How To Plan Your Dream Vacation Using SIP

A vacation today is not just about exploring new places or spending quality time with your family but a way to rejuvenate yourself by escaping everyday stress.

It’s not always possible to fund your travel from your salary, especially if you are travelling with your family and taking a long break. Now there are many who, in the rush to take a break from work, fund their travel through credit cards or travel, personal or other loans. Given that higher inflation rates have made taking a holiday a costly affair, this approach can land you in substantial debt and affect your savings for other goals or your lifestyle in general. The other option that people go for is dipping into your existing savings, which can derail your long-term goals.

So, does that mean you should not take a holiday? No, you must take that well-deserved break. Just make sure that you plan for that holiday in advance without putting your finances under stress.Here’s a guide for you.

Invest Through SIPs

One of the best ways to fund your goal of a dream holiday is to include it in your list of financial goals and start investing for it systematically. Just as you plan for major financial goals such as investing for your children’s needs, retirement etc., you can invest for your vacations too.

Figuring out when you plan to take the holiday is the first step. Once you have that sorted, you can work towards it using systematic investment plans (SIPs) of mutual funds. Choose the category of mutual fund as per your time horizon. For instance, for holidays that you plan to take within three years, you can consider debt funds which are suitable for short-term goals. The second step is to estimate the cost of your vacation.

Now let’s understand how this can be sorted using MF SIPs through an example.Suppose you started planning for a vacation in November 2020 with an estimated cost of Rs. 3 lakh. Considering the inflation of 6.15% (average CPI for the last 3 years), you would require Rs. 3.58 lakh for a trip in October 2023. By diligently investing Rs. 9,000 per month in an SIP over a 3-year period, your total savings can accumulate to Rs. 3,62,000, if it grows at 7 .20 per cent compounded annual growth rate (CAGR). The mean of 10 years rolling returns of the 10-Year G-Sec between June 1, 2013 – May 30, 2023 is 7.20%.

This strategy may not only help you achieve your dream vacation goal but could also ensure that you enjoy your vacation without worrying about the financial burden. So, if you are contemplating taking a break, remember that there are smart ways to handle it. With a bit of planning, you can make your dream vacation more enjoyable and less stressful.

Disclaimer

The calculations are for illustrative purposes and based on the #mean of 10 years rolling returns of the benchmark i.e., 10-Year G-Sec between June 1, 2013 – May 30, 2023: 7.20%. *The inflation rate for the cost of a dream vacation i.e., 6.15% has been based on average inflation of the last three years (Source: macrotrends), which may vary. Past Performance may or may not be sustained in the future and is not a guarantee of any future returns. The final value of investments is pre-tax, and investors may incur tax liability on capital gains based on prevailing tax laws at the time. The above calculations do not consider stamp duty / statutory taxes / levy that may be applicable and are shown purely to demonstrate the benefit of SIP and is not an assurance of profit or guarantee protection against loss in a declining market. Any calculations made are approximations meant as guidelines only, which need to be confirmed before relying on them. These views alone are not sufficient and should notbe used for the development or implementation of an investment strategy. Please consult your investment advisor before making an investment decision.

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