Invest wise | Planning a vacation? Get your finances right to ensure a blissful holiday

Also read: Summer Holiday Packages: 6 tips to secure the hottest holiday deals

In the era of Instagram, there is a lot of pressure to post pictures from new destinations. Not surprisingly, travel portals are advertising aggressively, offering discounts and EMIs.

There is no getting away from the fact that financing your vacation efficiently is no longer a good-to-have goal, but a necessity for many.

So, how do you go about it?

a)  Make a rough plan of how much money you would need to holiday every year.

b)  Add a buffer (costs are invariably higher than what you have planned for).

c) Start saving for it.

d) Book profits and set aside funds for your vacation.

Choose the right mutual fund scheme to achieve your goal

For individuals with regular cash flows, systematic investment plans (SIPs) are the best way to save. That way, you can set aside a certain amount from your monthly income for your vacations.

The choice of instrument depends on the investment horizon, before you use those funds for travel. The table below is for illustration only and just a representative sample.

How much should you save? That depends on how long you've saved for. Here’s a simple illustration of how much a SIP could help save for this goal over different time horizons.

The yield indicated here is for illustration purposes only and actual returns may or may not be similar.

As you can see, if you invest for a longer duration, you can invest in slightly higher-yield products (with commensurate risk), and the corpus built can potentially bankroll vacations without needing to touch other funds.

Also read: Tour operators woo women travellers with Holiday-Now-Pay-Later schemes. Should you sign up?

Saving for an aspirational goal

But should you build a travel corpus even if you're not planning a vacation?

Well, the world is shrinking, and people are increasingly mobile. Children and parents are based at different locations. This means that parents would need to set aside money to travel and meet their kids or grandkids. And this is not cheap, especially when you factor in the need for comfortable travel, gifts, etc.

Or for that matter, today, when people retire, they are still youthful and energetic, and have the luxury of time. A lot of them have a passion for travel and want to explore the world at this stage of their lives — the travel bug is not just for Gen Z and millennials.

A  little planning can help eliminate financial concerns, so you can solely focus on letting your hair down on your dream vacation,  and enjoy every moment of it.