The pandemic as we knew it seems to be nearing an end. With countries opening their borders, no quarantine rules, and no mandatory testing; hassle-free travel for leisure is looking possible again!

After 2 years of practically no travel, everyone seems to be flocking to different travel destinations. You too must certainly be looking forward to traveling again.

You may have the travel destination sorted out, a shopping list ready, and even an itinerary chalked out; but are your finances in order, to fund this travel? Have you struck upon a good holiday package for a few months from now? Then now is the time to get finances in order, for this.

Your financial checklist for holiday planning:
Just as it is advised to have different funds set up for your different financial goals – your travel goal too is no different!

• Debt funds are the way to go - short term travel plans call for short term investments

  Debt funds invest across debt instruments ranging from G-secs to corporate bonds and various money market instruments. They are touted to be less volatile than market driven equity. This makes them suited for shorter investment tenures as opposed to the long-term investing horizon of equity.
  
  Also Read - What are Debt Funds?

• Narrow down - Know what you need

  As with any financial planning, understanding how much you need and when you need it is the first step. Narrowing down on possible travel destinations, the number of travelers and time of the year can give you an idea of what costs you are looking at. Do not forget to consider the impact of inflation if you are planning a holiday a few years from now.

• Make a choice - the short to medium term divide

  Debt funds have a wide range on offer. From overnight and liquid funds for temporary parking to corporate bond and G-sec funds for the short to medium term.
  
  For a small holiday a month or two from now you can park away your corpus in a liquid fund. For a holiday planned in the years to come you can opt for short to mid-term funds that invest in corporate bonds, G-secs or a combination of these. These can also give you the potential of capital gains from likely price differences over time.

• Fixed travel timeline? - Look at Target Maturity Funds

  Within the debt fund universe, there exist target maturity or fixed term plans. These invest in bonds that have a known coupon rate and a fixed maturity date. If you know your travel dates for sure, you can match them with an appropriate target maturity fund. You will know the returns you will get as well as the date by which you will get them.
  
  Click here to read about - What are target maturity funds

• Why choose debt funds over traditional fixed income instruments?

  The number one reason to make this choice is the ability to earn ‘tax efficient’ returns. When you invest in a debt mutual fund it comes with tax benefits. A debt fund held for more than 3 years gets two tax benefits – indexation benefit to increase cost on redemption and lower tax rate of 20% on long term capital gains. This results in a lower tax cost on redemption, eventually giving higher post-tax investment returns. This is in addition to the liquidity benefit of debt funds.

• Execute away – consider opting for Systematic Transfer Plan (STP)

  SIPs are a popular mode of investing in mutual funds. The benefits of SIPs work better over longer investing terms though. While you can build your travel fund through SIPs, you can also consider STP (Systematic Transfer Plan) mode to move your money from existing investments into short term mutual fund schemes earmarked for your holiday.
  
  Also Read - SIP Full Form
  You may also read about : what is sip

Follow this checklist and be money-ready for your travel adventures. Leave the ‘fund planning’ to debt funds and focus purely on your ‘holiday planning’!

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.