How to save money: 'Valuable tool' Simple calculation can help to keep track of finances

Whether it’s for a deposit for a first home or for a holiday of a lifetime, there are countless reasons why a person may want to save up. However, with expenses aplenty, it can seem hard to know how to make money go further. John Ellmore, Director of KnowYourMoney.co.uk has shared some insight on how an individual can save money. It comes as the results of a survey by Know Your Money, involving 2,000 UK adults, suggest that 41 per cent of people do not feel comfortable talking about debt with their family and friends.

So, what does Mr Ellmore suggest doing in order to keep track of finances this summertime?

Understand your own finances

“While it may seem like an obvious point, the first step to managing debt is understanding your own financial situation,” he said.

“You’d be surprised at how many people lack awareness about their own finances.”

The Know Your Money director explained that it can be possible to determine how much a person is realistically able to borrow given their income and current debt levels – via a debt-to-income (DTI) ratio. – something he insisted is a “valuable tool”.

However, a Know Your Money survey showed that 39 per cent of people are unaware of what the term means.

“For those planning a holiday this summer, whether abroad or closer to home, I would encourage you to calculate your own DTI ratio (don’t worry – there are plenty of online calculators available to do this for you) before dipping into your overdraft or taking out a loan to finance big purchases like flights and accommodation,” he said.

Cut costs by going indirect

Another handy way to keep one’s finances in check could come into play when booking a holiday.

“Whether you’re planning to go overseas or stay in the UK, there are plenty of ways to save money when travelling from Point A to Point B,” he said.

“For those going abroad, consider taking an indirect flight to your destination. While the trip will no doubt take longer, it could be substantially cheaper.

“Before you travel, also familiarise yourself with transport options at your destination – are there buses that could transport you from the airport to your accommodation so you don’t have to rely on a taxi?

“Alternatively, if holidaying domestically, try and replace some train journeys with coaches instead!”

Compare options

Mr Ellmore also highlighted how comparison websites are available, which could enable the user to save money in a way which is tailored to their particular needs.

He continued: “While it’s a good idea to do your own research into the type of product or service you’re after (whether this is travel insurance or flights), this is a great place to start your search.

“Comparison websites can help you find the deals and offers best suited to your budgetary needs, ultimately helping you make better decisions regarding your spending.”