« When to Sell a Mutual Fund What is the danger of starting investments late? »

How to go for a foreign vacation every 3 years?

Posted on 26 Jun 2021
Author: Sayan Sircar

Tags: Set Goals

4 mins read

Walk-through: Get the SIP amount for recurring goals like a dream vacation every few years

Calculation of SIP amount

📚 Topics covered:

Asset allocation and target return for a recurring goal
After one year of running the SIP
A note on having the pre-requisites in place
All posts in this series

Asset allocation and target return for a recurring goal

We have already covered

This post will deal with a recurring goal like going for a foreign vacation every three years throughout your life (for the next 30 years).

Assume that the goal amount is 4 lakhs (as per today’s cost) every 3 years for the next 30 years starting 2 years from now. So this is a plan for 10 vacations using the same framework followed for multiple goals with constant inflation of say 5%. We should keep in mind that inflation for vacations can be unpredictable due to how fuel prices, demand at various tourism locations and other factors play out.

Assume 2 lakhs is available today which is allocated to the first year’s vacation.

These are essentially 10 single payment goals:

Goal 1: Vacation 1: 4 lakhs adjusted by 2 years of inflation in 2 years
Goal 2: Vacation 2: 4 lakhs adjusted by 5 years of inflation in 5 years
Goal 3: Vacation 3: 4 lakhs adjusted by 8 years of inflation in 8 years
….
Goal 10: Vacation 10: 4 lakhs adjusted by 29 years of inflation in 29 years

Using the single goal model the following SIP amounts are determined and the totals are added up as shown:

Calculation of SIP amount for recurring goals

The 40 lakhs initial cost of the 10 trips are expected to be around 93 lakhs over the next 30 years. The initial lump sum amount is allocated to the first trip since that will happen first. A single set of SIPs are created: equity 5154 and debt 22107 along with one lump sum investment in debt of 2 lakhs as per asset allocation. Refer to these posts for investing in equity and debt funds.

These calculations are explained in this Google Sheets workbook.

Recent articles:

1 / 3

<p>This article describes how to use the Arthgyaan goal-based investing tool as a calculator to determine if switching to the New Tax Regime makes sense.</p>

2 / 3

<p>This article describes a tweak that investors can implement to plan taxes more efficiently, given that non-equity funds will be taxed at slab rates after 1st April 2023.</p>

3 / 3

<p>This article shows the way forward for investors in debt, gold, hybrid and international funds which have lost indexation benefits on units purchased after 1st April 2023.</p>

❮ ❯

Join our WhatsApp community: You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.

After one year of running the SIP

The following needs to be done in this order:

find the new corpus (C) which is the sum of the current value equity and debt fund values
review the goal parameters (new horizon is 1 year less, review the current cost of the goals to adjust for actual market inflation etc.)
re-balance between the equity and debt fund values
Increase the SIP figure by 10% (or more, the model will tell you)

See this detailed post for the process for reviewing.

A note on having the pre-requisites in place

At all times ensure that you have the following in place

an emergency fund with 6-12 months of expenses
a term insurance policy (unless you are retired with no income)
a health insurance policy (separate from the company provided one if any) for 10-15 lakhs as a base policy with a 50-100 lakhs super-top up
a personal accident insurance coverage to safeguard against accidents where you do not die but cannot earn
no high-interest debt like credit card or personal loans

All posts in this series

Please see below:

What's next? You can join our WhatsApp community

You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.

Discover an article from the archives

Worked out case studies for goal-based investing

Case study: how this double income recently married family can perform DIY goal-based investment planning

This article shows how a young just-married couple can invest for future goals using the Arthgyaan goal-based investing tool.
Case Study: How should couples in their 40s with a new baby plan their financial future?

Did you welcome a bundle of joy in your 40s? This article will discuss ways of planning the child’s (and your’s financial future)
Case study: how this double income single kid family can perform DIY goal-based investment planning

This article shows how a very typical salaried couple with one child can invest for future goals using the Arthgyaan goal-based investing tool.

Previous and next articles:

<p>This post explains the situations when you can sell a mutual fund.</p>

Portfolio Review

When to Sell a Mutual Fund

This post explains the situations when you can sell a mutual fund.

Published: 25 June 2021

5 MIN READ

<p>You pay a heavy price by waiting to start investments: this post shows the effects of every year of delay</p>

Set Goals

What is the danger of starting investments late?

You pay a heavy price by waiting to start investments: this post shows the effects of every year of delay

Published: 27 June 2021

2 MIN READ

Latest articles:

<p>This article compares how the PPF has performed against the SENSEX since 1979 to help investors decide if they should invest a lump sum in PPF in April 2023.</p>

Choosing Investments

SENSEX vs PPF report card 2023: should you invest 1.5 lakhs in PPF in April?

This article compares how the PPF has performed against the SENSEX since 1979 to help investors decide if they should invest a lump sum in PPF in April 2023.

Published: 2 April 2023

5 MIN READ

Tax Calculator

Should you choose the new tax regime from 1st April 2023?

This article describes how to use the Arthgyaan goal-based investing tool as a calculator to determine if switching to the New Tax Regime makes sense.

Published: 1 April 2023

4 MIN READ

Topics you will like:

Asset Allocation (19) Basics (8) Behaviour (10) Budgeting (10) Calculator (15) Case Study (3) Children (11) Choosing Investments (32) FAQ (4) FIRE (11) Gold (6) Health Insurance (4) House Purchase (14) Insurance (14) International Investing (8) Life Stages (2) Loans (9) Market Movements (10) Mutual Funds (25) NPS (5) NRI (5) News (6) Pension (6) Portfolio Construction (42) Portfolio Review (24) Real Estate (4) Retirement (33) Review (11) Risk (6) Safe Withdrawal Rate (5) Set Goals (26) Step by step (9) Tax (22)

Next steps:

1. Email me with any questions.

2. Use our goal-based investing template to prepare a financial plan for yourself
OR
use this quick and fast online calculator to find out the SIP amount and asset allocation for your goals.

Don't forget to share this article on WhatsApp or Twitter or post this to Facebook.

Discuss this post with us via Facebook or get regular bite-sized updates on Twitter.