In these tough times, Brits are doing all they can to save a bit extra in case of the worst – but many might be going to far and could leave themselves exposed to more financial woes.

There are, of course, good places to cut back: new research from LV= has shown that a quarter of adults – 12 million people – plan to take their main holiday in the UK this year, whilst a further one in eight say they do not intend to have a ‘main’ holiday this year at all.

Almost five million adults who are taking a UK holiday this year put their decision down to financial concerns, with 16% admitting they cannot afford to go abroad. This is sensible saving – choosing a cheap holiday will save you money and will allow you to be more relaxed while you are away.

But there are also bad ways to save money – It is estimated that millions of people are cutting back on essential insurance cover in a bid to save money during the credit crunch, according to new research from Sainsbury’s Finance.

Among the most shocking findings of its study is the estimate that close to a million people have either cancelled their home contents insurance or reduced the amount of cover they have in the last 12 months as a direct consequence of their financial situation, and that over half a million people are estimated to have cancelled their life insurance policy for the same reason.

Its obviously important to save right now, and of course invest the money wisely in a vehicle like an offset mortgage, but it is crucial to save in the right places. Sacrificing cover, or even missing repayments on debts is just going to lead to pain further down the line.

Saving can only work if it is carefully balanced against spending. Talk to a financial adviser about what you can afford to give up, and more importantly what you cannot.

SOURCE: LV=, 04/04/09, Sainsbury’s, 07/04/09

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