Invest Wisely | Planning a vacation? Plan your finances carefully to ensure a great vacation

The sweltering heat of summer is a not-so-gentle reminder that it's vacation time. Seasonal school holidays can make vacation planning a little easier by eliminating the hassle of managing a school schedule.

Many are packing their bags and heading off to lesser known mountain resorts in India, cool European destinations and other exotic places.

“Peer pressure” to travel

But this creates problems. Prices rise when everyone goes on vacation at the same time. It burns a big hole in your wallet if you don't plan ahead. If your income can support it, that's great. But you shouldn't dip into long-term savings (set aside for other purposes) or, even worse, go into debt to splurge.

Also read: Summer holiday packages: 6 tips to secure the best value holiday packages

In the age of Instagram, the pressure to post photos of new travel destinations is on, so it's no wonder travel portals are aggressively promoting them and offering discounts and installment payments.

There's no getting away from the fact that efficiently funding your vacation is no longer just a desired goal, but a necessity for many people.

So how do you go about doing that?

a) Make a rough plan of how much money you will need to take a vacation each year.

b) Add a buffer (which will always cost more than you planned for).

c) Start saving for it.

d) Record profits and set aside funds for vacation.

Choose the right mutual fund scheme to achieve your goals

For individuals who have regular cash flow, Systematic Investment Plans (SIPs) are a great way to save. This method allows you to set aside a certain amount from your monthly income for vacation.

Your choice of investment vehicle will depend on how long you want to invest before you use the funds for travel. The table below is for illustrative purposes only and is a representative sample only.

How much should you save? It depends on how long you have been saving for. Here is a quick rundown of how much you can save towards achieving this goal through SIP over different time periods.

Yields shown are for illustrative purposes only and actual returns may or may not be similar.

As you can see, investing for a longer period of time allows you to invest in products with slightly higher yields (with corresponding risks) and potentially use the accumulated funds to fund a vacation without having to dip into other funds.

Also read: Travel operators lure female travelers with 'stay now, pay later' deals. Should you sign up?

Save for a big goal

But even if you’re not planning a vacation, should you still create a travel journal?

Well, the world is shrinking and people are moving more and more. Children and parents live in different places. That means parents have to set aside money to travel and see their children and grandchildren. This is not cheap, especially when you consider travel comforts, gifts, etc.

Alternatively, today, retired people are still young, energetic and have more time on their hands. Many of them have a passion for travel and want to explore the world at this stage of their lives. Wanderlust is not just for Gen Z and Millennials.

With a little planning, you can eliminate financial worries and focus solely on relaxing on your dream vacation and enjoying every moment of it.