Indians are no more content with domestic holidays. With rising incomes and aspirations, visiting foreign locales to unwind and have exotic experiences is becoming the new normal.
Exploring the world and creating memories is amongst the top wealth goal for many Indians and the recently released Aspiration Index survey also backed this up. The purpose of this survey was to gauge the aspirations of Indians through the lens of personal finances of various age groups. The survey found that aspiring to travel the world and create memories is the second most important wealth goal after buying a home. The aspiration to travel the world scored 89.3 on the Aspiration Index. For people in the age group of 22-27 years (Early Jobbers), this aspiration scored 89.4; for 28-34 years (Moneymooners), it was 89.4, and for individuals between 35-45 years (Wealth Warriors), the goal scored 89.1.
However, visiting foreign shores involves not just money but also meticulous financial planning. If travelling around the globe is on your mind, here are a few smart money ideas to prepare yourself for it financially.
Budgeting Always Helps
Budgeting is the mantra for achieving all financial goals. You may not know the exact amount you’d need for your travel, but you can always arrive at a ballpark figure. Prepare a list of expected expenses for your favourite destination. Once you understand how much you need, divide that amount with the number of months left before your travel. This will give you the amount you need to save every month. In calculating your expenses, don’t limit yourself to just airfare. Also include the cost of food, lodging, sightseeing, and shopping. Accommodate your travel budget into your regular budget which may include investments, rent and EMIs, and all your other fixed and discretionary expenses. Starting early to build a decent corpus will also enhance your prospects of a lavish vacation.
Invest And Let Your Money Grow
The amount saved every month should be parked in investment options that let your money grow and also provide easy liquidity. You can save this money in a savings bank account for around 4% returns per annum. If you want 6-8% per annum, go for a fixed deposit or recurring deposit. If you prefer mutual funds, choose a reliable liquid fund. The ideal way to create your travel fund would be through monthly instalments into a recurring deposit or a Systematic Investment Plan into a liquid fund.
Use Seasonal Income To Top Up Vacation Fund
You can let your vacation fund grow more by adding your bonus income or windfalls to it. However, this should be done only after assessing your financial goals and needs. The bonus earned should be diverted first to priority goals such as your retirement corpus, and you can also use part of such incomes to fund your secondary goals such as foreign travel. Likewise, you can use any kind of windfalls or cash gifts on birthdays and anniversaries to let this vacation fund grow.
Start With Your Bookings Early
Once you know the destinations you want to cover during your world trip, it would be smart to make your bookings early to secure your tickets at lower prices. By getting your bookings in advance, you may bag discounted rates and would also avoid shelling out extra due to peak season rates. This way you will save money, which can be later utilised for other necessary expenses during your tour, such as good food and comfortable local transport.
Take A Travel Loan Or Top Up Loan
If you haven’t been able to arrange funds for your trip, you can explore options like taking a loan. However, ensure your repayment plan is in place for any kind of loan. A travel loan, which is essentially a variant of the personal loan is offered by many banks and financial institutions. These are customised for foreign trips and offered on interest rates comparable to personal loans, which would be upwards of 10% in most cases. If you are a home loan borrower, you can also opt for a top-up loan if you meet your lender’s terms and conditions. These loans come with low interest rates for repayment tenure up to 15 years. Check with your bank in advance if you qualify for a top-up loan or your home loan.
To make yourself financially secure on your vacation abroad, you can opt for a credit card and insurance. While a credit card will help you with instant payments during emergencies, a travel insurance plan will protect you from unexpected situations like baggage loss, flights cancellations, hospitalisation etc. Once your vacation begins, ensure to have a good mix of cash and plastic money in your wallet to remain financially strong. A good vacation goal can be achieved with adequate funding for which proper planning is a must.
The author is CEO, BankBazaar.com