Vacation, Holiday, Trip, Excursion, Outing, Expedition, Journey – many words one feeling i.e. ‘JOY’ as it gives us time-out from the regular rat race. Today, Vacation is a part of everyone’s to-do list, be it a couple or a family, be it parents or grand-parents, be it a single lady or man, be it kids or even pets. Everyone looks forward to a holiday. The only difference is that some plan for it while others indulge in the spur of the moment and end up having debts to repay. Whether domestic or international, a few days or a few weeks, all holidays can be self-funded if finances are planned in advance.

Here are 4 simple steps that could help you plan your Vacation:

• Goal Setting: You can begin with goal setting; which means you decide on the macros of your holiday which include holiday type and frequency. Your goal setting exercise would give you a result something like this: I will go on domestic vacation annually and international vacation every alternate year OR I will take 2 vacations every year be it domestic or international or both.
• Budgeting: Once you are clear on your goal, you need to start budgeting. There are 2 ways to budget for this goal; 1. Depending on your annual/ monthly savings, set the amount you would spend on holiday 2. Set the amount you want to spend on the holiday first and then start saving accordingly. Now, this is easier said than done; therefore, it’s very important to also be realistic while budgeting for your holiday. Alternately, you could also ear-mark your bonus income for the same, which on the brighter side could motivate you to work harder, as a bigger bonus drives a bigger holiday and on the hind side, would mean no holiday if there is no bonus.
• Bucketing Savings/Investments: Moving forward from budgeting, you have to make sure that you do not end up spending this money on instant gratification i.e. the new iPhone 9 or one plus 7 should not eat into your holiday. Here, one of the best things to do is bucket your savings/investments. For a holiday goal you should look to park your money in an ‘ultra-short bond fund’ or a ‘liquid mutual fund’. These funds are provided by all the mutual fund houses but the beauty of these funds is that the money is parked for a short period and at the same time is readily available i.e. the funds will hit your bank account in 1 working day. So, if you look to pull money out for any other purposes from a fund that you have ear-marked for vacation, it will clearly ring a loud bell that you are eating into your holiday.
• SIPs / Lumpsum Investments: Investing in liquid or ultra-short bond funds can be done in the form of monthly SIPs (i.e. Systematic Investment Plans) from the monthly income; this is similar to an ECS or an RD where you have given an instruction in advance to your bank to transfer a sum on a particular day of the month directly into the mutual fund scheme for next 12 months. Investments can also be done in the form of Lumpsum investment from the bonus income i.e. a one-time transfer from the bank a/c to required mutual fund scheme. Depending on your tax bracket you can choose the fund options; if you are in the 5% or 20% tax bracket ‘Growth’ option would work better but if you are in the 30% tax bracket then ‘Weekly Dividend Reinvest’ option would work better. The risk in these investments is minimal as it invests in instruments which have short maturities of up to 6 months and shorter the tenure, lesser the repayment risk.

If, for some unforeseen reason you were not able to take your planned holiday at the end of the year, you can continue to hold the liquid investment until you take your holiday. Here, although you have missed your holiday, inflation has not stopped ticking. A delayed holiday also results in marginally higher cost. The good news is, your investments in the liquid funds would help you offset this to a larger extent.

Taking this investment approach not only helps you to stay away from short-term debts but also helps you grow the funds’ inflation-linked. However, above all, it gives you peace of mind during and post-vacation. An exceptional holiday is bound to set you in high spirits and aid to take on your daily routine once again, Refreshed! A little bit of planning coupled with the enthusiasm to travel to new places will automatically push you towards saving money and funding your dream holiday. Happy Investing!