Impulse travel may be fun, but lack of planning may take you to debt trap

Travel, today, has become a necessity. Some travel to disconnect and de-stress, while others to satiate their wanderlust. Millennials, in particular, have become so passionate about travel, that they 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. Impulsive travel booking leaves a huge hole in their pocket, which derails any savings and investment plan. 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. Do research to identify hotels where you can stay, restaurants where you can eat and activities you can indulge in. This will give you a fair idea of the money that you would require 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: Prioritise your travel. If you want to travel to an international destination in a particular year, push domestic vacations for later.

Invest wisely

Start with selecting 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 in advance. Select debt instruments for vacations planned within three years duration. As returns from debt instruments will be lower as compared to equity, you might have to invest a higher sum every month to achieve your target.

Tip: Build a separate holiday fund.

Factor in inflation

While planning for a holiday in advance, it is essential to 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: Inflation eats into your savings if not invested in growth instruments.

Look for deals and offers

Planning in advance gives you time to hunt for deals and discounts. Monitor various travel portals to identify deals that can help you bring down your total cost. There are various websites where you can compare the price of the same hotel room, to book it from the cheapest source. Look at converting 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 for travel insurance

When traveling 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 canceled or rescheduled flight fees.

Tip: Go through the terms and conditions carefully to select the policy that works the best 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. For instance, you plan a trip to Sydney, Australia estimating that you require 2000 AUD for the trip, which comes out to be about Rs 1,04,800 at the current exchange rate of 1 AUD = 52.4 INR. By the date of travel, the exchange rate moves up to say 1 AUD = 55 INR. This would mean that you now need Rs 1,10,000 to foot your expenses. Such fluctuations can throw your budget off the track. A smart move would be to go for a prepaid travel card, which lets you lock in the exchange rate before the trip. For expenses at the destination, opt for prepaid cards. If your bank offers free foreign transaction on your debit card, opt for the same, as ATM withdrawals turn out to be a better deal than the tourist exchange bureaus. Use ATMs of credible banks at your holiday destination for better rates.

Tip: Be cognizant of the exchange rate and familiarise yourself with the price of common items as a benchmark.

Avoid debt

While the use of credit cards cannot be ruled out due to the convenience offered, be mindful of the amount you swipe on your card. 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 the same, 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

The writer is MD & CEO, Axis Securities