To take a holiday, you have to evaluate the term of the break, potential costs, wellspring of assets and take satisfactory insurance covers for yourself and your family.
The first step towards creating your financial plan for the break is to estimate your expenses. This would be rather easy if you are taking the break for higher education; your tuition fee and living expenses are almost fixed. However, if you take a long vacation, your expenses will vary based on your choice of destination, travel, accommodation and food. Needless to say, if you are travelling as a backpacker, staying at hostels or BnBs and cooking your own meals, your break would cost you much less than the one with hotel stays and dining out. Also, it is a good idea to clear any short-duration debt before going on a break.
Factoring Expenses
When you are calculating the expenses, make sure you consider the following:
Let’s say you are going on a two-month vacation to Europe. It would cost you Rs 25-30 lakh across the following major expense categories:
- Airfare
- Intercity Travel Cost – Trains, Bus, Car Rentals, etc.
- Accommodation Cost – Hotels, Airbnb, Hostels, etc.
- Food and Beverages
- Activity Costs
- Visa
- Pre-trip Expenses
- Emergency Expenses
Making the Right Investments
If you are planning to take the break within three years, it is recommended that you start a monthly SIP in low-duration debt funds without any lock-in period or exit loads. Compared to holding the money in savings account or in FD/RDs, you could get higher return from these low-risk mutual funds with high liquidity. Starting a SIP helps you save money systematically every month. If your break is 5 or more years away, you could opt for a SIP in Hybrid (Balanced) mutual funds instead of debt schemes.
The first step towards creating your financial plan for the break is to estimate your expenses. This would be rather easy if you are taking the break for higher education; your tuition fee and living expenses are almost fixed. However, if you take a long vacation, your expenses will vary based on your choice of destination, travel, accommodation and food. Needless to say, if you are travelling as a backpacker, staying at hostels or BnBs and cooking your own meals, your break would cost you much less than the one with hotel stays and dining out. Also, it is a good idea to clear any short-duration debt before going on a break.
Factoring Expenses
When you are calculating the expenses, make sure you consider the following:
- - Will your family be dependent on you for finances?
- - Do you incur fixed expenses such as rent or EMI?
- - Do you have medical/health insurance? If it is company provided, will it still cover you during your sabbatical?
- - To minimize expenses, do you have to undergo any lifestyle changes like moving in with parents, selling your vehicle and cutting spends on shopping and leisure?
- - Will you be working as a freelancer or doing a part-time job during your break?
Let’s say you are going on a two-month vacation to Europe. It would cost you Rs 25-30 lakh across the following major expense categories:
- Airfare
- Intercity Travel Cost – Trains, Bus, Car Rentals, etc.
- Accommodation Cost – Hotels, Airbnb, Hostels, etc.
- Food and Beverages
- Activity Costs
- Visa
- Pre-trip Expenses
- Emergency Expenses
Making the Right Investments
If you are planning to take the break within three years, it is recommended that you start a monthly SIP in low-duration debt funds without any lock-in period or exit loads. Compared to holding the money in savings account or in FD/RDs, you could get higher return from these low-risk mutual funds with high liquidity. Starting a SIP helps you save money systematically every month. If your break is 5 or more years away, you could opt for a SIP in Hybrid (Balanced) mutual funds instead of debt schemes.