Last Updated : Jun 12, 2018 12:06 PM IST | Source:

Managing Money With Moneycontrol: Here's how you can go about planning your annual vacation

Holidays and vacations are an integral part of everybody’s life. However, people generally fail to plan their holidays.

Moneycontrol PF Team

Holidays and vacations are an integral part of everybody’s life. However, people generally fail to plan their holidays. Only when they don’t plan their budget well in time. In this episode of Managing Money with Moneycontrol, we tell you how you should plan your vacation and what all things you should keep in mind before going on holidays. In the accompanying video, Manoj Nagpal, Consulting Editor and Founder, Outlook Asia Capital, shares actionable insights on factors to keep in mind while travelling to your dream destinations.

Here are 5 things you should keep in mind while planning your vacation.

Calculate your spending: A big mistake that people make while travelling on holidays is that they decide the destination first, and then go about deciding their budget. However, that should not be the case, it should be the reverse of that thinking. You should be very clear what your spendings are going to be and then decide the kind of holiday you can go for. You cannot afford to spend beyond your means on a holiday because it will impact your other financial goals. So you may either be compromising on your retirement goal or your child’s education goals.

Think before you planning:  Most of us don’t give time exploring destinations we are likely to visit. It is very important to understand the places you are going to visit and the cost it will incur while travelling a certain place. Do not be so spartan in planning your vacation that when you reach the destination, you may not be able to enjoy it to the fullest.

Prepare a budget: The basic thumb rules say that you should not spend more 5-20% of your annual take-home salary on your vacations. If you spend more than that, then you are actually compromising some of your other goals, as stated above. For example, if your monthly income is Rs 1 lakh which equals to Rs 12 lakh annually. In such case, you should ideally spend Rs 2.4 lakh on your annual vacation. And, if you are thinking about two vacations per year then in such case, your spending should not cross Rs 1.2 lakh per trip.

Save money in a right instrument: Most of the people plan either one or two holidays during a year. However, some may also plan three or four trips a year, it’s totally one’s choice. But, what we need to observe here is that even if you are planning one vacation a year, you have only 12 months to make savings. In such case, you should ideally go for liquid funds or ultra short-term debt fund investing, where you should ideally park at least your two months’ salary in advance and get a decent return on it while planning your vacation. Also, if you are planning two or three vacations then in such case, you can park money in a savings account only. Do not park your money in stocks to maximise your returns in a short while as it may get you in losses instead of making gains.

Finance your trip but with caution: Generally, it is not recommended to borrow money for your vacations, but today’s generations are not likely compromising on their holidays, they tend to borrow money if they are falling short of it in some cases. In such case one can go for these two options:

Credit card borrowing: The credit card is offering lots of options these days. However, you need to remember it is the high-cost option amongst the all other options.

Bank borrowing: Banks also offers unsecured loans for a vacation. These loans generally charge you 10-14% of interest. So, ideally you should borrow when there is a critical need, else you should not go for it. Also, make sure if you are borrowing you should repay the loan as early as possible, do not stretch it and get into a debt trap.

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First Published on Jun 12, 2018 12:06 pm
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