7th Pay Commission: This is how your revised salary will look post allowances

Union Cabinet has given nod for the implementation of 7th Pay Commission. The central government employees will start getting the revised salary from July along with higher House Rent Allowance (HRA). 

As per the revised pay, the government has increased the minimum wage of the central government employees from Rs 7000 per month to Rs 18000 per month, which is an increase of 157.14%. 

ALSO READ: 7th Pay Commission: Central govt employees to get up to 157% HRA hike

With your pockets going to be heavier, do not spend at one go! Invest it. 

Central government employees have been waiting for the amount from quite a long time now. 7th Pay Commission will be effective from January 1, 2016. Which means, the total amount will be huge!

Before you put the amount in fixed deposits or spending on your "wants", do think about your "needs".

The first and most important thing you should consider doing it to pay off your debts, if any. Personal loan, housing loan, car loan, credit card dues, any borrowed funds -- try to close those as soon as possible to cut down on interest payments. 

"Focus on clearing loans with higher interest rates first – typically personal loan and credit card dues. Also, do not let the increment cause you to over-spend, else you risk losing the benefits of a salary hike," Adhil Shetty, CEO and co-founder Bankbazaar.com, said.

ALSO READ: 7th Pay Commission: Calculate what you will get from July 1

While investing, try to increase the amount you invest to match your income hike. Also, keep an eye out on inflation and invest in high return assets to beat inflation. 

Also relook your tax-planning as now you may need to pay higher taxes. Select your investment instruments to meet your tax-saving requirements.

Another point you need to look at is your age factor. If you are already in late 40s, your retirement is near and it is the high time to think about it if you have not started saving yet. 

With the money you have received, you can take out a portion of it and create a retirement corpus. Split your retirement corpus between Debt and Equity Mutual Funds depending on your risk appetite and time horizon. Ideal post retirement split can be 70% debt and 30% equity.

ALSO READ: Start young: Financial independence for first time investors should begin with SIPs

Equity funds in India have generated close 15-17% CAGR over the past 10 years. That’s about 8-9% above inflation. When you compound this annually, this gives you a significant amount of wealth over an extended period of time.

If you are a parent, do save some part of your salary for children's education. Like every other expense, education fees will also increase over time. So the sooner you start, the easier would it be for you to save up enough to fund your child’s education.

ALSO READ: Here's how young parents can save for their child's education

If parents can start this SIP when the child is 3-5 years old, they will have a good 10-15 years to build the corpus. This will not burden them at the time when the child goes to college and would have also allowed them to benefit from the power of compounding interest.

So, don't let your money sit in FDs and Recurring Deposits, keep investing it in mutual funds to diversify your portfolio and get tax benefits.