The increase in SIP not only saves you from impulsive spending but also lays the foundation for a concrete future
The feeling of getting promoted is an exhilarating one. You have worked hard with grit and determination and finally, rewards come to your way. You have already drawn plans to spend extra money. Spending is fine, but do not forget your investments. You have to show some discipline in the investing arena too.
If you are already investing through SIP, you must treat the promotion as an opportunity to increase your SIP investments. Let's assume, you have received a 15% hike, you must increase your SIP by 15% too. There could be a temptation to spend money now or invest it for a brighter future. The hike has made it easier for you to achieve your financial goals. Here are a few reasons why you must invest your money smartly and why:
Your SIP investments reflect the fact that you are a smart investor. You have the freedom to expand your financial goals. Check your missed goals and you have the perfect opportunity to revitalize them. Think about the cruise holiday you always dreamed of or owning a small condominium in the hills. The possibilities are limitless. This is the perfect time to check your portfolio. if your funds are faring well, you can buy some more or invest more in the same funds. It might seem a bit difficult but you will be pleased later on.
Regular investments make you disciplined with regard to saving and spending. When you are investing your money, you are building a prosperous future. The novelty of owning some fancy gadget wears off with time. The investments will empower you to buy such gadgets later on. In the next few years, you may not want to own a fancy gadget at all. Instead, you could be wanting an exotic holiday or building a better corpus.
The salary hike is just helping you to beat inflation. If income rises, so will expenses. Many argue that increased expenses rob the person's golden opportunity to invest. This is not true if you are determined enough, you are always going to find the capital to invest. For those who argue about the increase in expenses, let's understand a hypothetical example. Assuming your salary is Rs. 30,000, you have received a hike of 15% which comes to Rs.
4,500. Your monthly fixed expenses are Rs. 18,000. The hike in salary does not necessarily mean an increase in your fixed expenses. They are going to remain the same, at least for now. A proper budgeting exercise can help you save money that otherwise is wasted. The increase in SIP not only saves you from impulsive spending but also lays the foundation for a concrete future.
Building Corpus
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The increase in SIP not only saves you from impulsive spending but also lays the foundation for a concrete future
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Regular investments make you disciplined with regard to saving and spending. When you are investing your money, you are building a prosperous future
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Imagine the feeling of having surplus cash at the time of retirement; this is the time when you need a good income. You do not want to end up like a vast number of people who endure hardships due to a shortage of funds. You can beat inflation in its own game because you choose to invest your money and let it grow on its own.
Uncertainty is another reason to increase your SIP investments. You may have a great portfolio, but a look in past reveals that many times the assumptions go awry, the planning gets derailed. The commodity inflation might remain soft, but medical insurance has increased exponentially. Your salary hike serves as your safety blanket to shield yourself from uncertainties. You may not have to worry about such an occurrence when your money begins to grow on its own. The increase in SIP ensures that your financial goals remain intact and unaffected.
If you have worked with a financial planner, you know they estimate tomorrow's requirement by estimating the needs in today's environment, for example, the healthcare cost Rs. 8-10 lakh in today's world. 15 years hence, the cost may be Rs. 25-28 lakh. Inflation impacts the price and makes it costly. You can do investment planning on https://www.investonline.in/financial-calculators/education-loan-emi-calculator and estimate the amount required to take care of tomorrow's cost.
If you know you will require Rs. 25 lakh after 15 years, you can begin to save the money. Either you can invest Rs. 8 lakh in lump-sum or you can invest in equity mutual fund through Systematic Investment Plan (SIP). many people would find the first option nonviable because not everybody has Rs. 8 lakh as a surplus money. Hence, the SIP option allows you to build a corpus by investing small amounts at regular intervals.
The event of salary hike is an unusual event. It does not occur everyday. The same can be said of inheritance or a sudden rise in the price of stock you wrote off. These windfall gains are sudden and unexpected. If you visit www.investonline.in, you will find they offer top-up SIP which is meant for occasion just like these.
The above reasons are enough to convince a smart investor to be on track of his investing journey. There might be temptations but you must remain committed and disciplined. If you do not plan properly, it is easy to squander your money. If you manage your present better, you have a much better future ahead.
The writer is a founder of Investonline.in
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