Plan Your Dream Vacation With New Investment Ideas

What mutual funds should I invest in to fund my trip to Rome?' That's the kind of question many young millennials have for their financial advisors today.

There's nothing per se wrong in setting a financial goal that will fund a life experience. But the one quality that you may need to cultivate while constructing a financial plan for a holiday would be your ability to accept delayed gratification.

While it is commonplace for the GenX to decide on expensive annual holidays on the spur of the moment and to fund it by swiping their credit cards or taking personal loans, that can wreak huge damage on their finances and land them in a debt trap, as they're just starting out on their lives.

If you're tempted to take this route, think of the additional vacations you could take with the interest you save on your loan amount. When you take a five-year personal loan for Rs 5 lakh to fund a foreign holiday, you would be paying back Rs 7 lakh to your bank over five years, even at a moderate 14 per cent rate of interest. It is far more financially savvy to delay that holiday a bit and to fund it with your savings.

Warren Buffett may be one of the richest men in the world. But one tenet he lives by is, 'Do not save what is left after spending. Spend what is left after saving.' So, one of the best financial habits that you can develop as soon as you start earning is the habit of setting aside your savings as soon as your monthly pay cheque lands and using only the residual money for your lifestyle expenses. This inculcates the discipline of living within your means. But thanks to the easy availability of personal loans and the temptations of credit-card marketers, who periodically urge you to convert your outstanding loans into an EMI, many folks do the exact opposite of what Mr Buffett does. They indulge in a spending spree as soon as their pay cheque lands and make up the shortfalls towards the end of the month through the liberal use of plastic.

But saving up towards a holiday and looking forward to it for the next five years is certainly a far better idea than taking your holiday right away and slogging to pay off the EMI for the next five years.

If you're thinking of investing towards an expensive holiday, put aside small sums in a mutual fund SIP every month. If the planned holiday is just a year or two away, a short-duration debt fund would be your best choice. If you have three to five years' time, a conservative hybrid fund would be appropriate for you.

Even if you manage to fund only a part of your vacation costs, that's still good enough. A rupee saved from the clutches of your bank or credit-card Company is a rupee you can use to live the good life!