Insulating hot water pipes and your water heater or storage tank can save you about $40 each year. By keeping the water hot as it travels to you, you'll get hot water faster at the faucet and you can turn down your heater a couple degrees.
Figure out the diameter of your pipes (likely 1/2 inch or 3/4 inch) and buy some pipe insulation, duct tape, and scissors. Put the insulation on the pipes, cutting for appropriate size and angle, and then tape them up. Full details here.
If your water heater or storage tank feels warm to the touch, it's worth adding an insulation blanket. Buy one that will fit and follow these instructions.
Once you're done, try turning the heater down four degrees and see if that still provides hot enough water. Continue adjusting up or down until it's just hot enough.