Here are the main aspects to analyze before going on a vacation to help you keep your spending in check
With the summer holiday season upon us, many people must have already planned their vacations. In fact, you may have even kept enough money aside for the same. However, there are still areas where you can be caught off-guard; such as ending up overspending on unplanned activities. Here are the main aspects to analyze, which can help you keep your spending in check.
Plan in advance: “One should not plan at the last moment. If it is for a long vacation, one needs to arrange finances well in advance,” said Karan Anand, head-relationships, Cox & Kings Ltd. First, check how much of your budget has been allocated for travel, among other things, and then pick a destination. This will make budgeting realistic. For example, if you have Rs50,000 per person and want to travel to the US or Europe, it is not possible. You can travel to Dubai, Sri Lanka or Malaysia, Anand said.
Compare prices: Most of the information about the price of transportation, accommodation as well as souvenirs from a particular place is available online. Moreover, you can check with friends and relatives who have visited that place in the past. “All these expenses should be put in an order and approximate costs should be arrived at. It is always better to add 10% extra to this cost to manage any last-minute overheads at the destination,” said Anil Rego, chief executive officer, and founder, Right Horizons Investment Advisory Services. Plan the budget, and work towards achieving it, he said.
Reduce credit card use: Apart from planning the travel, also try to minimize the use of credit cards. “Planning in advance always helps to avoid overspending. Also, try to use the credit card less. When we have a credit card, we generally tend to overspend,” said Rego. Keep in mind that the interest rate charged on your credit card spends is on a monthly basis and ends up in the range of 24-40% per annum. Also, while using credit cards during international travel, you would be paying a foreign transaction fee, which is usually in the range of 3% of the transaction value.
Travel insurance: An extra expense is also a way to save money, in case things go wrong. Buy travel insurance and don’t assume that your domestic medical insurance cover will work overseas too. Travel insurance does more than cover unforeseen health emergencies or medical treatment as a result of accidents and specified illnesses while you are on a trip, said Anuj Gulati, managing director and chief executive officer, Religare Health Insurance. “In addition to hospitalization expenses and outpatient medical treatment, it covers non-medical benefits such as loss of checked-in baggage, passport, trip delay, trip cancellation and interruption, third-party liability for property and personal damages,” he said. There are also policies that cover emergency dental expenses, medical evacuation and repatriation of mortal remains.
Packaged tour or self-planned trip: “Tour packages will help in a guided tour, get some co-passengers and save money. These are well-suited for those who don’t want to explore more and want to keep the costs low,” Rego said. However, the limitation here is that they are time-bound and may leave you wanting to explore the destination more. Estimating the costs of self-planned trips is challenging, he said, adding that with a planned budget this can be managed well. “If you are (going abroad for the first) time, it is better to go for a packaged tour,” he said. It should also be kept in mind that popular destinations are cheaper. “Most of the time it is observed that popular destinations are much cheaper as they are more accessible and have more inventory in terms of hotel rooms etcetera. Compared to that, less popular destinations may not be developed and may not have proper access either,” Anand said.
However, depending on your choices, you can travel to the most expensive destination on a shoestring budget and travel in style to a budget-friendly destination, he said. So plan accordingly and have a good time by being prudent about your spending.