planning
Got a Salary Hike? Six Money Moves to Make First
By Himanshu Kumar Gupta · · 6 min read
Appraisal season brings a hike, and within three months most of it has quietly turned into a bigger rent, a new phone and more food delivery. A few decisions in the first week stop that.
1. Find the real in-hand increase
A 12% CTC hike is not a 12% in-hand hike. Higher PF, tax and variable pay change the number. The salary hike calculator shows the extra in-hand per month, and the hike after inflation.
2. Split the increase before you spend it
A simple rule: save at least half of every hike. If your in-hand pay rises by ₹10,000 a month, send ₹5,000 to savings and enjoy the rest guilt-free.
3. Step up your SIPs
Raise your SIPs in line with the hike, or set an automatic yearly step-up. A ₹10,000 SIP with a 10% yearly step-up can roughly double the 20-year corpus compared with a flat SIP. See step-up SIP and the cost of delay.
4. Grow the emergency fund with your expenses
If your rent or EMIs rose, your emergency fund target rose too. Recheck it with the emergency fund calculator.
5. Review insurance
A higher income usually means your family depends on more of it. Recheck term cover with the term cover calculator and make sure your health cover still fits your city and family.
6. Recheck your tax regime and PF
A higher salary can change which regime wins. Run the tax regime calculator again. If you want guaranteed, tax-efficient debt, consider raising VPF, keeping the ₹2.5 lakh yearly limit in mind. See EPF explained.
Do it once, then automate
Set the SIP step-up, the savings transfer and the VPF change in the first week. Then the hike works for you every month without another decision.
Frequently asked questions
- How much of a salary hike should I save?
- A common rule is at least half of the increase in in-hand pay. Automate it in the first month so it does not become spending.
- Should I increase my SIP after a hike?
- Yes, ideally by the same percentage as your hike, or set an automatic yearly step-up so it happens every year.
- Can a salary hike change which tax regime is better?
- Yes. As income rises, the value of your deductions relative to the new regime's lower slab rates changes, so recompare both every year.