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While it’s tempting to start planning how to spend, it’s equally important to think about how to invest it wisely; Here’s what you can do
Salary Hiked? Here’s How to Use It to Grow Your MF Portfolio
Receiving a salary hike is not just a financial win—it’s also a psychological boost that validates your efforts at work. And while it’s tempting to start planning how to spend that extra income, it’s equally important to think about how to invest it wisely.
For most salaried professionals, annual appraisals bring a raise effective from April. Financial planners suggest that this is an ideal time to reassess your savings strategy, particularly your Systematic Investment Plans (SIPs) in mutual funds.
How Do Salaried Employees Save Through Mutual Funds?
Salaried individuals receive a fixed monthly income, from which they set aside a portion after meeting their regular expenses. Many choose to invest these savings into mutual funds via SIPs, which are structured, disciplined investments aligned with long-term goals, such as buying a home, funding children’s education, or building a retirement corpus.
When Should You Increase Your SIP Contributions?
Experts recommend increasing SIP contributions annually, in line with your salary hikes and inflation. Most companies announce appraisals between April and June, with revised salaries effective from June. Financial planners advise that instead of increasing spending in proportion to your raise, allocate part of the increment toward boosting your investments.
How Can You Increase Your SIP Amounts Every Year?
There are two effective strategies:
- SIP Top-Up OptionWhen starting a SIP, investors can opt for an annual top-up facility, allowing them to increase their monthly contribution by a fixed percentage (commonly 5–10%) each year.
- Example: If you start with an SIP of Rs 20,000 per month and earn an average annual return of 11%, you would accumulate about Rs 91–92 lakh in 15 years.
- But if you increase the investment by just 5% annually, the same investment could grow to approximately Rs 1.20 crore in 15 years. This small tweak can significantly accelerate your journey toward your financial goals.
- Manual Annual ReviewAlternatively, you can reassess your investments every year after receiving your raise. Take a fresh look at your income, expenses, and overall financial plan. Based on your updated cash flow, you can decide how much to increase your SIPs.
- You may choose to add more to existing mutual fund schemes or start investing in new ones based on your asset allocation needs.
- For example, if you’re already heavy on equity due to market growth, consider diversifying into debt or hybrid funds. If your exposure to gold is low, a gold fund or multi-asset fund might be a good addition.
A salary hike offers a golden opportunity to elevate your financial future. While lifestyle upgrades are tempting, directing a portion of your raise into SIPs not only strengthens your investment portfolio but also keeps your long-term goals on track. With disciplined planning and periodic increases, you can harness the power of compounding and inflation-beating returns to build lasting wealth.
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