All civil servants in Bhutan received the biggest salary increase from this month. Some people received as high as 70% increase.
When the extra money comes into our bank accounts, it’s time we make smart financial decisions regarding that new additional money.
Let me explain how we can handle the new income; making some smart changes in our budget, financial habits, and also goals.
Take a moment to Celebrate
It is so natural for people to be excited with a better new level of income. You deserve to be excited. Celebrate it.
How to celebrate it depends on yourself. You can treat your loved one to some nice meals or weekend getaways.
If you have been looking at that new mobile far too long, just go and get it. You can gift it to your parents or share with your relatives.
You can donate some to charitable organizations that are doing works in causes you believe yourself. So many choices.
My friend use it to close his loan account. He’s so happy that the loan is cleared. If it makes him happy, it’s also a celebration!
It is important to celebrate this new milestone – create some memories. What is life without memories?
Consider a New Budget Plan
Once the celebration is over, we should get down to a serious business of planning how to put that extra money to work.
The truth is very soon you will not feel the difference of this new income level. Prices of goods and services will rise.
If you don’t keep check of your lifestyle inflation, it’ll easily take away that extra money from you.
We know how hedonic adaptation and the law of diminishing utility work. The same applies to your new income as well.
You can use the extra money of the first month for the celebration. Since the second month, being Azha Pasa must end.
If your budget rule is 50-30-20, start customizing that based on your new income level.
When I design my budget based on my new net income of Nu.45,000, it’ll look like below:
- Nu. 22,500 (on needs like rent, groceries)
- Nu. 13,500 (on wants like travel, movies)
- Nu. 9,000 (on saving/investing for stock)
This ensures your financial priorities is balanced and unchanged despite changes in income.
‘I don’t need that much for my needs and wants.’ Good. You can increase your saving and investment.
Rise Saving and Investment
I have used the take-home (net) salary for the conveniences. However, be reminded that salary increase will also increase your tax.
In previous income, you might be in a lower tax brackets. You must know the increase in net only and not on gross.
Personal finance enthusiasts in western countries recommend saving at least 70% of the additional money.
It’s a good target but personally I feel it’s too ambitious which will lead to failure. Saving 50% seems realistic.
If the salary increase is Nu.15,000, at least Nu.7,500 must be the saving. Saving in this context is something that will increase the net worth.
Stock investing increases net worth unlike debts. So, clearing debt too is a saving.
Remember, the secret of getting happiness out of money is when we are intentional about our spending.
We must avoid mindlessly splurging on all categories, and instead, invest generously in the things that truly bring us joy and fulfillment.
When our income grows, our abilities to save, invest, and reach financial goals should also grow.
Otherwise, pretty soon the rising spendings will catch up setting us back to a status quo.
Conclusion – Money Mindset
This salary increase is an opportunity for civil servants in Bhutan to take their financial journey to new heights.
Celebrate, but also don’t forget to budget it with purpose, and tailor your spendings as per your values and goals.
Every step you take towards wise money management brings you closer to a future filled with financial security and happiness.
Did you celebrate your big salary increase? Would you save and invest more?
