Counting pennies and learning how to budget.

These are simple tips for counting pennies and learning how to budget.

Feeling the pinch? Or simply looking to trim your expenditure so you can save more for a rainy day that just lately - with escalating redundancies, company closures and investment busts - feels unnervingly imminent?

Here are the most effective ways to slash what are probably your biggest costs overnight.

MORTGAGE PAYMENTS

Rates have been cut by 1.5 percentage points in the past year and may yet fall further. That won't be making mortgage holders feel nearly as warm and fuzzy as it should, though; Canstar says, depending on your lender, as little as 0.93 points has actually been passed on.

Even if this is your plight and you have a $300,000 mortgage, you could save an extra $179 a month. But you'll have to ask - lenders don't automatically reduce your payments on cuts as they increase them on rises (helping us pay less in the long run). You might be able to do better than that, too - four additional cuts better.

Your interest rate, if you're on one of the big banks' standard deals, is more than 1 percentage point above the best in the market (see Page 66). Point out you know this and you might not even have to switch lenders to save a further $184 a month. Be prepared to walk away if your institution doesn't acquiesce.

Of course, you could ultimately turn this money into a much larger sum and cut more than four years off your loan by continuing to pay it into your now-cheaper mortgage - but we're talking today about how to keep more of your hard-earned, so I'll spare you the lecture.

PETROL

Fuel costs have come back from five-month highs, on oil price falls, but remain at painful levels.

CommSec estimates in the past three months the weekly average household fuel bill has spiked $18. Cutting this comes to how you fill up and use up.

Pay $1.30 instead of $1.50 and the average driver saves $14. You'll be more likely to find this not on Tuesdays, as was traditional, but closer to the weekend. No rhyme or reason to this beyond retailers adjusting prices to yield more profit.

There's a lot to do to reduce consumption. Start with big ideas such as car pooling or taking the bus (the Census says 66 per cent of us drive to work), then look at your car and driving habits.

Empty it - carrying around golf clubs will cost you; get it serviced so fuel use is optimised; curb your lead-foot - accelerate gently, and brake and change gears as if there are eggshells under the pedals, to notice a big difference.

 

ELECTRICITY

There's been much talk about this one around the water cooler at my office as, whether it's justified or not, people reel from overnight increases as high as 100 per cent.

Don't put up with it! There are suppliers out there taking advantage of consumer discontent to grow their business. Jump on goswitch.com.au or switchwise.com.au to see what these are in your area (just be wary of signing up for long periods as the discounting is likely to heat up).

Look to your consumption then. Heaters, airconditioners and dryers are the most energy intensive - so limit your use of each. Choice and CSIRO research says just abandoning the dryer will save $127 a year. Wash in cold water, use economical shower heads and switch off appliances not in use to keep $403 more.

INSURANCE

House and contents insurance premiums are biting particularly hard as policyholders pay the price for floods in Queensland and multiple natural disasters elsewhere. Add this to the annual rises in health premiums - 5 per cent this year - and insurance is becoming a massive drain.

First, a caution: you need it. Key is to determine how much you need and then to make sure your policies represent best value.

Price comparison websites - try iselect.com.au and canstar.com.au - are your friend here, too. Before switching, check that coverage is continuous.

FOOD AND BOOZE

Bit vexed, this one, as supporting the supermarket price wars will ultimately drive smaller players out of business and send prices up. It's a broader issue but there's an argument for favouring smaller players doing their best to remain competitive.

There are lots of ways to reduce your spend: don't shop hungry, plan meals well ahead and buy only what you need, cook what's in season, shop at night for discounts on perishables, and join friends to bulk-buy at food and grocers' markets.

On alcohol, consider cleanskin wine or - gulp - cut back. It all depends on how motivated you are to save.

Nicole is the editor of afrsmartinvestor.com. Follow her on Twitter @NicolePedMcK.