Stock Market News: A salary hike feels great. But for many salaried employees, it also means bigger expenses. A better phone. A new car. More dining out. The investment amount, however, often remains exactly where it was years ago.
Financial planners say that is one of the biggest mistakes people make. A simple annual increase in your Systematic Investment Plan (SIP) can significantly boost your long-term wealth without putting much pressure on your monthly budget.
Experts generally recommend investing 20-30 per cent of your monthly take-home income. For those who are just starting out, even 10-15 per cent is a good beginning. The key is to increase that contribution every time your salary goes up.
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How Much You Should Invest
These are broad thumb rules. The ideal amount depends on your financial goals, household expenses, existing loans and emergency savings.
Don’t Stop At One SIP Amount
According to Shashank Udupa, SEBI-registered analyst, consistency matters far more than earning a bigger salary. “I think for a salaried person, the biggest advantage isn’t a high income. It’s consistency that comes from SIPs.
One of the simplest ways to build more wealth is by stepping up your SIP every year. As your salary increases, your investments should too. Even increasing your SIP by 10 per cent annually after your appraisal can make a huge difference. Over 15 years, the final corpus can be almost double what you’d build with a fixed SIP.
A very important and simple rule is to pay yourself first. The day your salary is credited, your SIP should be deducted automatically. Invest before you spend. Whatever is left can then be used for your monthly expenses and other spending. Waiting for the end of the month often leads to lower allocations.
The investment mix also changes as your income grows. If you’re in the early stages of your career, the priority should be building discipline maybe through index funds or large/flexi cap funds. As your salary rises, you can gradually allocate more towards mid cap, small cap and thematic funds to improve your long-term return potential, while keeping your core portfolio in safer funds.
At the end of the day, wealth isn’t created by earning more alone. It’s created by consistently investing more as you grow and giving compounding enough time to do the heavy lifting,” Udupa said.
Why Stepping Up Your SIP Matters
Many salaried professionals start a SIP early in their careers but continue with the same amount for years. Inflation, rising income and changing financial goals make that approach less effective over time.
For example, someone investing Rs 10,000 every month may see much better long-term results by increasing the SIP by just 10 per cent every year after an appraisal. That small annual change can substantially increase the final corpus over 15 to 20 years because every increase gets more time to compound.
Choose Funds According To Income
As income rises, your investment strategy can also evolve.
Those in the Rs 3 lakh-Rs 10 lakh salary bracket may prefer building their portfolio through index funds or large-cap and flexi-cap funds. Once income becomes more stable, investors can gradually add exposure to mid-cap and small-cap funds for higher growth potential while keeping the core portfolio diversified.
The thumb rule is simple: let your lifestyle improve with every increment, but make sure your investments grow first.