An Investment For The Wanderlust In You

by Vinaya HS on October 27, 2017

in Finance

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Remember your college days when you always wanted to go to Goa with friends, but the plan never materialized? Back then, we lacked enough money. Fast forward to now, and cash still remains short.

But now, you can pay equated monthly installments (EMIs) to finance a vacation with your family. Read on to find out how.

The roadblocks

Before we discuss how to tackle the finances, let’s first recognize the financial challenges. Most people avoid vacations as they do not have enough savings in their account. Also, vacation is usually considered as a luxury and not a necessity. This is because paying your children’s school fees, loan EMIs and systematic investment plans (SIPs) take priority over splurging for a vacation.

The solution

However, there is an alternate path. There are ways in which you can go for a vacation while not having to worry about your children’s fees, EMIs and SIPs.

You could tap into your savings, take a loan or invest beforehand. Taking money out of your savings is not prudent as they should be reserved for emergencies. The loan option would result in you building a debt. Instead, you could invest your way to an exotic destination.

There are several investment options that can fetch you returns in a short period of time. Stocks, treasury bills (T-bills) and mutual funds are some of the options. But, stocks are considered too risky, while T-bills are on the other end of the spectrum and provide low returns. Mutual funds, however, are relatively safer and provide higher returns than T-bills.

How could mutual funds help?

You could invest a part or whole of your savings account money into a mutual fund. Say, you have Rs 5 lakh in your savings account. If you were to invest this amount for a year in a short-term debt fund, like Franklin Templeton STIF, you could earn around Rs 50,000 in a relatively short duration.

But, even if you don’t have savings, you can still start with an SIP. You might already have an ongoing SIP. However, it wouldn’t hurt to start another SIP that would help satiate the wanderlust in you. All you need to do is budget expenses and make room for another SIP.

When to invest in mutual funds

If you have a travel budget of Rs 1 lakh, you can start an SIP with Rs 8,000 to meet your target within a year. It is ideal that you start an SIP at least 4 months prior to a domestic holiday. The duration increases to at least 8 months in case you want to go overseas.

Mutual funds are a great investment option even for people who don’t draw a huge salary. The minimum investment for a mutual fund is Rs 500. However, investing Rs 500 every month would take some time to build a corpus large enough for a vacation.

Bottom line

The SIP investment amount would differ depending on the number of vacation days and the number of people going on a vacation. It would even differ for different destinations. However, SIP investments could be the difference between you going for a vacation and staying at home this festive season.

So plan for your dream vacation right away!




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