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Taking your family on a vacation is one of those special moments which will be cherished by you. It is therefore important to make it memorable by planning for it well in advance. When you do not plan for your vacation in advance, you find that you are not able to get hotel reservations and you have to shell out a hefty sum for travel and accommodation. There are several benefits of planning your vacation well in advance. Let us first look at the financial aspects of how to plan your vacation. Here are a few things you must do when you plan your vacation:
Estimate the budget after you finalize the destination and dates: The first step is to determine your holiday budget. This is possible only when you finalize where and when you want to holiday. Vacations abroad are extremely expensive, especially now with the rupee depreciating. It is therefore very important to decide your budget at present costs considering all the relevant factors.
Find out how many months or years are remaining for your vacation: The next step is to determine how much time you have left for your vacation. Although small budget vacations do not require years of planning in advance, when you wish to take a foreign holiday, it is always better to determine a few years in advance. Some families also decide to holiday abroad once in every five years or so. So you must establish the number of months or years you have left for your vacation.
Inflate the present cost based on the time left: Once you have decided how much your trip will cost you in present day terms and also the number of years or months left for your vacation, you must inflate this cost to get the approximate amount you will be spending on your holiday. Remember that inflation plays a crucial role in all financial planning, and also holds good for your holiday budget. Assume a realistic inflation factor based on past and present times to determine how much your cost of vacation will increase, compared to the present.
Find out how much you need to save monthly to collect that amount: When you know the amount of travel corpus you will need, work backwards to determine the amount you will have to save every month. To do this, you will also have to assume an expected rate of return you will