SIP Vs. EMI: Which is better for planning a vacation?

Its vacation time! Have you taken your family on a vacation to beat this summer heat, yet? If not, don’t worry there is always the next time. Have missed out on planning one? Always remember planned vacations are the best. Rather than rushing to one and finding it difficult to sponsor for it completely. Saving for your holidays makes more financial sense than taking an EMI and paying over a period of time.

Try to surprise your family next year with a tour that they wouldn’t have thought of. Make up for this year’s disappointment. Vacations aren’t cheap. Affordability is the biggest problem. Vacations that are planned for well in advance are very good and stress-free. Be it the deals on air tickets, hotels, internal transits or any other packages, works out to be cheap when done in advance rather than in the last minute. It makes more sense to see all the places around the destination, as you wouldn’t want to go back again and again to the same destination. Hence planning plays a very important role.

Are dream vacations possible?

Yes, very much. Dream vacations aren’t cheap and hence are mostly an expectation than a norm. Many times you plan on taking a vacation after seeing pictures of your friends on social media or when your child suggests new destinations after hearing their friends vacation plans at school. Or, you want to surprise your family by taking them on a fun-filled adventure vacation. Such dreams are possible only when you have planned for it well in advance and are saving for this goal regularly. Investing in Mutual Funds through SIP route is the best option to realize your dreams. These regular investments will ensure your financial discipline.

African Safari Vacation in 2020

Get away from the hustle of the city and enter the world of nature. Go out for a safari or a walking safari or take a ride of the hot air balloon or simply do nothing and just relax. Africa has it all. We’ve budgeted the trip cost to be Rs 3.74 Lakhs for 2 adults and 1 child at the end of the goal period of one year. This is based on today’s cost of Rs 3.50L.

Using the Goal-Based investing optionVacation’ on Upwardly, you can identify how much and where to invest.

The recommended plan that would best suit your requirement is a Balanced Plan. With a monthly investment of Rs 29,900 for 1 year will help you take your family for an African Safari trip.

Note: To shield from short term market volatility, Upwardly recommends only Balanced Plan for less than 2 years.

Credit Card Sponsored Vacation

The most popular/convenient way to fund a vacation is by swiping your credit card. And later converting it to a 12-month or 24-month EMI. However, that’s not the right strategy. For a 12-month EMI the interest rate is at 15% making it the costliest source of funding your vacation.

Below example shows that for a Rs 3.50L spent on a vacation, you’ll end up paying Rs 29,080 as interest and EMI value of Rs 31,590.

SIP Vs. EMI

Vacation: African SafariSIPEMI
Goal Horizon1 Year1 Year
Goal Amount₹ 3,50,000₹ 3,50,000
Inflation Adjusted Goal Amount₹ 3,74,500
Retrun/Interest8%15%
Amount Per Month₹ 29,900₹ 31,590
Total Payout₹ 3,58,800₹ 3,79,080
Difference (Total EMI Payout - Total Interest Payout)₹ 20,280

From the above table, it is evident that vacation becomes a costly affair when you take the EMI route. A credit card sponsored vacation might seem convenient, but when it comes to repayments if you are not prompt then the charges would eat into your savings. Doesn’t the table look convincing enough to prove that earning return is better than paying interest?  

Conclusion

Don’t you agree that having a debt-free life is the best way to live? So, try to avoid them as much as you can. Go on a debt-free vacation even if it’s a little late, rather than taking the costliest loan. The longer time you have for taking a vacation, the less is the amount you’ll require to invest monthly. This is due to the power of compounding. And, this will help you go on an extravagant holiday. Let us help you surprise your family, start saving small amounts today, to take them on a fun-filled vacation. Let your kids have fun and make memories while you are not compromising on anything but are just having fun with them. 

Happy investing for a dream vacation with your family!

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