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Got promoted? Got that hike you had your eye on? Excellent! After all, nothing feels better than working hard and getting rewarded for your discipline. For those of you with an extra bit of money in your kitty following the appraisal season, it is but the perfect time to continue that streak of discipline and accelerate your investment. We know that you would have already made plans on how you want to spend that bonus sum or that raise.
Financial experts opine that a hike is but the perfect time to begin small additions to your SIP that will reward you in a massive way later on. By increasing your investments now you will be able to reach your financial goals without any hurdles. As we all know, investing smart always pays off. We have put together some pointers to help you understand where to put your money and why.
It reflects well on your end to have started a SIP already. Maybe you had a financial goal in mind that you wanted to achieve; well don’t we all? With the extra cash in your kitty you have an excellent opportunity to expand your dreams furthermore. If you were saving earlier for your Big Day or your child’s higher education, you can now, by increasing your SIP, start saving for that long due holiday which you know you deserve! Revisit your portfolio and see if the funds are performing as per the goals you had set. If you see there is a possibility of more investment that could fare you well in the long term, invest the extra money you have and watch it grow. You will thank yourself later when you are on that vacation of yours.
You might be fairly comfortable with your present scheme of savings and investments and that is wonderful. But the idea behind investing more when you earn more is not just to ensure that you have ample for the future, it is also for you to discipline yourself and know where and when to spend. With more money comes the added temptation to spend more, whether we need it or not. This is human nature to want more when we have the means. Another good thing about getting a hike is that you can plan on having a new financial goal or a new target to meet. Utilize the extra cash to add towards your new goals on top of the existing ones. This will help you ensure you are able to set new benchmarks and achieve them without burning a hole in your pocket.
I hear many people wondering if there would be enough money to spare for investments even with the hike, as the expenses also tend to shoot right up. Expenses are going up there is no denying that but experts believe this is not the entirety of the picture. There is always enough capital to invest even with the rise in the general price level. There is always enough to invest if you budget your expenses and spend smartly. What increasing your SIP does is not only keep you from overspending but most importantly it ensures that you have enough saved for your future.
For instance, If your salary is INR 1000 and every month you spend INR 600, it means your fixed expenses are taken care of with 60 percent of your income. Now, if your salary increases by INR 400 or 40 percent, your expenses will not necessarily go up by 40 percent because your fixed expenses as we saw earlier are already covered. The smart thing on your part would be to not spend extravagantly just because you have some spare change. That spare change, when put to use effectively, can result in a higher outcome.
How much better is the idea of ending up with a little more cash at the end of your investment tenure than being left with a shortage of funds. And all of this without feeling the pinch of being cash strung.
You may have your investments charted out in detail but there is always that uncertainty looming around the corner that often takes even the most prepared ones by surprise. The good news is that you can have a safety blanket to protect yourself from such events. You can increase your SIP which will allow you to make adjustments to certain anomalies like the difference caused by the rate of inflation which may be higher than you expected; or the actual return on investment which may turn out to be lower than anticipated, etc. When you have long-term goals to meet, like a child’s higher education, a marriage in the family, and so on, these little adjustments made by increasing your SIP will ensure you meet your target despite the adverse play of the market forces. A little more from your end and you will only have more to look forward to.
We hope now you understand the importance of and the simplicity by which you can increase your SIP. It does not have to be a burden if you are a smart money manager in the face of extra cash in your hand. This is particularly important to note, as it is with extra money that we tend to be more careless with our expenses. This does not have to be the case. Budget your expenses and invest smartly. A spare change invested well today can bring about a bigger change for your tomorrow.