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How to Save Money for your 2020 Dream Vacation

Some prudent financial steps will ensure you unwind without stressing about how you are going to sponsor the trip.

Every traveller has a dream destination which they could jet off to and spend time at leisure. From skiing in the Swiss Alps to enjoying game drives in Kenya, there are options galore.

Vacations – wherever they may be - are meant to slow down the busy pace of modern life and relax you. But the hard reality is that exotic travel costs a good amount of money for a family. 

Some prudent financial steps, however, will ensure you unwind without stressing about how you are going to sponsor the trip. 

1. Create a savings goal

Once you have decided the destination, find out the tentative cost of travel, hotel stay, food expenses, sight-seeing, souvenir costs and other related expenses. One way to simplify it – especially for foreign travel - is to look at all-inclusive group tour costs of popular tour operators such as Cox & Kings or Thomas Cook.

For instance, the ‘Swiss Alpine Wonder’ 7-days package tour of Cox and Kings costs about Rs 1 lakh per person (inclusive of all costs). A travel by a five-member family could mean setting aside a travel budget of about Rs 5 lakh. Of course, individual tour plans could set you back by a further 20%-30%, while giving you privacy and flexibility. Moreover, you might need to provide for other incidental costs like travel insurance, unexpected illness and depreciation in rupee.

Once you know how much needs to be saved each month, immediately start a holiday fund. Choose a short-term debt fund or a liquid fund and automate your investments through a SIP.

Once you arrive at a tentative cost – work backwards to reach your savings goal. Divide it by the number of months you have to travel. It will give you the monthly savings that ought to be set aside for vacation. For instance, if you have 12 months to save Rs 5 lakh, you need to set aside Rs 42,000 every month. If it’s a stretch, consider postponing the travel to fit the bill. For instance, if you can spare only Rs 30,000 a month, prepare for a travel plan 18 months from now. 

2. Fill the gaps

If there are gaps in the travel budget, try streamlining it. Reducing days of travel, off-season travel, group touring, Airbnb (as against hotels), internet bargains are options. Moreover, consider converting unnecessary household expenses into memorable ones. For instance, you could forego 100 cab rides to office to sponsor one dream gondola ride at Venice. Happy hour eat-out, turning nights-out into nights-in and bulk grocery buying are among other ways to save for the vacation. Lastly, consider part-time jobs and assignments to prop up your income. Sell unwanted household stuff like old furniture to get some cash.

3. Start a Holiday fund

Once you know how much needs to be saved each month, immediately start a holiday fund. Choose a short-term debt fund or a liquid fund and automate your investments through a SIP. These funds will grow your savings at a higher rate. Ideally, choose a SIP date which is just a few days after your salary credit, so that you don’t end up spending it.

Funnel any extra money — like a work bonus or birthday cash gifts –partially into your vacation fund. However, set limits and ensure at least half of the salary hike or a work bonus goes towards meeting existing financial goals - be it retirement or children’s college education.

4. Stay motivated

Take a picture of your dream destination and post it on your refrigerator or on your bulletin board at work. Perhaps consider making it the background of your computer or Smartphone. By doing so, you are more likely to follow the plan as these images remind you of your goal and the need to save.

In short, planning for your dream travel abroad isn’t that complicated. A bit of planning, foresight and some motivation can ensure you meet your goals without any hiccups.

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