Love Travelling? Here's How You Can Create a Travel Fund

If you’ve always wanted to see the world, don’t let your finances hold you back. Start building a travel fund so you can backpack across Europe, enjoy an overwater villa in the Maldives, skydive in Dubai and more. Sound financial planning will make sure you have the money to enjoy your trips, and that you don’t have to worry about your finances when you’re back home.
Jul 2022
4 mins read
How to build your travel fund

Review your finances
It’s important to understand your expenses and liabilities today and expected outflows tomorrow. This will help you allocate your earnings and savings efficiently to gain optimum returns from your travel fund investments. You could use online investment planning calculators to know how to manage expenses and how much to allocate each month to achieve your goal in a defined time.

Calculate how much you will need – and where to invest
  • Say your next foreign vacation is a week in Dubai next year. Your target may be around Rs. 50-60,000. You could contribute 60% of your savings towards term deposits of 1 year, and 30% in liquid funds. The remaining 10% could be your most liquid asset in your savings account for emergency needs.

  • For a fortnight’s backpacking trip to Europe, your target would be around Rs. 1,50,000. If you are planning this trip within the next 2-3 years, investing a portion of your savings and earnings in mutual funds regularly may give you the necessary returns.

  • You could also consider mutual fund schemes like FMP (Fixed Maturity Plans) or ELSS (Equity-linked Savings Scheme) that offer tax benefits under Section 80C of the Income Tax Act. Equity-linked mutual funds may offer higher returns, but at a higher risk.
Consult a financial planning expert to guide you with investment plans that suit your needs. They will also help you understand the risk-to-reward ratio along with the expected return timeline to make an informed investment decision.

Long-term travel budgeting
You can also pursue investment planning to build a long-term travel budget for several trips or for a marquee dream vacation. You could build a portfolio of stocks with a mix of large-, medium- and small-cap funds. You could also consider investing in SIPs (Systematic Investment Plans). Begin with a small investment, and gradually increase the value of the investment as you start feeling more confident about the chosen scheme. You could plan higher investments in the initial years, and lower investments in subsequent years, as your responsibilities increase later in life.

Remember, financial planning isn’t just an austere exercise to help you save for the future and mitigate risk – it’s also there to help you build the resources you need to live the good life. Invest early and build a solid travel fund so you can get started on your bucket list!
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