraction lower than an existing deal can result in a sizeable annual saving. "Homeowners should ensure they are getting the best deals possible. Even a small difference in rate can greatly affect the overall monthly mortgage payment," he says.

Switching a £150,000 mortgage from the average standard variable rate of 4.7 per cent to the two-year fixed rate from Santander at 2.65 per cent would, he calculates, save £2,040 annually.

Switch your balance

Left unchecked, credit cards are notorious for spiralling out of control, crippling the financial circumstances of those that use them and hampering the economy.

Now is the time to switch any debt on a credit card to a balance transfer card – one that charges 0 per cent interest for a fixed period – and use that time to eradicate debt once and for all. By switching £2,000 in debt on a card with an average APR of 17.32 per cent to the Virgin Credit Card, there would be no interest to pay for the first year. This gives an annual saving of £301.85, taking into account the balance transfer fee, says

Energy savers

The easiest way to make savings on electricity and gas is to move to a dual-fuel, direct debit – by switching to the best online tariff instead of staying on the average standard QCC tariff. This can save an average of £258 over 12 months. A simpler way to cut costs is to turn the thermostat down 1C, saving 10 per cent off your bill. Insulating lofts and open spaces can help cut up to 35 per cent of heat loss, according to Moneysavingexpert.

Inflate your income

The simplest way to boost your income is to switch to a current account that offers a higher rate of interest. The Santander In Credit current account pays interest of 5per cent on credit balances. Keeping a £1,500 balance in this account for 12 months would generate £75 in interest.

Another way to increase income is to keep a running budget analysing household income and expenditure on a week-by-week basis. Keith Thomson, the director of investment services at Dundee-based Blackadders, says this helps prioritise what is and is not essential, helping eradicate unnecessary expenditure which gobbles up income.

"Most people only have a vague idea of what they spend. Keeping track of all expenditure, especially cash – for newspapers, lunches, drink etc – will give you a clearer picture. It should help identify where money can be saved for unexpected bills, and you can still enjoy little luxuries."

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