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Building your travel budget in 5 simple steps

Updated: Jan 29



A recent study identified that across the world, 62 per cent of Millennials travel between 2 to 5 times annually. In fact, GenZ and Millennials are willing to work extra just so that they have more to spare for a vacation. GenZ refers to those born between 1997 and 2012 and Millennials are those born between 1981 and 1996.


No surprise then that your new year resolution has at least one dream destination to cover this year. A well-planned budget this year could make it fairly easy to live up to that resolution. Planning will ensure you avoid taking last-minute high-interest personal loans or maxing out your credit cards, which could cost you up to 50 per cent more than the actual trip cost.


Here is the 5-step formula to a truly happy holiday:


1. Research and put aside the costs of transportation first

In case of international travel, flight costs form a significant part of the travel budget. Hence, this is the first of the expense column, which needs to be finalised at the earliest. Apart from scouting for deals, also check for flight options to nearby airports (close to your holiday destination), which might be more economical.

Also factor in your airport transfers and any local transport required to cover your hotel drop-offs and visiting sightseeing spots. In international travel, be mindful that there could be currency fluctuations from the time you plan to the time you actually travel. Some ways you can avoid high costs related to foreign exchange would be to use a travel card that does not charge you extra for your international transactions. It is better to conduct the currency exchange at a bank or institution before you go, rather than exchange currency on arrival at a rate that you may not be sure of.

If travelling domestically, finalise your flight as well as local transportation deals at least 30 days prior to travel. Scout for flexibility with lenient cancellation policies, in case of any last-minute changes.


2. Estimate your hotel costs, meals and any special experiences

Even before finalising the exact hotels, you could do city-wise research on the benchmark cost for the type of accommodation you prefer. It will help you draw up an estimate of the overall hotel spend, which is especially useful for long trips or when planning for a large group. The choice of hotels can significantly move your travel budget and can often throw you by surprise. To avoid any last-minute issues, you should prioritise research.

Food costs are also an expense to factor, based again on the type of experience you are seeking. A smart thing would be to allot a daily budget for your food expenses. At times it is a good idea to plan for an indulgent meal in case the travel is around a specific occasion or location. To this, add on any ‘not to be missed’ experiences you would like.


3. Don’t forget the visa costs and travel insurance

While planning your preferred destination, visa cost and time taken cannot be overlooked. In the case of a large family or group, this could be a deciding factor – since it not only adds to costs but also the certainty of travelling together. For a few destinations, this cost could amount to almost four to five per cent of the entire trip.


While most international destinations have a mandatory requirement for travel insurance, add it to costs when travelling internationally to get assistance during situations like personal accidents, illnesses, hijacking, theft, personal liability expenses or any other travel-based issues. These policies are available in multiple variants, starting as low as ₹ 70 per day for travel within Asia.


4. Final estimate


Make a note of each of the above expenses to arrive at a broad travel budget. Given below is a sample template, to ensure nothing is missed out :



5. How to start saving

Once you set your travel goal and decide the tentative time of travel, you have a clear financial travel goal. Using the specific amount and a defined time limit, one can make use of many goal calculators available to set the amount to be saved monthly.

There is also another factor in deciding the monthly amount – this is the return expected. While in case of immediate goals (less than one year), one could choose a bank savings account, for travel goals which are more than a year away, the other investment options include – fixed deposits, recurring deposit, and or, mutual funds.

Mostly, it is a good idea to keep a healthy mix of cash savings with short term low-risk products. You can use the Basis app to calculate the monthly investment required.

The Basis app already has a travel goal feature which not only defines the future value of the present-day cost to travel but also defines the right mix of mutual fund products depending on your investment preference.

As an example, a vacation to Australia planned two years from now, for two adults and one kid would cost ₹ 4 Lakhs (based on the above tabulation). To reach this goal, one must invest approximately ₹ 18,500 per month in short term mutual funds, expecting an annualised return of 8 per cent. Without investing, the savings required would be ₹ 20,000 per month, parked in the bank.

Taking a loan, while easily available, would turn out to be an expensive proposition. An amount of ₹ 5 Lakhs taken as a personal loan at 12 per cent for a period of 3 years, would end up costing approximately ₹ 6 Lakhs – quite a heavy price to pay for not planning a budget well in advance!


Don’t come back to a loan from your annual holiday, plan and invest for it on the Basis app. Let the vacation bliss linger on longer.

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