Smart ways to invest when you get a salary hike

1. Increase your Employee Provident Fund (EPF) contribution

As a salaried employee, you typically contribute a portion of your basic pay to the Employee Provident Fund. Consider increasing this contribution whenever you receive a salary raise. If you value safety and stability as an investor, doing so will help secure your finances while providing assured returns and capital protection. Take this opportunity to strengthen your financial future!

2. Pre-pay your existing loans

Are high-interest EMIs weighing you down? Take control now! By increasing your monthly EMI or paying more towards your principal, you can lessen your financial burden, reduce stress and empower yourself to achieve financial freedom today!

3. Increase your insurance cover

Reviewing and buying appropriate insurance cover can help your family in case of your untimely demise. With it, you can provide a health insurance, term insurance and a steady source of income for your family when you are not there. Also, insurance products can be your tax-saving tools.

4. Create an emergency fund

Establish a contingency fund to handle emergencies such as job loss or accidents. As a general guideline, aim to save at least six months’ worth of your current income in this fund. If you already have an emergency fund, review its adequacy and adjust it to align with your latest income needs. If you do not have an emergency fund, create one immediately, as emergencies often occur without warning and require preparedness. You can use any extra income you earn to help build this safety net. Keep in mind that the primary purpose of an emergency fund is to ensure liquidity and instant access to your money. Good options for saving include Fixed Deposits, Liquid Mutual Funds, and cash.

5. Invest in guaranteed returns

Guaranteed Return Products are perfect for individuals looking for a risk-free investment with assured returns. These products are beneficial for investors with a long-term vision, as they help create a reliable financial corpus while also providing insurance coverage. The best feature of these products is that the returns are guaranteed, allowing you to know exactly how much money you will receive each month when the policy matures. This certainty of a steady income enables you to plan and achieve your financial goals. Additionally, these products ensure your family's financial stability in the event of any unfortunate circumstances.

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6. Invest to save tax

As your income increases, so does your tax liability. To make the most of this situation, consider utilizing the full potential of Section 80C, which allows you to save up to ₹1,50,000 in taxes if you haven't already. If you have a low-risk appetite, you might want to increase your contribution to the Employee Provident Fund (EPF) or invest in National Saving Certificates (NSCs). Other investment options include the National Pension System (NPS) and Equity Linked Savings Schemes (ELSS). ELSS is particularly beneficial as it not only helps you save on taxes but also builds wealth over the long term. If you find that you can't fully utilize the ₹1,50,000 limit under Section 80C, consider using your increased income to enhance your tax-saving investments. This approach will help you reduce your tax payments each financial year while also contributing to the growth of your investments. For those with a moderate risk appetite, equity-linked saving schemes (ELSS) offered by mutual fund companies can be a good choice. Meanwhile, conservative investors may prefer safer options like the Public Provident Fund (PPF) or National Saving Certificates (NSCs).

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7. Start or increase your mutual fund SIP

You should consider using the increase in your income to start a Systematic Investment Plan (SIP) in mutual funds. This approach not only encourages regular investing but also helps you build wealth over time while countering the effects of inflation. If you already have an SIP in place, you might think about increasing your monthly investment in your existing funds or exploring other schemes after consulting with your financial advisor.

8. Invest your bonus towards your goals

Investing your bonus can be a great way to make use of that extra cash and potentially enhance your financial stability over time. In the world of investments, every penny matters. It’s essential to know how to effectively utilize your available money and maximize gains whenever the opportunity arises. As you may know, inflation gradually erodes your income, making it vital to invest your newfound wealth in mutual funds that provide inflation-beating returns to help you achieve your important financial goals. With your bonus in hand, consider starting your investment journey through regular Systematic Investment Plans (SIPs) in mutual funds. If you have a longer investment horizon and are comfortable with higher risk, you might want to explore equity mutual funds. While they can offer better long-term gains, keep in mind that all investments come with risks, and past performance does not guarantee future results.

9. Boost your retirement corpus

Paying off your debts is a crucial first step but take it further by investing part of any windfall money into your retirement fund. This decision can significantly enhance your financial future. Many people delay retirement savings, thinking it’s a distant concern, but this can leave you with insufficient funds, especially with rising inflation. Start your retirement planning now to maximize your savings and ensure a secure future. Consider diversifying your investments in mutual fund schemes, which can generate returns that outpace inflation. By allocating a portion of your bonus to your retirement, you'll grow your savings and move closer to achieving your financial goals. Act today for a more secure tomorrow!

10. Invest in mastering a skill

Consider using your extra income as a powerful opportunity to enhance your skills. Are there job skills you've always wished of mastering? Investing your bonus in these skills can dramatically boost your earning potential in your current role and pave the way for a more lucrative and fulfilling career in the future. Furthermore, this bonus can be a gateway to personal growth; exploring a new musical instrument or learning a foreign language can enrich your life and provide immense satisfaction. Don’t miss the chance to invest in your future and personal fulfilment—make your bonus work for you!

11. Indulge yourself

Financial prudence is essential, but it's important to allow yourself occasional treats. Proper planning ensures that spending on fun or luxurious items doesn't jeopardize your financial future. You can set up a fund to save for specific goals, like a vacation, and invest any excess funds. Annual bonuses can feel like a treat, and it’s wise to use them mindfully to improve your future, reduce financial stress, and enjoy some luxuries in life.

Earning a bonus, raise, or promotion is very satisfying and can significantly enhance your financial well-being. With Suryoday SFB’s products and services, you can make the most of your appraisal money.