How do they meet holiday expenses?

Be it saving for a vacation or banking on surplus income, going it alone or through agents, people budget for travel in their own way. Here’s how

A week or two every year in a scenic hill station, a beach resort or other exotic locales is a must-have break for most families.

But how do they meet their vacation expenses – does this come out of a vacation kitty or is it pulled out of surplus income? Do people save in a systematic way for their holidays? Here’s what we found.

Saving for the vacation

“My dream is to travel to at least 20 countries in my life-time,” says Narendra Dev, pursuing his Masters degree in Europe. “I save money in recurring deposits for the vacation which I move to fixed deposits towards year-end.”

Narendra saves for a longer period, up to 2-3 years when he plans a long trip. He prepares a detailed trip plan and also maintains an excel sheet for actual and estimated budget. He tries to park his money in deposits that earn a higher interest as that would add to his travel budget.

So far, he has been sticking to one public sector bank which has been offering better interest rates on both fixed deposits and recurring deposits.

Shivsankar, who works as Instructional Designer, says “I don’t usually save for my vacation. But I add the monthly surplus to a contingency fund. This contingency fund is kept as a separate bank account.”

Lakshmi Gnana Bala, Executive Engineer in ONGC, plans for the vacation well in advance. Lakshmi and her husband allocate a month’s salary, each, for the vacation and they don’t plan for any big expenses two months prior to the vacation.

Lakshmi, who hasn’t had any ‘saving for holiday’ plans until now hopes to build a vacation kitty by way of a recurring deposit in the future.

Then there are those people with a comfortable cash flow who manage vacation expenses without saving.

Dipanjan Mondal, State Head-Emerging corporates group, Business & Relationship Management with India Ratings, says he starts planning for the vacation six months ahead. He makes payment for tickets and accommodation using credit card. He doesn’t follow any saving plan for the vacation.

Travel agency services

Going for a vacation through travel agents will reduce your cost and time. Travel agents can make a big difference if you plan international tours. Most travel agencies have tie-ups with tourist destinations, airlines, hotels, etc, and are able to pass on the benefits to customers by way of free offers/reasonably priced packages.

If we were to visit an unfamiliar destination, we may end up spending more whereas travel through these agents is a fixed cost and will not increase the budgeted expenses. But, of course, cancellation of tickets booked through travel agents comes with its own costs. Every travel agency has its own cancellation policy and the refund depends on when the tickets are cancelled.

If the travel agency is informed about the tour cancellation a month or two before the departure, generally around 15 per cent of travel cost is not refunded; some agents may charge more.) As the number of days prior to departure reduces, the cancellation charges increase. When the cancellation is close to departure by a week, no refund is given. These cancellation charges are linked to the cancellation policies of airlines, hotels etc. Even if you make the bookings directly, you will lose some money, depending on when you cancel the booking.

Lakshmi says, “sometimes we use travel agency services and sometimes we book places on our own. We have done both. We usually do a comparative analysis and if there isn’t much difference and if the group is bigger than six people, we go with agencies.”

“I prefer doing my own research, looking for places to visit and options to travel and stay. Thanks to the internet, one now has access to friendly home-stays and options to find the best and cheapest mode of travel,” says Narendra.

Group tours offered by travel agents might at times save money but at the cost of flexibility. When the vacation itself is all about relaxation and having fun, flexibility plays an important role. For people who want flexibility, group tours won’t be the right choice.

What if vacation expenses exceeds budget

Narendra says “My expenses have always exceeded the budget. Out of the saving allocated for travel, 75 per cent is allocated for expenses and the remaining is kept as reserves. I have met the excess expenditure with the reserves.” Lakshmi says that when going in a group they share the expenses and it has never exceeded the budget.

Dipanjan plans the major expenses relating to vacation before the travel and has fewer expenses during the vacation. If expenses exceed the budget he maintains liquid cash in an account to be used in such circumstances.

Carry cash or cards

Both cash and cards are used for domestic and international travel. Shivsankar says “I prefer to pay by credit card and carry just enough cash to cover a day, or to use during emergencies. However, if I am travelling to a place where there are no facilities to pay by card, I scout the area for ATMs and ensure that I carry as much cash as necessary.”

Domestic traveller Lakshmi says, “I prefer card over cash as it gives a log of your expenses. But it is not always possible to use cards, so one might have to carry cash too.”

Narendra, who is an international traveller, uses both forex card and cash. He says he cannot rely on only cards, because sometimes the ATM might not be able to dispense money. Also, roadside shops may prefer cash payment to card.

Dipanjan, who is also an international traveller, uses forex exchange to pay in cash and goes for cards where necessary.

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