If you're trying to cut down on your hot water use, you've likely taken steps such as shortening your showers or changing to cold water washes for laundry. It's easy to forget about the water heater. Making a few improvements to this appliance can be a big help on your utility bills.

Conventional water heaters are always ready to provide hot water for a shower or washing dishes, but this standby mode also leads to some inefficiencies. Joe Bousquin, writing for the National Association of Realtors' home improvement site HouseLogic, says the water in the tank will cool down over time and require additional energy to heat it back up. Allison Casey, writing for the Department of Energy, says water heating often accounts for up to 12 percent of a home's energy costs – second only to heating and air conditioning.

One way to reduce your water heater's energy use is to simply turn down its thermostat. Water heaters are usually set at 140 degrees. While dishwashers generally use water at this temperature in their cleaning cycle, it increases the risk of scalding during a shower or bath and leads to more standby heat loss.

Every reduction of 10 degrees will save you between 3 and 5 percent on your utility bill. The Department of Energy recommends setting your water heater's thermostat at 120 degrees, since this will be sufficient for most of your hot water needs.

Bousquin outlines a few extra steps to ensure that the temperature is set at 120 degrees, since the water heater's thermostat might not be accurate. Use a thermometer to take the temperature at the farthest faucet from the water heater, mark the temperature on the thermostat, and turn down the thermostat to where you expect it will hit 120 degrees. Once you've allowed the temperature to adjust, do another thermometer test and mark the 120-degree point on the thermometer once you've confirmed it.

The Department of Energy says you may need to remove screw-on plates on electric water heaters to access the thermostat; if so, shut off the electricity to the tank before unscrewing the plate. You should also be aware that some water heaters have thermostats at both the top and bottom of the unit.

If your dishwasher has a booster heater, it will be able to increase the water temperature in the appliance to the required level. Lowering the thermostat is not recommended if the dishwasher doesn't have a booster heater, since it will not be able to function effectively at a lower temperature.

When you go away for a few days, turning the thermostat to its lowest setting or shutting down the water heater entirely will prevent the unit from needlessly keeping a supply of hot water on hand for an empty house. If you shut off the water heater, however, make sure you know how to get it started again.

You can also add modifications to the water heater to keep it from warming up the water when you don't need it. Timers allow you to automatically shut down the unit at night and turn it back on in the morning. Heat traps control the flow of water into and out of the tank, preventing hot water from exiting when you don't want it to.

Regularly removing the sediment from your water heater will help it run more efficiently. The Department of Energy recommends draining a quart of water every three months to get rid of this buildup, but you should follow the manufacturer's recommendations for the best results.

The water will lose some of its heat as it travels through pipes from the water heater to its destinations. While you won't be able to easily access all of this plumbing, it should be simple to add inexpensive insulating sleeves to the exposed pipes in your basement.

The water heater itself can also be insulated. Blankets for this purpose can be purchased at minimal cost to cover the tank and prevent heat loss.

Be careful not to cover up critical components with this blanket. Bosquin says the thermostat should remain accessible in electric models, while the insulation on gas-powered units should keep the air inlet and exhaust clear. If the water heater is already insulated, adding a blanket might block these components and prove hazardous.

If it's time to replace the water heater—the Department of Energy recommends doing so every seven years—consider upgrading to a more efficient model. Some options include heat pumps, solar-powered heaters, and water heaters that warm up the water directly without using a storage tank.