Got a raise? Here is how you can increase your SIP

Getting a salary increase is something to cheer about. It is evidence that one's employer rewards one's abilities and hard work. As much as one might be tempted to use the added money on new gadgets, travel, or upgrading one's way of life, it is also an opportune moment to review one's fiscal planning. One of the most significant ways to let one's augmented income work for an individual is by enhancing one's investments, particularly one's Systematic Investment Plan (SIP). Boosting one's SIP after getting an increase is an intelligent, practical decision that will get one one step closer to one's future objectives without compromising one's existing routine.

Do You Have a SIP Already

Starting an SIP is one significant step in your wealth creation journey. If you have an existing SIP, you have been following a disciplined path towards developing wealth and securing your future. Through SIPS, you invest in a fixed amount periodically, enabling you to ride through falls and rises in the market through “rupee cost averaging”. This curbs volatility in markets to some extent and makes investing less stressful.

However, most investors commit an error by not increasing their SIP amount from one year to another. If your SIP is not rising proportionately to your income, you may not fully realise your earning potential. Your expenses and financial targets will increase, thus your investment needs to improve too.

Whenever you receive a salary increase, revisit your SIP and increase the amount if feasible. For instance, if your monthly investment is ₹5,000 and you receive a 10% salary rise, increase your SIP to ₹5,500 or even ₹6,000. This strategy, commonly viewed as a Step-Up SIP, ensures that savings keep pace with earnings and aspirations, making wealth creation more efficient and seamless.

Increase in Income Demands Larger Goals

A salary increase improves your take-home pay, giving you broader aspirations. You can purchase a superior home, improve your automobile, offer excellent education to your kids, or retire early. Such ambitions can only be achieved through systematic and planned saving.

Your cost might increase post-increase, but so does your capacity to save and invest more. By investing part of your salary hike in the case of an increase in SIP, you make sure that more money is being spent and saved. The extra amount one can invest can impact the future thanks to compounding, wherein one's money is earning interest not just on the initial amount but on the interest generated over the years.

For example, an additional ₹1,000 per month invested in your SIP over 10 or 20 years builds considerable wealth because of compounding. Whenever you get an increase in income, treat that as an event to reassess and make your financial objectives more ambitious yet realistic by raising your SIP.

Will you have sufficient funds to invest amidst rising inflation?

One particular worry for investors is that they won’t have enough to invest, particularly when their purchasing power is being eroded year in and year out by inflation. Inflation results in an ongoing increase in prices for goods and services, such that an equivalent amount of money will purchase less.

Leaving your SIP amount unchanged for several years could fall short of funding your future requirements since money loses value over time. That is, ₹10,000 now will not purchase anything in 10 years. That is why it is crucial to increase your SIP amount periodically in association with your income and inflation.

If you increase your SIP for every salary hike that comes your way, you can combat inflation effectively. This keeps your investments at par with inflation's value and can fund all your future objectives—education for your kids, an enjoyable retirement, or some other milestone. Inflation is stealthy but persistent, so your investments need to rise at a higher rate than inflation to prove worthwhile.

Secure Your Future with SIP

Most individuals feel that investing in an SIP is sufficient for their future security, but that is just the beginning. Your financial needs, objectives, and market fluctuations will all evolve over time. Unless you keep investing the same amount, by then, you might have insufficient funds.

Regularly revising your SIP amount is essential to protecting your future gains. Nearly all mutual funds and most investment websites have an inbuilt facility to "step up" or "top up" your SIP every year or at an interval that you prefer. This easy tweak makes all the difference in the long run, as every increase, however small, is accelerated by compounding.

Additionally, raising your SIP does not have to hurt. If you cannot even increase it much, a modest annual hike will bridge the gap between what you contribute now and what will be needed. What is most important is to remain constant and active, checking on your SIP at least annually or every time income increases.

Conclusion

A salary increase isn’t just about spending more it’s a chance to secure your future. By raising your SIP, you're making a smart move: matching your investments with your growing income. This not only helps you build wealth steadily but also keeps you on track to achieve your life goals. A small step today can make a big difference tomorrow.