Perfect Holiday Destinations

Perfect Holiday Destinations

Advance planning translates into better savings and helps to bag the early bird deals, says Khyati Dharamsi

We are you forced to miss the azure beaches and alluring mountains due to lack of funds? Did you fall short of the
budget because of last-minute planning? Apart from facing the sunken faces at home, there is one thing you can do to ensure this doesn't happen next year around - Start planning for your future holidays now.

"I suggest a family should have a five-year holiday plan as peer pressure forces them to be ambitious about holidays. Sit with
the family and decide whether you want to take one domestic holiday and an alternate foreign holiday or one foreign holiday in three years. This helps to set the expectation and build the funds with the help of the family's involvement," recommends by Vivek Rege, Founder and Chief Executive Officer, V R Wealth Advisors.

Don't forget to take into account family events such as board exams, daughter's marriage, etc., he adds.

For Your Travel Bag

Amount Required (₹)	Period	Rate of Return (%)	Savings Per Month (₹)
13 lakh	2 years	9	50,000
3.11 lakh	3 years	15	7,000
1.6 lakh	5 years	12	2,000
4.5 lakh	5 years	12	5,600
11.21 lakh	6 years	15	10,000

Set the budget

Typically, a domestic vacation would cost a family of four around Rs. 1.5 to 2 lakh, while a foreign holiday would lighten your finances by Rs. 7-13 lakh depending on the destination. Once you have set your sights on the destination and the timeline, you can channelise your monthly savings towards the next vacation.

There are many planners available to tell you how much you would need to save. If you are planning for more than three years, don't forget to build in the inflation aspect as a 5 lakh holiday would cost 8.05 lakh considering a six per cent inflation after three years.

When it comes to foreign vacations, foreign exchange alterations too could swell your expenses and turn your plans awry. Other expenses to consider are pre-holiday shopping, miscellaneous expenses such as tips, internal travel, food and external care for pets or dependants.

Save small quantum

Saving bit by bit for a holiday would not just help you stash the vacation funds, but also help you bag the early bird deals and translate to better savings. Once you have set the budget, you can opt for a monthly systematic investment plan (SIP) or a recurring deposit to set the money aside.

So, a Rs.5 lakh holiday to be taken over a five-year period would require you to save Rs.10,500 for a period of five years considering a rate of return of 12 per cent per annum and an inflation build up of six per cent. While a Rs.15 lakh vacation to be taken over a five-year period would require you to save Rs.18,366.

While windfall gains such as bonus, variable pay, income tax refunds or gratuity is a time of exuberance and you would like to rush to fulfil your bucket list, one should avoid indulgence. Instead, divert the funds to your holiday kitty, provided no other debt is waiting to be paid off.

So, one large lump sum investment too can help you achieve the goal. For instance, an annual bonus of Rs.2 lakh saved for a period of five years can help you accumulate Rs.4 lakh, if it earns 15 per cent returns.

Family contributions

Now that the family has set its sight on the destination, you can seek the family's help in achieving it. So, ask for sacrifices of two weekend outings a month, fewer spends on luxury items such as new phones, bigger cars, and optimum use of electricity or eyen walking instead of using vehicles. Staying back home for just one weekend in a month can help you stash away a minimum of Rs.2000 a month.

If you have been thinking of what you can do with additional small savings then you haven't yet realised the might of compounding. If you save as low as Rs. 2,000 month, you can end up with Rs.1.6 lakh over a period of five years, considering your savings earn a return of 12 per cent per annum.

One can take a leaf from the incident of Mumbai-based Atul Mudholkar, 54, who had been saving to upgrade his car from the Volkswagen Polo. But he wanted to take the family on a surprise foreign holiday. He had a quick chat with his financial planner and he knew that if he opted for a foreign vacation, his dream car would have to wait.

"I sacrificed my goal of a bigger car twice for a debt-free foreign holiday - first South-East Asia and recently to Europe. Altering my goal has left us with happy memories as I realised that quality family time was more important
than buying a car. A bigger car was a desire, a social need, which still remains a dream since 2013-14."

Build the right kitty

Choosing the right instrument is as essential as saving the right amount. While equity investments are ruled out for short term savings, there are other alternatives available. One can invest in liquid funds, where no exit loads are applicable, or even short-term debt funds. Recurring deposits too can be used to move away the amount from your savings bank to avoid the tendency of overspending on daily needs.

Short-term debt funds offered by mutual 

funds have low volatility and should be looked

at for investment less than three years. Currently, the two-year return on short-term debt funds is 7.9-9.3 per cent. An Fixed Maturity Plan (FMP) of a duration that
matches with your investment period too an be considered. FMPs are closed-ended unds where maturity is predefined. "For a saving plan of three years and above, one can consider balanced funds, which invest in both equity and debt," says Rege.

Timely withdrawal

Not just saving, but ensuring the money is in your bank when needed to is essential. Ensure the cash flow is adequate at the time of booking tickets in advance. So, set up a systematic withdrawal plan three to four months prior to the holiday date, so that partial funds are redeemed for booking while the rest stays invested till a week prior to your departure. If you have invested in balanced funds, then the redemption should be made considering suitable equity market environment in a phased manner to avoid getting stuck in market cycles. Since the holiday isn't an emergency financial circumstance, better planning is all it takes to build picture-perfect holiday.