The British economy is in it worse shape in living history. With the prospect of rising costs and job losses hanging over the population, here is your 22-step plan to making sure you are in the best position to stay clear of the crunch...

1. Budget

If you do nothing else, make a budget. It may sound dull, but writing down exactly where you money goes each week, as well as what you have coming in, is the single most important thing you can do. Afterwards, you can evaluate where to cut spending and where you can make your money work harder for you - as long as you remember to put some aside for the inevitable large expenses that crop up.

2. Bring your mortgage cost down

One of the largest impacts of the international credit crunch on consumers has been the rise of mortgage rates. It's one of the biggest expenses you face and even those on fixed-rate deals should be wary for when they run out. There are three ways to reduce the cost of your mortgage: switching to a cheaper deal - although make sure you include fees in any calculation; extending the term or moving all or part of your mortgage to an interest-only deal - where less is being paid off now, but it will have to be paid off eventually; or overpaying - overpaying - which is astonishingly effective because you save more by paying off debts than saving first. Offset and current account mortgages let you do this automatically.

3. Supermarket shopping bills

The weekly food shop is an easy area to save money on. Britons waste a third of the food they buy - so rediscovering the joys of leftovers and freezing spare food can save you a huge amount. There are also areas where saving money does not result in a loss of quality to your diet and other things you can cut back on or cut out entirely.

4. Taxing matters

The last thing you need to be doing when money is tight is handing more money to the taxman than you should. But millions of people are tax losers and don't even know it. One word - check. You can either have an accountant look over your tax return (at a set cost) and see where you are overpaying or you can do it yourself with a self-help book. It's possibly worth checking you are receiving the all the tax credits you might be eligible for and are in the correct council tax band as well.

5. Money to burn

Domestic fuel bills look set to top £1,000 a year for the average family this year. There are two simple ways to bring this down: switch to the cheapest provider and to use less energy. Energy efficiency isn't just about saving the planet, it can also make you better off.

6. Petrol savings

While we're on the subject of fuel - petrol and diesel costs are also hitting highs. But there are plenty of ways to bring these costs down too. The simplest is to look for the cheapest petrol station near you or on your commute. You can also save money by driving more fuel efficiently and even by walking or cycling where possible instead of driving - or possibly switching to a more fuel efficient car or even a motorbike or scooter.

7. Insuring you're OK

Insurance is becoming increasingly important as the economic outlook is less certain. But as well as making sure your income and mortgage are covered, along with essentials such as car and home insurance, it makes sense to check you are not paying too much for any cover.

8. Cut out non-essentials

Small purchases can make a big difference. You can save more than £2,000 a year by cutting out non-essential purchases. Think what you could do with the extra money - especially if it is put into savings or towards paying off debts.

9. See what you can get for free

Before buying something, check to see if you can get it for nothing or at a discount. There are a number of things you should never pay full price for and others you can get for nothing. You might also be able to buy vouchers online at a discount to use in shops and supermarkets.

10. Get online for less

Online shopping lets you compare prices more easily and look for discounts using search tools - but it's important to make sure you broadband is not ripping you off. Long contracts, download limits, "free" deals that are nothing of the sort and charging you to call technical support are all tricks that are used. You should also compare prices to ensure you get the cheapest deals for your usage patterns.

11. Socialise for less

Having fun doesn't have to cost much. There are a host of options that let you have fun with friends at little cost. It's important to make sure you still enjoy yourself when money is tight, because locking yourself away from friends and family only increases the temptation to splurge cash later.

12. Save wisely

Two working Britons in five don't have enough savings to last a month out of work, according to credit rating agency Callcredit. While money is generally better employed paying off debts than sitting in a savings account when times get rough, it is essential you have access to some emergency cash. And if you do have savings, you might as well earn as much from them as possible. Savings accounts are paying over 6%, as are the best tax-free ISA deals - and unless you are on a good deal, you are simply throwing free money away.

13. Be credit card sharp

Money being tight is no reason to cut up your credit cards. They are a flexible way to borrow and are great for tiding you over for a few days or spreading the cost of a big item if you don't have savings to fall back on. However, you have to use them smartly. Don't carry a balance on the cards long-term if you can help it, and if you do have a big balance, try and get it onto a 0% balance transfer card. If that's impossible, switch to a card with a low standard rate. If you are using a card to pay for big items, try and use either a card with an interest-free deal on initial purchases or one that offers you cashback on spending.

Current account deals aren't as good as they used to be - but there is still a huge difference between the best and worst accounts. The top deals on overdrafts charge less than 10% interest (or are even interest-free for a fixed period), while there are several accounts still paying more than 5% interest on positive balances. Some bank accounts will also let you keep up to date with text message alerts on the current state of your balance as well as online deals letting you check your finances any time of day or night - making managing money easier.

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15. Check your credit status

To make sure you qualify for the best current accounts and credit cards, you need to make sure your credit record is in the best shape it can be. Your credit report will be used by banks and other financial institutions to decide if you are eligible for the best deals or even any deal at all. You can check out your report for free online and also take steps to improve your credit rating - something that is increasingly important as banks tighten up lending criteria.

16. Summer holidays

Now is not the best time to be heading overseas. The pound has fallen in price against almost every world currency (except the dollar) making foreign travel more costly - especially to continental Europe. However, a savvy traveller can still holiday for less - and there are some great holiday destinations in the UK. But if you are really in trouble with debts, flying abroad for a week or two at peak summer prices is one luxury you can do without.

School holidays are expensive times - working parents can spend as much as £1,200 on childcare costs alone, according to Abbey. But there are ways to bring the costs down. Free trips and days out can be had at museums and in the park - with outdoor games for sunny days. Working parents can co-ordinate their schedules with each other and friends and families to minimise the cost of daycare and if you team up with other parents it means more children for yours to play with.

Tips to save money...

18. Phone in savings

There are now more mobile phones in the UK than people and on top of this most homes have landlines as well. Combine all of this and there are massive savings to be made by moving to the cheapest deals, and you can even take your number with you.

The property market is in bad way - as house prices fall month on month and mortgages become more expensive or are withdrawn from the market entirely. Most people agree that long-term house prices will be back, but for now it might more sense to keep renting or extend a your home rather than buy a new one.

20. Use spare rooms for profit

If you have a spare room in your home, you can rent it out for up to £4,250 a year tax-free. But be careful, any money they give you for bills or food could become taxable if it means they pay in total more than the tax-free limit.

21. Money for old rope

There are plenty of other ways to make money from your home. De-clutter your home with online auction sites, car boot sales, pawn brokers and auctions to get rid of things you don't need any more and make money from them.

Find out where to look for hidden treasure and the best ways to cash in.

22. Earn more

There is a simple way to make yourself more comfortably off that you can do without economising, earn more. This can be done through either negotiating a pay rise or by supplementing your income with another part-time job. Many of these take up less time and pay better than you might imagine - and might even be a good way of widening your friendship circle.

Article by James Andrews