Travelling is fun however managing the cost involved is a headache. Infact most of our travel plans get rescheduled or altered to adjust the cost involved. This is a problem especially for students who have a limited and meager source of income. Most of the students save money for their travel plans either from tuition, some freelancing or by saving pocket money. Know How to Fund Travel Budget through Short Term Investment.
It is not tough to plan a good trip with such small savings. It’s just needed to plan and invest the money properly and regularly.
We will understand the step by step planning procedure together.
Let’s assume you are student X with fixed monthly income.
HOW TO FUND TRAVEL BUDGET THROUGH SHORT TERM INVESTMENT
Step 1 – Fix a Timeline.
Most important step of all. You must fix a timeline before thinking of how to save money. Time limit is the most important aspect on which every activity related to financial planning is based. On fixing a timeline you become focused on the approaching day. You are aware of the decreasing time in hand.
Say X wants to go on a trip on summer vacation which is due after 6 months.
Step 2 – Calculate your spare money for one month.
Once you set a fixed timeline, it’s important to calculate how much you can save in a month.
First calculate your total income for a month from all sources, say pocket money, tuitions and others. Negate the necessary expenditures and some extra money for emergency. The result remains as your net income or savings.
Say X gets 4000 as income from all sources and can save rupees 1000.
Step 3 – Research to invest and increase your money.
The saving that you calculated in last step is fixed. If you keep it in your locker it won’t increase. Neither will there be any significant increase if the money is kept for such a short time in bank account.
The best and wisest way is to invest the money in Mutual Funds. Since we are calculating on monthly basis. We will consider monthly Systematic Investment Plans. You can use a SIP calculator to calculate the returns.
There are variety of short term invest plans available in the market giving a return of around 16% to 17% for six months SIP investment. Yes you read it right!!! Bank gives you very less interest per annum.
To know about the best apps to invest online read our article 5 best investment app for beginners.
You can easily invest in a SIP plan using the apps mentioned in the article above. All you need to have is a bank account with online transaction and internet connection.
Say X decides to invest in a SIP plan the 1000 rupees per month with 16% interest. He will get rupees 6978 at the end of six months. This becomes his travel budget for the trip.
Step 4 – Fix the place to visit and calculate the cost
Now that you know the maximum amount that you can get at the end of your fixed time. It’s time to plan the trip.
Fix the place, number of days and calculate day by day cost to be incurred in the trip including travelling cost. At first don’t think of whether the cost is overflowing the budget. Make your whole plan and the get total cost incurred.
Total cost to be incurred in your trip is Rupees 8000.
Step 5 – Adjust your plan.
Now that you know the maximum budget you can afford after six months. Have calculated the cost to be incurred in the whole trip two conditions can arise. Either the budget and cost incurred is at par, then it’s good. Otherwise you need to adjust your plan. It’s more like financial planning.
There are two ways to do so :-
Way 1 – Adjust your time. (Focus on trip plan)
In order to match the cost to be incurred as per schedule of the plan, you need to increase your budget. However with fixed savings the only way to do so is to increase the time left for the trip so that the return matches the finance required.
Way 2 – Adjust your plan. (Focus on budget)
Say you don’t have the luxury of changing the time of trip. Most of us face this same problem. In such circumstance the only possible way is to reduce the costs in the plan as much as possible say squeeze two days into one. Or reduce the daily costs calculated in terms of food, transport or stay.
X decides not to change the time left for the trip and change the schedule.
Step 6 – Invest.
The only thing left to do now is to invest the money in the decided scheme and continue to do so diligently till the time of the trip. The return percentage as shown by the scheme doesn’t change much as per practical scenario within a short scenario. Hence it is very safe and secure return.
X invests the money in scheme Y for 6 months at 16% return.
Step 7 – Withdraw.
Normally it takes 7 days for the withdrawn money to be credited to bank account. You must apply accordingly.
You can withdraw the money in the same way you have invested. Simply click on the invested fund and then click on the withdraw button.
Now you HOW TO FUND TRAVEL BUDGET THROUGH SHORT TERM INVESTMENT by which you can use the market to fund your budget. Do tell your thoughts in the comments section below.
Happy Investing and Happy Travelling !!