In today’s demanding work environment, travel is seen as a stress-relieving activity. We all have our dream destinations. These plans are often put on hold since they require more funds, and most people do not wish to take funds out of their savings to travel. That is where systematic investment plans or SIPs come in. Before we discuss how SIPs can help you plan for your dream destination, let’s take a closer look at what SIPs are.
SIPs: What are they?
A systematic investment plan is a method of investing a fixed amount at regular intervals to achieve long-term or short-term financial goals. The intervals can be determined according to your convenience, whether monthly, quarterly, or weekly. As a result of not tying up a large sum with investment, you have that extra money for other activities. It is also possible to misuse idle funds. Not only does this help you prevent that, but it also helps you earn returns. From singlehood to marriage to retirement planning, it can prove to be a good financial support at every stage of life. SIPs are also an excellent financial tool to help plan your dream vacation.
How can SIPs help you plan for your dream destination?
Everyone makes a holiday budget. But regardless of how much you plan, it is natural to go overboard which can then significantly impact savings. Also, if you take spontaneous trips, you are likely to pay far more than you might otherwise. The benefit of SIPs is that they allow you to dip into your funds and save on those extra expenses, even on spontaneous trips. Here’s a look at how SIPs can reduce the impact on your savings.
Let us cite an example.
The cost of a 4-night/5-day tour to Hong Kong is around Rs. 1,00,000 per couple, including airfare. Your monthly investment in a SIP would be around Rs. 8000, for a year. Due to the necessity of this amount in the short term, the ideal route will be to invest in a financially sound, liquid fund with around 7% returns.
However, if you want to plan a vacation after 2 years, you will need to invest even less, i.e. half, Rs 4000 monthly in SIP. Hence, the longer the investment period, the lower the monthly investment. With compound interest, your tour amount will be Rs 100,000 after 1 year. Hence, you have a concrete amount for your trip.
Moreover, if you are a solo traveler, the tour cost, budget, and consequently the SIP amount will be even lower. Meanwhile, you can look for deals that offer better prices. As travel opens up again, you will find a wide range of deals and offers in the market today. In this way, not only are you able to enjoy a stress-free vacation but there is also no financial burden every month. In addition, this amount would not be spent on unnecessary items.
- There are online SIP calculators today where you can input the monthly investment amount, the return on the fund you are investing in, and the investment period. Using this tool will help you plan your monthly finances.
- Today, the majority of people use SIPs to finance their vacations, whether domestic or international. However, if you are a beginner, we advise you to invest a small amount and increase it over time.
- It is also vital to set up a travel fund after devising a plan for primary life goals of retirement and children’s higher education.
Having read the above article, we hope you have a fair idea of how SIPs can help you achieve your travel dreams. Nevertheless, before committing to an SIP, you should always research the options and analyze your holiday costs first. In case of confusion or doubt, you can always seek the advice of a financial advisor.