We are living in uncertain times. House prices are falling, the economy is slowing and consumers are under the cosh from the fall-out from the credit crunch, which is sending borrowing costs higher.

Preparation is the best defence for your finances. As Karen Torson, partnerships business manager at the Cheshire Building Society, says: “An uncertain economy can cause worry for many individuals, but taking the time to ensure you are well prepared can provide peace of mind and make a big difference — whatever the future holds.” Whatever might lay ahead, our top tips should help:

* Protect yourself

There are many different insurance policies on the market offering various levels of cover, so consider what you actually need, be it mortgage protection, income protection or both.

Research cost options and check the small print. In comparison with income protection policies, mortgage payment protection insurance (MPPI) plans can be greatly inferior and might even cost you more, according to protection specialist LifeSearch. Typically, MPPI plans only pay out for one year, include a number of important exclusions and both the premiums and the conditions of the policy can be changed at short notice.

* Don’t stop the music

Read other insurance policies carefully to know what you’re covered for.

For example, music fans should think about protecting downloads. Many of Britain’s big name home insurers are still not paying out for claims on the loss of downloaded music — despite the fact that digital sales now form a massive chunk of consumers’ music purchases. They include Endsleigh, Barclays and Bradford & Bingley, according to price comparison website Moneynet.co.uk.

* Save for a rainy day

Inflows into building societies are on a high — and cash savings are an important cushion against hard times. The rising cost of living has made it more difficult for most to save, but every little helps: try and put a small sum into a high-interest savings account each month.

* Shop economically

Think of ways of cutting down on spending. Supermarkets, for example, usually have reduced-priced goods near the end of the day, while TK Maxx sells designer and high street brands of womenswear, menswear, homeware, gifts and accessories at up to 60 percent less than the recommended retail price.

* Know where to turn

There are many services out there that can help if you fall on hard times or have a financial problem. The Citizens Advice Bureau is a good starting point.

* Keep your CV up to date

Regardless of whether or not you feel secure in your job, take time to update your CV. It will mean one less thing to worry about if you find yourself out of work.

Are there other ways you are easing the financial strain? Share your tips with us.

The “open market option”: it sounds like complex financial jargon. But  it’s certainly worth knowing about. For, when it comes to retirement, it could boost your income by almost 25,000 pounds.

A 65-year-old woman with 100,000 pounds-worth of pension savings could be missing out on a staggering 24,162 pounds by failing to exercise this right; a man by 23,025 pounds, according to numbers crunched by independent financial service provider Hargreaves Lansdown. That is around the same as average annual earnings in the UK last year — 23,764 pounds, according to the Office for National Statistics.

More than 85 percent of savers buy an annuity contract when they retire. This guarantees an income for life in exchange for savings built up in a pension fund. “That’s always been the case and is likely to remain the case, as for most people it really is the right thing to do: they need the certainty of income and haven’t got many other assets,” Nigel Callaghan, a pensions analyst at Hargreaves Lansdown, the largest annuity broker in the UK, tells Reuters.

Some 200-plus companies offer pensions. Yet only a small proportion — a dozen or so — “play” the annuity market. The average difference between the best and worst annuity rates published by the Financial Services Authority is more than 15 percent. Legal & General, Prudential, Axa, Friends Provident and Norwich Union are among those that vie to be competitive.

But did you know that savers need not buy their annuity from the company with which they’ve stashed their retirement savings? This — the “open market option” — became a contractual right in 2002, forcing insurers to send “wake up letters” to those approaching retirement to tell them of their ability to scour the market for the best deal. Despite that, the number of people exercising this right has remained largely static at around a third.

“Consumers are being ripped off right, left and centre when it comes to retirement,” says Callaghan. “Many, if not most, of these letters are the complete antithesis of plain English. Some are six-plus pages and you’ll find the stuff about the open market option embedded at the bottom of page four in small print and written in Latin. That’s why I think the take-up figure is so shockingly low. It’s not working: it wasn’t working back then and it’s not working now; commercial greed is the bottom line.”

If the current trend continues, insurers stand to make even greater sums: the number of pensioners is on course for a boom. Last year, 330,000 people bought annuity contracts with 12 billion pounds-worth of pension savings. By 2012, that figure is set to balloon to 18 billion pounds, as the baby boomer generation retires and the demise of final salary pension schemes continues.

By exercising the open market option, these people and the retirees that come before them can avoid handing insurers telephone-number profits. And, by all accounts, savers should be able to get a good deal: annuity rates are at a four-year high as the capital value of corporate bonds — used by insurers to back annuity contracts — plummets and yields stretch. “There have been 30 movements in annuity rates this year alone — the majority up,” says Callaghan. “It’s largely to do with the credit crisis and the continued spanking of corporate bonds. Annuities are one of the few beneficiaries of the credit crisis.” A beneficiary of the credit crunch? Well, I never.