Saving up for a coveted vacation takes financial discipline. You can try different “diets” and restrictions, but the easiest way to plan your travel budget is to choose the right financial instrument. It should be reliable and have a good return on a short period of time.
If you understand how this financial “diet” works, you don’t need other people’s advice. Most likely, you are able to plan important purchases, do not go along with the habit of spending your spare funds on trifles, and are rational and disciplined.
Our tips are more useful to people who are lazy, not ready to overload life with a set of additional financial rules. If we consider vacation as a variant of investment with a period of several months to a year, everything becomes easier. We choose the right tool that will help us save for vacation with no risk. But, more importantly, helps us with discipline.
You should not chase a high percentage of investment when it comes to such a necessary thing as a vacation. The fact of losing the value of the investment is irrelevant here. Savings for vacation should bring a systematic, stable, albeit low income over a short period of time.
The money you’re saving for a trip shouldn’t be readily available until you’ve saved enough to buy a trip or book everything you need on your own.
A simple option – virtual “piggy banks” – have two big drawbacks. First, there is usually a ridiculous interest rate. Second, you can withdraw money at any minute. Too much accessibility is like a chocolate cake in a fridge for those who lose weight. Sooner or later a person will “lose it”.
A bank deposit as a way to save for a vacation
Deposit in the bank – a simple and clear product: put the money, after an agreed period of time received on them a fixed percentage. The advantages are obvious: it is reliable, the money is almost guaranteed not to disappear, if you do not choose the wrong bank.
Here there are some nuances that are often overlooked. You will have to look for a deposit that allows you to withdraw money without losing interest. For example, if suddenly there is a need to make a payment before the designated time, otherwise the tour operator threatens to increase the cost of the tour.
Deposits with an attractive rate for a short period of time, as a rule, exclude the possibility of additional funds and imply a high amount of minimum investment.
Replenishable deposits also work on the sly. Interest on the deposit is accrued at the beginning of the reporting period. For example, if you opened a savings account on the 1st day, and deposited additional funds on the 20th day, then in fact 10 days before the next month the money will lie as a dead load, income will not accrue on them.
Bond mutual fund and vacation piggy bank
A bond mutual fund consisting of good-rated securities is a direct analogue of a deposit. The yield here is virtually linear, there is no particular volatility. The duration of investments in such a mutual fund almost does not play a role. Although the higher the investment horizon, the lower the deviation from the annual target return.
A mutual fund is disciplined to a certain extent. You will think several times before you sell a unit and withdraw your money before the target date, since some management companies charge an exit fee. You will have two or three days to get your money, which will keep you from impulsive or “drunken” purchases. Then again, you can always withdraw them without losing interest if an urgent need arises.
In mutual funds, the money works every day. You don’t have to wait until the next reporting period when depositing funds to receive your rightful interest on them.
Considering all the nuances with placing a short deposit in a bank, a bond mutual fund’s yield will be several percent higher. Even taking into account the management fee.
It is worth mentioning the disadvantages of this option. Money in this case is not insured through DIA, you will have to carefully choose a management company. The yield may be higher or lower than declared, given the market volatility.
A credit card? Why not?
Not always and not everyone has the start-up capital to set aside for a vacation and add to it little by little with spare cash.
Credit tools for serious purchases should be used with caution. A credit card may be an appropriate option to pay for a vacation. Nothing disciplines and motivates you more than being reminded of your credit debt and the high-interest rate outside of the grace period you signed up for.
If you have a few months left before your vacation, it’s a good idea to pay for some of the expenses (hotel reservations, plane tickets) with your credit card. Many of them come in handy during the holidays when the costs are beyond the set budget.
How to calculate the size of the investment and become an investor with a small amount of article
By the way, it also covers the risks of currencies, which is relevant for holidaymakers abroad. You pay for your vacation in advance and do not have to worry about fluctuations in the currency market. You will have to pay in rubles. The price of your vacation can change seriously. The cost of travel and accommodation, if you pay, say, six months to a year in advance, maybe substantially lower than a couple of months.
One last tip for those planning their vacation: if you’re going abroad, it makes sense to buy a little currency. Euros or dollars, depending on which country you are going to. And there is an opportunity to earn extra income in foreign currency through appropriate funds or deposits.
You have to take a broader view of the problem and take into account the global risks. God forbid, the Euro goes up against the ruble, and here we are again on vacation with a hoe at the country house.