A cousin aged 30, recently got married. He and I discuss finances frequently and hence, he asked me one day – My wife and I want to travel and take international vacations every 2-3 years starting from 2023. But since these holidays cost a lot, there is a always a bit of guilty feeling that I have if I spend so much on a discretionary expenses like travelling. What should I do? How can I plan and save for travelling abroad for international holidays once every 2-3 years?
For many, travelling is an important goal and they don’t have any qualms spending money on it. But for many others (who too wish to travel), spending too much is something that makes them a little hesitant when they see that there are other more important loan term goals to invest for.
Everybody doesn’t have a lot of surplus for all their goals and wishes. Isn’t it? But life is a lot more than just about saving and saving and waiting for old age. If you don’t spend a little on enjoyment (of your liking) when you are younger and have energy, then you need to rethink the purpose of money and what you really value.
That said, to avoid any guilt about spending, you can always gradually save for this goal of international vacations (a recurring goal every 2-3 years). I have written earlier also about how to save for vacations using a Travel Fund.
So how to go about saving for your international holidays?
The goal here is simple – Taking an international vacation once every 2-3 years. So starting in the year 2023, the next few international vacations for my cousin will be in 2025, 2027, 2029, 2031 if he does it every 2 years. Or it will be in 2026, 2029, 2032, 2035 if he goes once every 3 years. Reality might be different as he may travel as per other reasons as well but for the sake of simplicity and this discussion, we limit ourselves to saving for international holidays once every 2-3 years.
First thing to decide is which financial product should you use to save for this goal – If your vacations are about 2-3 years away, you can simply choose one of the following – Recurring deposit (RD) / Ultra-Short Duration Debt Funds / Equity Savings Fund / Conservative Hybrid Fund.
Note – Only a handful of debt fund categories are suitable for saving for your vacation/holiday goals amongst all the SEBI mutual fund categories in India.
Now comes the budget. Travel costs can vary a lot. But my cousin told me that it would take him Rs 4-5 lakh per trip (in today’s value) for his international holidays.
Here is how much he needs to save monthly if he takes a trip once every 2-3 years
- How to save Rs 4 lakh for an international vacation in 2 years – Start saving Rs 14-15,000 per month.
- How to save Rs 5 lakh for an international vacation in 2 years – Start saving Rs 18-19,000 per month.
- How to save Rs 4 lakh for an international vacation in 3 years – Start saving Rs 9-10,000 per month.
- How to save Rs 5 lakh for an international vacation in 3 years – Start saving Rs 11-12,000 per month.
If you are an ardent traveller, then it’s best to make vacations a clear financial goal in your overall financial plan. That way, you will be diligently saving for the goal and increase the probability of your goal achievement so that you can travel guilt-free whenever you want.
You can also look at this as putting in place a rolling travel corpus that continuously gets funded from your monthly savings. You can withdraw money periodically whenever you wish to travel from this corpus. So in some year you may not need to withdraw (as you may not be travelling abroad). In such years, the travel fund keeps getting bigger to fund your larger travel expenses in the near future. And if you want to keep up with inflation and currency depreciation which may increase your travel costs, then try to increase your savings for travel fund by 5-8% every year.
So let’s say you start saving in 2023 for Rs 5 lakh international vacation in 2 years time. You start with a simple RD of Rs 20,000 monthly. And you want to do this travel thing every 2nd year.
Here is how your monthly savings should increase each year (rough numbers to give you an idea of how to increase and not exact calculated figures):
- In 2023, you do a monthly RD of Rs 20,000 per month for a year
- In 2023, you do a monthly RD of Rs 22,000 per month for a year
- In 2023, you do a monthly RD of Rs 24,000 per month for a year
- In 2023, you do a monthly RD of Rs 26,000 per month for a year
- In 2023, you do a monthly RD of Rs 28,000 per month for a year
- In 2023, you do a monthly RD of Rs 30,000 per month for a year
Essentially, it is like stepping up your investments or as they say in mutual funds, doing a Step-Up SIP each year.
These days, many people take personal loans to travel and then pay back in monthly EMIs. In my view (and you may differ), travel is a discretionary expense and not exactly a critical one from a financial perspective. So if you can, then its wiser to save for it and then spend on it instead of spending on it and then repaying loans
So that is how you can save money for international travels from India (2023) once every 2-3 years and not feel bad about spending money on travel.
Note – If you are a regular traveller, then holidays will be a recurring financial expense for you. So you can treat funding your vacation as any other financial goal. It’s just that unlike other important goals of children’s education, retirement, house purchase which generally are one-time goals, the goal of vacation will be a recurring annual goal for you.