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

📚 Table of Contents

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• 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

• how and why to set a goal
• how to get asset allocation for a single goal
• how to get SIP amount for a single goal
• how to get SIP amount for a goal with multiple payments

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:

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.

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:

• how and why to set a goal
• how to get asset allocation for a single goal
• how to get SIP amount for a single goal
• how to get SIP amount for a goal with multiple payments
• how to get SIP amount for traditional retirement
• how to get SIP amount for early retirement
• how to get SIP amount for all goals together
• how to get SIP amount for recurring goals like vacations