After facing job loss and salary cuts during the pandemic period, it’s time for a salary hike. Following a steady normalisation of the COVID-19 situation – after the withdrawal of salary cuts and improvement in job market – companies are giving due appraisals to their employees again.
While restoration of jobs and full salary provides respite to the affected employees, appraisals would provide much needed motivation and some additional money to counter high rate of inflation.
However, apart from removing the curb in spending and spending some extra out of the increased part of the salary, one should also save and invest from it to make provisions for future contingencies and increase in expenditures due to inflation.
“One of the best moments in the life of a salaried employee is when he gets a salary hike. Normally, the younger generation likes to celebrate the occasion with their friends. Nothing wrong with getting momentary gratification for a year of hard work, but it is always prudent to rejig your investment portfolio with every increment,” said Vijay Singhania, Chairman, TradeSmart.
Apart from making provisions for contingencies and countering inflation, it’s also important to invest for meeting the future life goals.
“The incremental money should be immediately assigned to a goal to multiply your wealth. It can either be allotted to reducing your liability or invested in instruments like Stocks, Exchange Traded Funds (ETFs), or Public Provident Fund (PPF) that help you in achieving an important life goal,” said Singhania.
While the appraisals would provide additional cash in the hands of the employees, some part of it would be eaten up by taxes, unless tax-saving options are exercised properly.
“One needs to consider that an increment comes with a baggage of higher taxes. In such a scenario, the individual needs to plan his investment in a tax efficient way,” said Singhania.