Getting a salary raise is a proud moment for anyone. It’s a sign that your hard work is being recognized. While it’s tempting to upgrade your lifestyle buy a new phone or go on a vacation there’s something even more powerful you can do increase your SIP (Systematic Investment Plan).
Many people start SIPs to build wealth or save for future goals. But most forget to increase it with their income. Why stepping up your SIP after a salary hike can be a smart move and how it can change your financial future.
What is a SIP?
A SIP (Systematic Investment Plan) is a method of investing a fixed amount regularly in mutual funds. It allows you to invest small amounts monthly (or even weekly) which over time can grow into a large sum due to the power of compounding and rupee cost averaging.
Example:
If you invest ₹5000 every month for 20 years and your investments grow at 12% per year you will have around ₹50 lakh at the end.
Why Should You Step Up Your SIP After a Raise?
Here’s the truth: Your goals are not static.
Inflation is rising and the cost of everything from education to healthcare to buying a home is going up. So if your income increases but your investments don’t you might fall short of your goals.
By increasing your SIP every year even by a small amount you are adjusting for inflation building wealth faster and taking full advantage of your growing income.
1. Faster Wealth Creation
Suppose you are investing ₹10000 per month now. If your salary goes up by 10% and you increase your SIP by ₹2000 (just 20% of your hike) you will end up with a much bigger corpus.
Example (Assuming 12% returns):
- Without step-up: ₹10000/month for 20 years = ₹99 lakh
- With ₹2000 annual step-up: You can build over ₹1.5 crore in 20 years!
That’s ₹50+ lakh extra, just by slowly increasing your SIP.
2. Achieve Goals Sooner
Do you dream of buying a house sending your kids abroad for education or retiring early?
Stepping up your SIP can help you reach these dreams faster. You are putting your growing income to work instead of letting it sit idle or spending it all.
3. Beat Inflation Smartly
Inflation eats away the value of your money. What costs ₹1 lakh today may cost ₹2–3 lakh in 10–15 years.
If you keep investing the same amount every year it may not be enough. But if you increase your SIP regularly you are better prepared to handle rising costs.
4. Better Use of Salary Hike
Let’s say you got a 10% salary hike. You can divide it smartly:
- 50% for SIP increase
- 30% for lifestyle upgrades
- 20% for savings or emergency fund
This way you reward yourself while also building your future.
5. Power of Compounding Works Faster
The earlier and more you invest the more time your money gets to grow.
Let’s say you start with ₹5000 per month and increase it by ₹1000 every year. In 15 years your SIP becomes ₹19000 per month. This growing investment earns more returns because your principal amount keeps increasing and returns get compounded.
6. Keeps You Financially Disciplined
When you automate SIP increases you train yourself to save before you spend. This habit keeps your spending in control and helps you stay focused on long term goals.
7. You Won’t Feel the Pinch
A small increase in SIP each year won’t hurt your monthly budget. In fact most people don’t even notice the difference in spending especially when their income is increasing.
Instead of spending all your extra income you are building a stronger financial base.
How to Step Up Your SIP
- Manual Method:
Increase your SIP amount every year by logging into your mutual fund platform or app. - Auto Step-Up Feature:
Many platforms (like Zerodha Coin, Groww, Paytm Money, etc.) offer an option to automatically increase your SIP by a fixed % or amount every year. You can choose this when starting a SIP.
How Much Should You Increase?
There’s no fixed rule but here are some suggestions:
- Fixed Amount Method: Increase your SIP by ₹500 or ₹1000 every year
- Percentage Method: Increase your SIP by 10–20% every year in line with your salary growth
Choose the method that suits your budget and income pattern.
Example: Impact of Step-Up SIP vs. Fixed SIP
Let’s say:
- You invest ₹10000/month for 20 years (no increase) → ₹99 lakh
- You invest ₹10000/month but increase it by 10% every year → ₹1.76 crore
That’s a difference of nearly ₹77 lakh! Just by stepping up your SIP.
Final Thoughts
A salary hike is a great opportunity—not just to spend more but to secure your financial future. By stepping up your SIP every year you are giving your goals a better chance of becoming reality.
Instead of increasing only your lifestyle increase your wealth too.
So, the next time you get a raise, ask yourself: Have I increased my SIP?
Quick Tips
- Start SIPs early and increase them yearly
- Don’t wait for a big hike—small increases matter
- Use auto step-up to make life easier
- Review your financial goals once a year
Start stepping up your SIP today. Your future self will thank you.