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Can increasing your income be a financial goal?

The limit is only the reality of our savings and income. The greater the income we have the more or bigger financial goals we can plan and invest for. If that is the case, then can increasing our income be a financial goal?

From being able to watch the next cricket world cup in four years to buying a farm house worth a crore in the next 15, most have a unique, and often interesting, financial goal. Our dreams and life goals tend to be unlimited.

The limit is only the reality of our savings and income. The greater the income we have the more or bigger financial goals we can plan and invest for. If that is the case, then can increasing our income be a financial goal?

We all ask about returns when we consider investing

Apart from the security of our investments, we all focus on returns. Returns matter, as they should, up to a point. It’s about balancing risk and the growth that we need to meet our financial goals.

But what about your personal rate of return?

Your personal rate of return

Asset classes have an expected rate of return based on historical data as well as reasonable assumptions about the future. Equity should deliver 12% pa going ahead, while good quality fixed income, like liquid funds, should give around 7% pa.

However, can you say the same about your ability to grow your income or salary? Your savings, which you invest, come from your take home income after all.

The truth is that meeting many of your financial goals will also require you to grow your income. The bigger the goal the more it might demand from you in terms of income growth. This is because investment and compounding can do wonders, but not if they don’t receive enough to grow.

The economy of the future (also of today) is going to be a lot about how fast you adapt to what the market demands and how forward looking you are. Investing in your skills by taking relevant courses, trainings, as well as building contacts with the right people in your chosen industry can all significantly impact your ability to earn more.

Grow your salary/income

Average salary growth for most of corporate India has been around 10% in the recent past. This is about 2%-5% over inflation (depending on the year you consider). At the very least, you should work towards maintaining an income growth rate over inflation.

Of course, not all of it is under your control. The organisation you work for might have caps on salary increments and in case of tough times might hand out poor hikes. However, try your best to ensure a poor hike is not on account of lack of performance on your part. All we can do is try our best, when it comes to doing well in our current jobs.

But your ability to earn more is not fixed if you take the necessary steps.

Becoming better helps

The economy of the future (also of today) is going to be a lot about how fast you adapt to what the market demands and how forward looking you are. Investing in your skills by taking relevant courses, trainings, as well as building contacts with the right people in your chosen industry can all significantly impact your ability to earn more.

You should consciously take charge and have a plan about how you are going to increase your own rate of return.

A side income

In today’s gig focused economy, it makes sense to build a skill set that is other than or complements what you use in your day to day job.  Can you learn something in a few years, that will allow you to earn on the side?

The answer may be different for each one of you. It has to be practical as well. Not everyone can become an expert in data science or machine learning, just because they seem to be in-demand skills. Focus on what you do really well and, will also enjoy doing on a daily basis.

Increasing your income, will often be because of what you do really well rather than simply because the skill happens to be in fashion. Being barely average even in an in-demand skill might get you a job but it won’t take you further than that.

Finally, it is all about you

Investing is merely a tool that can help us lead the kind of life we really want to. For the vast majority of us, our wealth will be a function of our unique abilities. Grow those, and you will see your ability to increase your income go up. Don’t just hustle, but hustle with purpose.

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