MONEY COMMENT
Take The £1,000 Saving Challenge

By Cliff D'Arcy
February 17, 2003

Along with thousands, if not millions, of Britons, my wife and I are saving up to buy a new home. My young son and his toys have added to our clutter, such that we've outgrown our tiny house in West London.

We're keen to move to give us more space but, thanks to sky-high property prices, our next home will probably cost twice as much as our current house will fetch. As my wife works part-time and I only joined the Fool at the beginning of the year, we need to be ultra-careful and confident with our finances before taking the plunge.

As seeking out additional sources of income (renting out a room, taking a second job) isn't really an option for us, I thought I'd set myself a challenge. Can I save £1,000 a year from our household budget without too much effort?

Here's how I think I can do it.

Re-mortgaging
Mortgages are one of our biggest commitments, so this is where I'm going to start. There are about 11.4 million mortgages in the UK - our total mortgage debt is a colossal £671 billion.

In an earlier article, I mentioned that I was shopping around for a new mortgage lender, as the Abbey National aren't keen to offer me a better deal to keep my business.

I'm off to a good start, since the rate cut this month reduces the interest bill on my tracker mortgage by £165 a year. Even better, using a no-free mortgage broker, I've found a mortgage deal that cuts my interest rate by a further 0.8%, saving an extra £528 annually.

(Your saving here could be a lot larger, as we only have a small mortgage - in London terms, at least).

Transport
I currently buy monthly season tickets to travel to and from the Fool office, costing 12 x £131 = £1,572 a year. An annual ticket is only £1,364 - that's £208 less.

I'm going to buy my annual ticket the day after my credit card statement is produced, giving me almost two months to pay this bill.

Household bills
I've switched energy suppliers twice in two years, so I'm already with the cheapest local suppliers. However, when my 12-month BT Broadband Internet contract is up in a few months, I'm going to shop around for a better deal. Giving up Broadband altogether would save almost £360 a year, but it's useful for work and, anyway, I don't think I'm willing to go back to dial up!

Saving and borrowing
As a firm believer in the stock market as the best way to generate wealth, I don't keep a lot of money on deposit, except some tax-free savings. I'll make very little extra transferring these to other providers, so I'll leave them where they are.

I do have a massive amount outstanding on credit cards but, as it's all voluntary debt, most of it is costing me nothing. The remainder is on low balance-transfer rates that are about as cheap as my mortgage. However, by shuffling more onto the 0% cards, I can save at least £120.

Total saving
Mortgage: £165+£528
Travelcard: £208
Card switching: £120
The grand total is £1,021 - made it!

See how your spending compares to the rest of Britain here or visit our Living Below Your Means and Dealing With Debt discussion boards.