An ET Wealth study concluded that the Indian middle class has made travel a priority. Our financial goals, over the past decade, have evolved considerably, moving “Vacations” up from the sixth spot in 2009 to the second spot in 2019. Sadly, with the coronavirus confining us indoors for months, we’re exhausting our strength to fight the travel-bug. Our hunger to be outdoors, and just take a break, is begging to be satiated. But wait, do we have enough money to meet this desire? And if we don’t, how do we save for travel, such that money never gets in the way of these goals in the future?
Let me tell you a story that will help answer this question.
When I was 21, my best friend, Mita, invited me to join her for a trip to London. It was just after we had graduated and it would make the perfect summer holiday. Since she has family there, we wouldn’t have to worry about accommodation; only airfare to and fro, transport within the city, food, and any other activities we wanted to spend on. I had never been out of the country before, so naturally, I was jumping with excitement. There was one problem though. I didn’t have the money.
I went to my parents. They are avid travelers themselves, and since I’ve inherited my travel gene from them, a part of me hoped that they would help me fund the trip. But it wasn’t meant to be. They had bigger plans in store for me, and that’s when I learned a few lessons on why, and how, I should save for my travel goals.
Why should I save?
I didn’t go on that trip at 21, and that upset me for a while, days actually! For a brief period, I behaved like a spoiled brat. Why wouldn’t they loan me some money? After-all, isn’t travelling a learning experience?
With time, the whining stopped. And as I started setting aside a small amount in my “London with Mita” fund every month, I started to see the beauty in the process. I began to understand the values that my parents were trying to instill in me. With every investment I made, I felt my self-reliance grow. And a few years later, I’d not only built up a robust travel fund, but I’d also learnt the art of planning for goals in general.
Building smart money habits, learning how to prepare a well-rounded budget, and developing a strong investing mindset are some of the most important skills in life. Travelling with parents in one thing, but asking them to fund your personal travels is quite another. It’s easy to borrow from others, or even take personal loans from a bank. But more often than not, the easy way isn’t always the best way. The costs of borrowing are too high, monetarily, as well as for your own growth.
So, while putting off that holiday seemed like the worst thing for me at the time, the practice of saving for travel replaced my childish outlook with a responsible and independent attitude towards my finances.
How do I build a travel fund?
Now you must be wondering, where would I have saved and invested this money? How does one build a travel fund? Learning these two steps helped me, and I’m sure they’ll help you too.
Step 1: Spell out your goals and be as specific as you can
You want to have short-term travel goals as well as long-term travel goals. The first set of goals must factor in weekend getaways, spontaneous road-trips, or domestic travel that you might plan for in the near future, say within a year. The second set of goals are for more elaborate travel plans, like a trip abroad, or if you want to travel for an extended period of time (like taking a year off to explore the length and breadth of India!).
Once you categorize your travel goals into short-term and long-term, put down an estimate of the costs. Whether you prefer luxury holidays or budget travel, be sure the expenses give a realistic picture of how much you would need.
Step 2: Arrive at your monthly investment amount
You can do this with the help of an online SIP (systematic investment plan) calculator, like the one here – https://www.mutualfundssahihai.com/en/calculators. Enter your goal amount, investment duration and expected rate of return.
For short-term goals, opt for lower risk investments, like liquid mutual funds. As the term, “liquid”, suggests, you may withdraw from these at any point in time, and they are thus much more flexible than say a Fixed Deposit or a Recurring Deposit. For long-term goals, you may invest in a mix of debt and equity. The further away your goal is, the more equity you may invest in. Taking advantage of equity instruments results in higher returns over the long term.
Now, jot all these details down in a spreadsheet and you’ll arrive at your total monthly investment required.
Here’s what this exercise would result in:
Now that you have a monthly investment figure ready, all you need to do is start investing, preferably at the beginning of the month. In the above example, though you invest in three different avenues, all three put together, will form your overall travel fund.
Living a traveller’s life
When I finally had the funds to visit London, my trip had to be put off yet again. Only this time, it wasn’t for the lack of money. In my research on the UK visa process, I had overlooked one crucial aspect. I hadn’t redeemed enough funds to reflect in my savings account as liquid cash. What a blunder that proved to be!
But life goes on. My travels within India continued. When I wasn’t heading to the Himalayas on work, I was planning my own adventures near and far. And when travel is a priority, sometimes, the question, “Can I afford to do this or not?” becomes a statement, “I will find intelligent ways to fund my travels.”
Divyakshi Gupta, aka the Quirky Wanderer, has been a travel writer for nearly a decade now. She gives some great advice on funding regular travels.
“The one way I don’t let money get in the way of me and my travel dreams is to diversify my sources of income. I link my passion to travel with creative business ideas. Whatever I earn through travel blogging, guest lectures and workshops, I spend on my travels. I have a dedicated fund that I dip into for all my travel plans. But freelance earning is mostly sporadic and uncertain, which may lead to anxiety and frustration. My tip to aspiring travellers is to plan their travel in advance. I find yearly plans super helpful. And if you have a job, keep it. Quitting your job to travel is NOT a wise option unless there is a solid back-up plan in place. It must be well thought through.”
Speaking of well thought-out plans
When it comes to short-term travel, planning a few months, or weeks in advance, is alright. However, when it comes to long-term travel, one could even start planning a year, or more, in advance.
I’m crazy about spreadsheets. They simplify planning, budgeting and tracking like nothing else can. And there are a host of templates available on the internet. Or better yet, create your own!
Simply list out all the expenses you would expect to incur on your trip – for flights, accommodation, visa, travel insurance, food, transport, sight-seeing, shopping and emergency cash. This is how much you’ll allow yourself to spend on the trip. Later, compare these figures with your actual expenses to see how you’ve fared.
A trip budget could look something like this:
So, in addition to setting aside an amount every month, and regardless of the duration of your trip, be sure to:
- Do your research, extensively, and much in advance
- Ensure you have a trip budget in place, before you embark on your trip
- Track your expenses while on the trip, so that you know you aren’t over-spending
Fellow spreadsheet-freak, civil engineer, and one of my favourite travel buddies, Amulya Kumar, shares some brilliant tips and insights on her blog. She says,
“What I have learnt is to first tackle the larger aspects – first book your round-trip flight, then book your accommodation. After that, look into inter-city transport. And lastly, book your intra-city tickets. Chalking out your itinerary well in advance definitely helps you save money and results in a beautiful budget trip with amazing memories.”
What keeps people from travelling?
A US-based survey asked this simple question – what keeps people from travelling? In short, the answers were – work, health and money. 28% of young people cited work, 32% of older people cited health, but the biggest barrier for all ages, for 40% of them, is money.
It was only last year that I stepped outside the country for the very first time – not once, but twice! One of these was a four-week solo trip to Canada.
I had saved. I had invested. I had planned the itinerary. I made my bookings in advance so that I get the best deals. And when I was there, I even volunteered at a local organization for a few days. The confidence I gained, the friendships I forged, and the memories I made are priceless. And boy, was the wait worth it!
As Mark Twain eloquently puts it,
“Travel is fatal to prejudice, bigotry, and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome, charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one’s lifetime.”
As we near the end of 2020, and as we travel virtually, collecting kilometers playing the Go India game on Google Pay, let’s think about how we’re going to save for the real moments we want to collect in the future. Whatever ranking we give travel on our list of goals, the important thing is to plan, save, and invest towards it. This process of planning and investing is a journey in itself – insightful, gratifying and worthwhile. Like the journey I’m still on since I was 21 – London with Mita; with many other adventures added along the way. 🙂
