Financial planning for a vacation
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18 Apr, 2018
Taking a Caribbean Cruise or seeing the Northern Lights in Iceland, relaxing on the beaches of Goa or enjoying the scenic backwaters of Kerala – you have always had a travel bucket list and dreamed of going for a carefree vacation. Travelling helps you create memories and experiences which you cannot measure in money. But those experiences cost money and by planning and investing smartly you can have a great holiday and not be counting money.
Here is how you should plan your vacations without stretching your finances:
1) Draw up a bucket list of your dream vacations
List down ahttp://happida.com/wp/wp-admin/edit.phpll the short and long vacations you want to take in the next 5 years. Deciding on the destination, duration and who you will be travelling with, will make it easier to prepare a budget.
2) Create a budget for each of the vacations
For planning the finances for a vacation there are two factors that should be considered–
- How much that dream holiday will cost?
- How much can you afford to spend on it?
Start with estimating the rough cost of a vacation either by searching the internet or consulting friends and family who have travelled to the place you want to travel to. Set a daily budget for the food and sight-seeing, in addition to the cost of the transport and accommodation. For international trips keep in mind the exchange rate while estimating the cost of the vacation and budget a little more than necessary to cover unexpected expenses that may arise during your trip.
Based on your monthly income and expenses you can first determine how much you can save towards all your financial goals. Next this money needs to be allocated towards more important financial goals like providing for your child’s education, buying a house or a car and planning for your retirement. Once you allocate money for the goals you get an idea of how much can be kept aside for a vacation.
3) Setting your vacation goals with timelines
Once you’ve estimated the budget and how much you will spend on the vacation –
- Place your vacation goals on a timeline and consider the time left for the vacations.
- Consider inflation (about 7% p. a.) and arrive at the amount you will require for the vacation at the time you want to take one.
- Set up separate goals for each of the vacations and start investing towards them. You’ll be more motivated to save when you see the saving for your “Euro Road Trip”, “South Africa Adventure” or “Mediterranean Cruise” goal increase each month.
4) Start investing towards these vacation goals
The task of setting aside a huge sum may seem daunting but breaking it down into smaller amounts to be set aside for the trip is easier and will lessen the burden of paying for vacation at the last minute. Ideally you should start investing for your vacations 4 years in advance giving your money enough time to grow and thus reducing the amount required to be saved. For vacations that you will take in 4-5 years, invest every month in a balanced fund through SIP. For vacations in the next 2-3 years, look at using your current savings, bonuses etc.
Few more tips to help you plan your dream vacation
- Get insurance
- Claim your tax benefits
From losing baggage in transit, your wallet getting stolen, falling ill, to meeting with an accident, a lot can go wrong while on a trip. Buy a good travel insurance cover to save you the financial worry of dealing with such losses.
When you’re back from the trip, put away the tickets and boarding passes safely to present to your company accounts team to claim LTA benefits on your salary.
Discuss your dream vacation goal with your financial planner because planning a vacation is like any other financial goal, where regular saving and investing is required. So, plan for that vacation now, and the next year could find you riding the waves on a beach in Australia or relaxing at a yoga retreat in Bali.