Making Smart Use of Your Salary Hike in Financial Year FY26

A new financial year has begun, and companies across various sectors will be implementing salary hikes to recognise employee contributions. While you celebrate this personal financial boost, you must also plan your finances strategically. In this article, we highlight how you can manage your salary hike effectively for a secure financial future

Utilising Your Salary Hike In Financial Year FY26

To maximise the benefits of your salary hike, consider a balanced approach. First, dedicate a portion to savings and investments. This will build long-term wealth for you. Next, analyse your debts and pay them down, either partially or fully, to become debt-free faster. Finally, you can take a long-awaited trip or purchase a new smartphone to give yourself a small treat!

• Increase Your Investments

The amount you invest depends on your financial goals and existing commitments. Save and invest 20% to 30% of your increment, focusing on long-term objectives such as retirement planning, wealth accumulation, and education funding. Consulting a financial advisor can help you determine an appropriate allocation strategy based on your unique circumstances.

SIPs, or Systematic Investment Plans, offer a straightforward way to invest in mutual funds. You choose a regular investment amount—weekly, monthly, or quarterly—making it adaptable to your budget. This method helps you grow your wealth gradually, smoothing out market fluctuations.

• Reduce Your Debt in Financial Year FY26

You can utilise a portion of your salary hike (10%-15%) to pay off a larger chunk of your home loan or student debt. This will offer you a tangible sense of financial progress and achievement. This will also serve as a one-time boost to your debt reduction strategy.

You can also perform a cost-benefit analysis to check the feasibility of debt restructuring. Talk to your lender and see if it is possible to increase the size of your monthly EMIs. This will help you in closing your loan faster.

• Revisit Your Priorities 

To safeguard yourself against unforeseen events, build an emergency fund for yourself. Ideally, this fund should be able to sustain you for 3-6 months if you lose your paycheck. Moreover, you can consult your health insurance provider to avail of new top-up plans. This includes coverage for critical illnesses and miscellaneous medical expenses.

With the remaining amount, you can buy yourself a great vacation, a new smartphone, or a new salon membership, whatever you like!

Conclusion

Salary hikes offer a chance to achieve long-term goals when used wisely through prudent decisions. To gain maximum benefits from salary hikes, strategic financial planning is necessary. This can help you in fulfilling all your aspirations eventually!

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.