Love to travel? Beware! Do not make this big money mistake
The availability of cheaper flights, affordable travel packages and reward programmes has lured millennials into a debt trap.
Travel, today, has become a necessity. Millennials, in particular, plan their entire work calendar to squeeze in as many quick getaways and long holidays as possible. The availability of cheaper flights, affordable travel packages and reward programmes has lured several millennials into a debt trap. With a few simple tricks, anyone can manage their finances better to travel the world stress-free.
Plan in advance
Start by defining the frequency of holidays you want to undertake in a year. Shortlist the destinations you would want to visit. Research the hotels where you can stay, restaurants where you can eat and activities you can indulge in. This will give you an idea of the money required to fulfill your aspirations.
If you feel that travel to a particular destination is stretching your budget, push it towards the latter half of the year or the following next year. This will give you enough time to accumulate funds for the same.
Tip: If you want to go on an international holiday in a particular year, push domestic vacations for later.
Select the right investment options to accumulate the desired sum of money, within the available duration. Opt for equity and related products if you are planning your vacation three to four years down the line. Select debt instruments for vacations planned within three years duration. As returns from debt instruments are lower as compared to equity, you might have to invest more to achieve your target.
Tip: Build a separate holiday fund.
Factor in inflation
While planning for a holiday in advance, keep in mind that costs involved may not remain the same when the actual time to travel arrives. Factor inflation in your estimates to plan your finances.
Tip: Invest in growth investments to beat inflation.
Look for deals, offers
Planning in advance gives you time to hunt for deals and discounts. Monitor various travel portals to identify deals to help bring down your cost. Convert air miles to get a discount on airfares. Take tips from those who have been to your preferred holiday destination to identify places where you can get best deals on food and excursions.
Tip: Read the fine print when opting for any discount and offer.
Buy travel insurance
When travelling abroad, travel insurance becomes highly crucial as any loss or health-related issues can cost you a lot. Apart from lost luggage and medical emergencies, travel insurance can help you claim your cancelled or rescheduled flight fees.
Tip: Go through the terms and conditions to select the best policy for you.
Monitor exchange rates
Another key consideration while planning an international holiday is the exchange rate. Any movement in the exchange rates has an impact on your budget. A smart move would be to buy a prepaid travel card, which lets you lock in the exchange rate before the trip. If your bank offers free foreign transaction on your debit card, opt for the same, as ATM withdrawals are a better deal than tourist exchange bureaus. Use ATMs of credible banks for better rates.
Tip: Familiarise yourself with the exchange rate and price of common items as a benchmark.
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While the use of credit cards cannot be ruled out due to the convenience offered, be mindful of the amount you swipe. Use the card where necessary, as repayment entails considerable expense in terms of interest rate and penalties on late payments. In case you do incur a debt for travel, make it a priority to repay at the earliest, as late payments attract a hefty penalty in addition to tarnishing your credit score.
Tip: Inform your credit card company of your travel plans so that they do not freeze your account when they notice any unusual spends
By: Arun Thukral
(The writer is MD & CEO, Axis Securities)
Source: DNA Money