Skip to main content

How to manage Pay Hike?

Source: Image courtesy of rediff.com


Pay Hike – This word does wonders to one’s mind set, it motivates you, makes you feel happy, and most importantly it makes you think of what all you are going to do with the extra money that you will get. You can plan this money for buying something you have been thinking of from a long time, you can use it for travelling to your dream destination, you can save it for your rainy days, you can add it to your retirement corpus, or you can just let it stay in your bank account. Every Coin has two sides; similarly hike in the salary can also be either good or bad depending on the choice you make in its utilization. The feeling of affording things you didn’t have before, sometimes leads to bad financial habits. If you want this salary hike to be useful to you, then you have to make the right choices.
Don’t jump in immediately for buying all the pending things you have been planning to buy. Let this take some time to settle in, and then you can plan how and where you are going to spend this cash. After all, you have not won this money from a lottery; it has been given to you as a token of appreciation for all the hard work you have put in your job. So, you should think it through before spending it anywhere.

1.       Do your math: This extra money which you will be receiving will also increase your tax liability. So, you should make proper calculations on what is going to be your in-hand income and how much will you need to pay for taxes. You can plan for your purchases post clarity on this issue. If still you are not clear, you can wait for 2-3 pay checks to come then make decision.
2.       20% for Self Development: Of whatever amount you have got as an increment you should use at least 20% on your self-development. After all you got this hike because of your skill-set and you should improve it by learning more. It will make you more competent in your job and increase your prospects. You can do so by reading some books, by enrolling into some online program, or by doing some week-end course.
3.       10% for fun: All work and no play makes Jack a dull boy. You have worked so hard to be where you are today and you definitely deserve some pat on the back. Take some time out to do things which rejuvenate you, be it travel, partying, or good food.
4.       Do your budgeting: After taking 30% out of your increment, you can start your planning by doing budgeting of your monthly income and expenses. Were you delaying some important expenditure which can be included in your monthly budget now? You should make a list of all your expenses including your savings outflow like insurance premiums, mutual SIP’s, Recurring Deposits, Public Provident Fund, etc. You can do so by checking your monthly out go from credit cards, bank statements, and cash expenditure. Checking your previous month’s statement won’t give you much clarity, you need to check it for at least last 3-4 months to get a fair idea.
5.       Increase Inflow towards Retirement: Check out with your financial planner if your contribution towards the retirement plan is sufficient, if not you can start adding more money towards it. Even if you are contributing the required amount, it will never hurt to add on more as due to compounding effect you will get more at the end.
6.       Pay-off your loans: Are there any loans on you? You should consider paying off loans like personal loan, car loan, and credit card over-debt, etc., as these loans are given on a very high rate of interest. So, if the interest on loans is higher than the prevailing savings rate it is better to pay these debts rather than investing the amount into some financial instrument.

Planning for your future should always be a priority for you, as efficient planning leads to a stress free life. You have earned this raise; you should ensure its proper use as it is not unlimited in nature. After all at the end of it, you should not be left wondering where the money went, so put an action plan for it.



Charu Hastir, CFPCM is founder of www.theriteplan.com. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/
Labels:

Comments

Post a Comment

Popular posts from this blog

What to do when Stock Markets suddenly go up?

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch

This May we have seen BSE SENSEX moving from the levels of 39,031 on 30th April to 37,090 on 13th May and then back again to 39,352 on 20th May. Such volatility in such a short period makes us doubt our investment decisions and questions our long-term plan of staying invested in the equities. This Market volatility has the power to change our investment strategies and at times even question it. Sometimes we think that we have missed a golden investment opportunity and on other times we assume that we have invested at a very bad time. At the very best it keeps us confused on our next steps.
John Maynard Keynes has rightly said that "Markets can remain irrational for longer than you can remain solvent." But how should we treat our investments when we come across such turbulent times and what is the right course…
Post a Comment
Read more

5 ways to trick yourself into Saving Money

Saving money has always been a daunting task and most of us fail miserably at it. One can relate more to this after seeing the average savings contribution. Lavish vacation or a fancy car can always distract us from our long-term goal of owning a home. It was easier in the earlier times when the life expectancy was lower and there was no need to plan for the long term. But now with increasing life expectancy and rise in the nuclear family culture, it has become more important for us to save for ourselves rather than depending on our Children or the Government.
When it comes to money management, it is indeed difficult to infuse the savings habit if we are a firm believer of You Live Only Once ideology. Nevertheless, savings is important even if your mind stays more on spending rather than putting the money away for your goals. But as they say there is a solution to every problem. All you have to do is to trick your mind into savings. Here are a few tricks to nudge yourself towards th…
Post a Comment
Read more

Before you hire a Financial Planner!

We all have access to financial advisors in the form of our parents, siblings, or some friend who keeps on reading financial blogs to help us out with our financial queries. Though this all sounds good but at some point, in our lives we do realize the importance of professional advice and tend to go searching for a Financial Planner. There are pressing questions in our mind like how much to save for our child’s education, will I run out of money in my retirement?
There is no doubt that a certified financial planner will help you chalk out your future in a better manner than any of your friends. But, the answer to these questions vary from individual to individual. Your family circumstances, lifestyle, income, expenses, etc. Though a financial planner is supposed to give advice in your best interests but sometimes you do get to meet people who are more concerned about their own interests rather than client’s and you end up owning the products you never needed. Yes, there are rules/re…
Post a Comment
Read more