BUDGETING

EVERY one of us should live for today as well as for our future. You and your family need relaxation time together. While you are planning a vacation this summer, do not count the pennies while you walk along the beach side or thinking about interest accrued on your savings account as you plunge into sea for a swim. Vacations are well-deserved treats and money should not be a cloud over these precious times away. Follow the suggestions as discussed below, for staying within your budget on vacation so money concerns will not definitely interfere with your good times.

Start planning early

The key to optimal vacation spending is planning and budgeting. According to some of the personal finance advisors, one can spend up to 8% of the annual income on travel and vacation. If you like to travel more you can increase this percentage of your annual income. While planning for your vacation, allocate your expense as follows (a) where you are going; (b) how you plan to reach there; and (c) what you plan to do there. Advance planning can help you to save money on the above three aspects. Watch for bargain airfares and consider alternative accommodation like home stay, camping, etc. Involve your children in researching things to do at your destination and accordingly you take the final call.

After the initial expenses on transportation and hotel, set a daily budget for expected food, drinks, and other activities. Inflate the figure which you have calculated by 10 to 15 per cent as a cushion for small emergencies or unforeseen expenses. Once you arrive at your daily allowance, set aside that amount in separate envelopes for each day and stash the envelopes in the hotel safe. Each day, use only what is in one envelope.

Be a modest Santa

It is tempting to pick up souvenirs for friends and family every time you pass a store. But while we are all for gift giving, there is no need to return from Italy with four leather bags for your mother or a bar of soap for your best friend. Before leaving, make a list of people to buy gifts for and how much you want to spend on each person. When you hit a nice shop where you can knock several gifts off your list, buy in bulk and negotiate a discount. Choose the right souvenir

When going on vacation, you want to make your memories last. But before buying, think about whether the 'souvenir' in question fits into your lifestyle or home decor. Snag items that work seamlessly with your lifestyle, like a fair-trade hand bag from down south or a jar of pineapple jam from north east—that way, vacation memories become a part of your everyday life instead of relegated to a dusty mantle display. Plan your year’s budget with your vacation in mind—if you know you can get an inexpensive silk saree in Kanchipuram (Tamilnadu) when you head there later this year, do not buy one in your place (say in Delhi) where it will be more expensive. Also, consider buying less stuff but taking a lot of photos you can later frame or keep on your phone or computer screen. Shop with your budget in mind.

Taste local cuisine

Hotel restaurants can often be much pricier than restaurants in the surrounding area. Ask for recommen- dations for inexpensive cafes nearby. Street food is another inexpensive option and is a great way to try authentic local cuisine.

Carry fold-up bag

Leave room in your suitcase for items you may want to bring back so you do not need to buy another luggage piece on your trip or get charged with additional baggage fees. If you are allowed to carry on or check another bag, consider bringing a fold-up tote bag and packing it in your suitcase to accommodate extra items.

Save now for next year

A little planning now will set you up for next year's vacation. Start thinking about what kind of vacation you would enjoy and estimate the cost. If you wait until you have cash on hand, you will never be able to go! The most effective way to save is to put aside some money every month in a bank recurring deposit account. You can schedule an automatic transfer to the account on payday and then sit back and watch that account build. Going into debt to have a vacation just adds to your stress level, this little nest egg will help you enjoy yourself guilt-free. Saving for a vacation is as important as your insurance or retirement planning—so use the same disciplined savings approach. The writer in associate professor of finance & accounting, IIM Shillong