Salary Hike Season: Why Your SIP Deserves a Raise Too

With the beginning of the new financial year and everyone starts discussing appraisals, which eventually lead to a salary hike. The additional money from your next hike should be used judiciously so along with your salary, even your investments get a hike.

Salary-hike season is a fork in the road. One path is ‘upgrade life’, which could mean a new phone or car, extra EMIs, and more subscriptions. The other path is ‘upgrade future-you.’ If you don’t make wise decisions, your lifestyle will creep up on you and decide for you. Your expenses will easily keep pace with your new salary. That’s why budgeting your salary hikes matters more than budgeting your existing pay.

How to Go About It?

Bump up your SIP

The easiest way to make the switch is to give your SIP a raise the same week your salary gets revised. Don’t hunt for ‘extra savings’ later; capture it upfront. A simple rule is to take your monthly in-hand increase and redirect 30%–50% of it into a higher SIP.

Fresh look at the new money

If you are worried a higher SIP will pinch, try the ‘two-account’ trick, keep your old salary for your regular expenses and treat the increment as a separate pool. From that pool, first fund SIP, then your emergency buffer, and only then lifestyle. This creates progress without feeling deprived in the very first month.

This is especially powerful for you as a woman because your income may not be a straight line. Career breaks, maternity leave, caregiving, relocation, or switching to flexible roles can temporarily slow your earning capacity. When you raise your SIP during high-income years, you build a buffer that protects your goals during low-income seasons.

Automate your SIP bumps

Make it automatic so you don’t negotiate with yourself every month. Many investing platforms allow a step-up/top-up feature. This allows you to increase your SIP by a fixed amount or a fixed percentage each year. Set it once, align it to the appraisal month, and let discipline do the heavy lifting. If you prefer manual control, review your SIP annually and increase it in line with your hike.

Imagine starting with a ₹20,000 SIP and increasing it by 10% every year for 20 years. Here is how your investment journey could potentially look over time.

*The above tables are for illustration purposes only. The rate of return is assumed to be 12% per annum. Actual returns may vary depending on market conditions and investment performance.

https://mutualfund.adityabirlacapital.com/investor-education/tools-and-calculator/sip-calculator

Mistakes to Avoid:

If you are planning the “SIP raise” prevent these common money mistakes:

1. Pausing your investments the moment expenses rise.

2. Withdrawing or panic selling your investment when the markets dip.

3. Not having a 3–6-month emergency fund, which could lead you to dip into your savings or investments when in need.

4. Investing too aggressively or more than you can afford.

5. Increasing the SIP without checking how the portfolio is performing.

6. Not diversifying your raise and raising only certain SIPs in your portfolio.

Conclusion

This appraisal season, enjoy your upgrade, but make sure it is not only visible on your phone screen. Let it show up in your portfolio too. Future-you will thank you for choosing progress over pressure, one monthly debit at a time.

The document is solely for the information and understanding of intended recipients only. Wherever possible, all the figures and data given are dated, and the same may or may not be relevant at a future date. Information gathered and material used in this document is believed to be from reliable sources. Further the opinions expressed and facts referred to in this document are subject to change without notice and ABSLAMC is under no obligation to update the same. 

SIP does not assure a profit or guarantee protection against loss in a declining market.

An Investor education and Awareness initiative of Aditya Birla Sun Life Mutual Fund

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