Prices are up, credit is tight - so let's start slashing costs

Householders will be hit by a further rise in the cost of living from Tuesday when above-inflation council tax and water rates kick in. Council tax will go up by an average of 3.9 per cent, adding £52 to a Band D property, while water bills will rise by an average of 5.8 per cent, increasing the typical bill from £312 to £330 a year.

A Moneyexpert.com survey of 2,000 adults published last week revealed that 57 per cent intended to cut back on spending over the next 12 months, with many planning to reduce the amount of money they pay for basics such as the weekly food shopping bill. And a report last week using figures from the House of Commons library showed that the additional costs of everything from food bills to running a car has added £1,400 a year to the average household's expenditure in the last year alone.

With households across the country starting to feel the pinch, how do you keep costs down?

1. Food

The cost of a basket of supermarket goods went up by 16 per cent last year, while in the last nine months the price of some staples such as eggs and butter has risen by more than 30 per cent. While most people doggedly stick to their local supermarket, those who shop online might be able to cut their food bills by using price comparison website Mysupermarket.com.

The website works.....continued below

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by asking you to choose your usual supermarket - Tesco, Asda, Sainsbury's or Ocado. It then scans your trolley contents and suggest swapping some items for others that are better value. You can then 'send' your trolley to the online checkout of whichever supermarket works out cheapest overall.

Average annual saving: £936 for the average family that spends £90 a week.

2. Council tax

You might not think you can do much about your soaring council-tax bill, but lots of homes are in the wrong band, meaning you could be paying hundreds of pounds more than you need to. This is because in 1991 properties were given 'drive-by valuations' to assess which band they should be in. The system was full of holes and means people with identical houses are in some cases paying different levels of tax.

There is a comprehensive explanation of how to establish whether you are paying the right amount in the Reclaim section of moneysavingexpert.com.

Average annual saving: £100 to £200 plus any backdated money owed.

3. Gas and electricity

Rises in the cost of energy since the beginning of the year have already added £128 to the average household's annual bill and experts predict there could be another £100 rise by the end of the year. Nevertheless, it is still worth switching your provider now and reviewing the situation in six months time. You can save even more money by going for an online tariff and paying by direct debit. Websites to help you switch include: Theenergyshop.com, Energyhelpline.co.uk and Uswitch.com.

Average annual saving: £200 for someone who has never switched suppliers.

4. Petrol

Chancellor Alistair Darling announced in the Budget earlier this month that he would delay a 2p increase in fuel duty until October. This will do little to appease motorists, who have seen the cost of petrol rise by 18p a litre over the last year. If you register your details at Petrolprices.com, it will tell you the cheapest petrol stations in your postcode area - and it is free.

Average annual saving: £180 on 10,000 annual mileage.

5. Car insurance

Motor insurance has gone up by an average of 5 per cent over the last year, according to the AA, which expects costs to rise further. The best way to keep insurance costs down is to find a cheap deal through a broker or a price comparison site and then contact your existing insurer who will often beat this quote. Paying for your insurance up front, rather than in instalments, will also save you money. Many insurers charge 20 per cent more for payments by regular direct debit.

Helpful sites include: Gocompare.com; Moneysupermarket.com; Confused.com; Tescocompare.com.

Average annual saving: Hundreds of pounds, depending on your car, your postcode and the extent of cover you are buying. Moneysupermarket.com recently found a £400 difference in insurance costs between the cheapest and most expensive providers for a 40-year-old male driving a 2002 Ford Mondeo living in London SW5.

guardian.co.uk © Guardian Newspapers Limited 2008

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