If you are off on holiday soon then here are a few tips that I learnt from this trip:

1) Make sure the local tourist information centre is the first place you visit as they are not only a great source of information but many of their leaflets contain vouchers that can save you hundreds of pounds. We were very lucky this time and found plenty of ‘buy one get one free’ vouchers for things we planned to do any way.

2) Eating out gets very expensive and in Australia this was particularly true. Avoiding restaurants for a couple of nights can significantly reduce the total cost of your holiday. If you are staying by the beach then I reckon there are few restaurants in the world that can beat eating Fish & Chips sitting on the beach, and it’s far cheaper too! Also if you are in big cities look for food courts which often offer a great range of food at reasonable prices.

3) If you are away for a while then you will soon get bored of hotel breakfasts so it is well worth investing in a box of cereal and some milk (can be kept in the mini bar). This will not only save you pounds in your wallet but also pounds on your stomach if you would otherwise be having a cooked breakfast every day!

4) Make sure you have a good credit or debit card with you whilst you are away as most charge an extra 2.75% on all foreign transactions which you won’t even notice on your statement as it’s not broken out. The only two major card providers that do not currently have this charge are the Post Office and Nationwide.

And finally if you are going away for a while make sure the debit card you pay your bills with doesn’t expire whilst you are away. I learned that lesson this time the hard way when I returned to lots of overdue bills. Fortunately no harm done, but not the sort of welcome you want when you return from holiday!

Basically what is happening is the car hire companies are offering the cars at a loss to entice customers in, then they make their money by selling a bewildering range of insurance policies and extras. By now they have already hooked you on the idea of hiring a car and use your fear of the worst to sell. Here are just a few of the most common types of insurance:

Collision damage waiver (CDW). This is the basic cover and it reduces your liability in the event of an accident. Without it, you could be forced to pay for the replacement cost of the vehicle.

Theft waiver (TW). The equivalent of CDW but protects against theft. Also known as theft protection.

Super collision damage waiver (SCDW). Reduces your liability to zero and covers tyres, roofs and windscreens.

Personal insurance (PI). Pays out if you kill or injure yourself or a passenger, usually covered on regular travel insurance.

Personal effects cover (PEC). Pays out if your property is stolen from a vehicle, usually covered on travel insurance.

To make matters worse the car hire companies have developed lots of fancy names to help market these insurance products making it virtually impossible for anyone without a legal degree to easily compare one companies offering with another. The first thing to do is check what cover if any you already have on your existing travel insurance policy as there is no point paying twice for the same cover. The next thing to check is what is included in the price, it’s usually just the bare minimum required by law so leaves a lot of things uncovered.

You’ll probably want some additional insurance (especially if your standard excess is very high) over and above what is included in the price but don’t just opt for cover from the car hire company. If you search around you’ll find standalone cover is substantially cheaper, often by as much as 70% which on a 2 week hire could easily save you over £100. If you are just hiring a car for a couple of days then the savings may not be worth the effort, but if you do this a couple of times a year then the savings on an annual policy are probably worth looking into.

Next they will try and sell you extras such as child seats, sat-navs. If you need a child seat then you may find it’s well worth packing to take with you and if you have a sat-nav in the UK you may find its a lot cheaper to buy overseas maps rather than hire this when you get there. In fact with many car hire companies charging in excess of £10 per day for having sat-nav in the car you could even buy your own for less than hiring it for 2 weeks!

Your car hire bill will still soar as you move closer towards booking as they’ll add compulsory taxes, airport pick-up fees, different location drop-off fees, young driver surcharges, additional drives fees and many more. Be sure to include the prices of these extras when comparing different car hire companies as they’ll often cost far more than the actual cost of hiring a car and most of these charges can’t be avoided.

Before you rush to book car hire for your next holiday make sure you consider whether you really need it. If it’s really only for getting to and from the airport and a few short journeys once you get to your destination you may find public transport is a much better option, or you may even find that taxis are cheaper.

Firstly start with the big name travel brokers such as Expedia, Hotels.com, Ebookers, Lastminute and Travelocity. You’ll often find these come back with very competitive rates that are hard to beat elsewhere. You’ll quickly notice that the number of stars hotels has varies by website so don’t pay too much attention to them as it’s a flawed system of rating hotels online. Instead check reviews on Tripadvisor which is a site that allows past guests to rate and review hotels. If there are plenty of good reviews then you have probably found a good hotel, but its worth remembering that everyone has a different view of what makes a good hotel. For example if you are looking at European hotels you will probably find plenty of Americans complaining about small room sizes, it’s not that the rooms are particularly small but more often just a case of them being used to far larger hotel rooms back at home.

Once you have found a couple of good hotels it’s time to see just how low you can get the nightly rate. I always start by looking at last minute prices as if I was going in the next week as these are usually the lowest possible prices you’ll ever be able to get. Armed with this information it is worth contacting the hotels reservation manager direct asking if they would let you book a room at this rate for the particular dates you want. Unless you are going at a particularly busy time then you’ll usually be able to negotiate the nightly rate down close to the lowest rates you have found for other dates as the reservations manager is normally authorised to go to this level.

If the hotel is not willing to negotiate the price you pay then ask for a free room upgrade or breakfast to be included etc. The value of this to you is far more than they pay for it and if it gets them a booking they’ll normally agree. Remember if you have found several suitable hotels then each individual hotel needs your booking more than you need them!

Finally if you are on a tight budget then consider staying in hostels as they may not have all the facilities of a hotel but they are usually well located and are a great option if you just need a bed to sleep in every night.

I am yet to find a more powerful comparison site than Kayak but it’s one downside is that it only searches the main airlines and therefore does not cover the budget airlines. So alongside your Kayak search I suggest you use Travelsupermarket which includes most budget airlines along with many flight brokers. It’s not quite as user friendly as Kayak but will search deeper for the best bargains. There are loads of other flight comparison sites you can use such as Skyscanner, Kelkoo, Cheapflights etc but searching just Kayak and Travelsupermarket should be enough to cover most of the market.

If you really want to be sure you have found the best deal then you need to check prices with Flightbrokers as these may sometimes have special offers with certain airlines. I would suggest you try Expedia, Ebookers, Travelocity, Lastminute and Opodo (which tends to undercut a lot of other sites as it’s owned by nine of the major airlines!). Also don’t forget to check the airlines website’s as they sometimes advertise special deals which the comparison sites fail to pickup, this is particularly true if you are booking a multi-destination flight.

Having exhausted the internet and still wanting to find a cheaper deal than call your local travel agent and see if they can beat your best price. Many of them wont even try but some will be able to get you the same price you have seen online and share their commission with you to reduce the price you pay them for the flight. It can also be worth calling the airlines as sometimes their staff know about special offers that are coming up in the future so it may be worth delaying your booking for a couple of weeks (although be careful as if flights get booked up then prices tend to go up).

If you already have money in the bank ready to pay for your holiday then you can skip the next couple of paragraphs, otherwise to answer this question you need to have an annual budget that you are confident you can stick to. If you have never done a budget before then check out this article on MoneySavingExpert.com. Make sure you have captured everything in your budget as it is amazing how many people miss things out (even us accountants make mistakes!) and don’t forget to include savings, as you don’t want to spend the money if you should have been saving. 

Hopefully once you have done this your income will exceed you expenses with enough left over to pay for a holiday. If it doesn’t then I suggest you read through my Money Saving and Money Making posts for ideas on how to improve your financial situation. I would never recommend spending money on holidays that you don’t have unless you are confident you can repay any borrowings quickly upon your return, otherwise your holiday will end up costing far more if you have to start paying interest too.    

Once you have sorted out your finances you can start thinking about whether you can afford the sort of holiday you want. Obviously your choice of destination and the level of luxury you want will make a big difference to the overall price of your holiday. That isn’t to say that more expensive holidays offer less value as it’s all about what you get for the price you pay. You probably already have a destination in mind so the next step is to put together a quick estimate of how much your holiday will cost.

1) Start by researching approximate prices for a flight on one of the many flight comparison website’s to that destination at the time of year you want to fly and make a note of the average price you find, you don’t want to pick the cheapest as these may not be available for the exact dates you want to fly. Also make sure that the prices you have found include taxes as these can quickly add up, particularly if you are flying to multiple destinations. Obviously if your choice of holiday does not involve flying then substitute the word flight for ferry, train, car, space rocket etc.

2) The next thing to do is get a rough idea of how much accommodation is going to cost. Again the comparison website’s come in handy for this as they enable you to get a feel for prices quickly. It is important to be realistic here as if you don’t plan to stay in anything less than five star then you shouldn’t be looking at the prices of two star motels. Same as with the prices of flights select an average price that is easily available for the time of year you want to go and multiply this by the number of nights you will be away.

3) If you asked people to name the three biggest costs of going on holiday then they are very likely to have said ‘flights, hotels and umm….’. Try it you will be amazed how many people answer like this. From my experience the third biggest cost is your daily spending money, i.e. all those little costs which are frequently paid for in cash but over the course of a holiday add up to quite a lot, which for me includes food, drinks, entrance tickets, tour buses, public transport etc.

Think about what you will be doing on holiday… will you be eating out every night or self-catering? what attractions do you want to see?  Then try some quick google searches to find out how much things are likely to cost or searching the lonelyplanet forums as questions are frequently asked about how much spending money you need for different destinations. If your holiday includes lots of expensive attractions, for example a theme park holiday in Florida then its probably worth splitting this out as a separate budget category. Once you have an idea how much you need then you need to multiply this by the number of days you will be on holiday.

4) Now it’s time to think about all the hidden extras that you have to pay to go on holiday. Unless your chosen destination is in the UK then you’ll probably need holiday insurance so do a quick search on one of the insurance comparison sites such as moneysupermarket.com to get an idea of how much you’ll have to pay.

Also don’t forget to add in the cost of getting to the airport and parking your car if necessary, a quick search on the airports website will give you a rough idea how much you have to pay. The final hidden cost to add in is any visas or passport renewals as if relevant there is no way of getting around paying these.

Holiday Budget

Price of flights (make sure you include taxes) = £xx

Price of accommodation x number of nights = £xx

Daily spending money x number of days =£xx

Cost of Insurance = £xx

Cost of getting to the airport = £xx

Cost of Visas/passports = £xx

Once you have added everything up then add 10% to the total (i.e. multiply the total by 1.1 on your calculator) as the same survey that found the average family holiday cost £2,725 also found that the true cost of a holiday is underestimated by an average of £214. This acts as your buffer to ensure that if the holiday ends up costing more than you originally planned, which hopefully it wont, you still have enough money to pay for it. This ensures you don’t suffer a financial hangover when you return from holiday. 

This should have taken less than an hour and you should have a good estimate of how much the holiday you want is going to cost. Next comes the hard bit of deciding whether you can afford it by looking at your annual budget. It’s important to be realistic here as its easy to get carried away with the dream of that expensive holiday and overstretch yourself financially. If you clearly cannot afford it this year then think about postponing that holiday until next year, hopefully an extra year of saving for it enables you to go on your dream holiday. If you are just short of having enough money then read through my Money Saving and Money Making posts for ideas on how to make up the difference.

Don’t forget this estimate is just that, an estimate. Over the next couple of weeks I’ll be posting ideas of how to save money on the price you pay for your holiday and how to get more for your money.