My salary is 1.2 lakh per month. Have three loans and one salary over draft 1) home loan 38 lakh. 34k emi. 20 years. 211 months pending 2) personal loan 15L, emi 28k for 72 months. 17 months paid 3) personal loan 5L emi 9k for 72 months, 11 months paid Salary OD 3lakh Only meagre MF of 45k stock worth 30k. How to manage SalOD

Ans: You earn Rs. 1.2 lakh every month.

You are currently managing four borrowings:

A home loan of Rs. 38 lakh with EMI of Rs. 34,000

A personal loan of Rs. 15 lakh with EMI of Rs. 28,000

Another personal loan of Rs. 5 lakh with EMI of Rs. 9,000

A salary overdraft of Rs. 3 lakh

Your total monthly loan repayment is Rs. 71,000. That takes up nearly 60% of your salary. You have very minimal investments: Rs. 45,000 in mutual funds and Rs. 30,000 in stocks. You have no emergency savings. This is a high-risk zone. But there is a clear way forward.

Step One: Tackle the Salary Overdraft Immediately
The salary overdraft is not like a normal loan. It charges daily interest. There is no EMI. But it pulls you into a debt trap silently. Even if you pay it off one month, you can slip again next month. So we must close it fully and never touch it again.

Start by stopping all new mutual fund or stock investments for now. Every rupee saved must go to the overdraft.

Cut lifestyle spends for the next 3 to 4 months. No eating out. No online shopping. No new clothes unless essential. Every bonus, gift, or small income must go into this repayment. Sell old gadgets or unused furniture if possible.

Even saving Rs. 25,000 extra per month can help you repay the Rs. 3 lakh overdraft in 3–4 months. This will give instant mental peace and reduce interest drain.

Step Two: Build an Emergency Fund Immediately After
After your salary overdraft is closed, we must build a safety cushion. This fund should be at least 3–6 months of your essential expenses.

Let’s assume your basic needs like food, rent, utility, EMI minimums come to around Rs. 60,000 a month. Then your emergency fund should be about Rs. 3.6 lakh.

Start a recurring deposit or use a liquid mutual fund. Allocate Rs. 15,000–20,000 every month until you reach the goal. Don’t use this money unless it is an emergency. This fund will keep you away from overdrafts in the future.

Step Three: Handle the Loans with a Smart Plan
Let’s look at your loan pattern.

The home loan is long-term. It may have the lowest interest among all. But your two personal loans are short-term and have higher interest. These loans are hurting your monthly cash flow badly. You are paying Rs. 37,000 per month for just the personal loans.

Start by focussing all extra money towards repaying Personal Loan 1. The outstanding is Rs. 15 lakh. You have already completed 17 months. Around 55 months are left.

Target this loan first because the EMI is high and the interest rate is likely steep. Once your emergency fund is complete, shift full focus to repaying this loan faster. Use any tax refund, bonus, or side income to bring this down faster.

Once Personal Loan 1 is gone, your monthly burden will reduce by Rs. 28,000.

Then shift to Personal Loan 2. You have 61 months remaining here. It’s smaller, so it will get closed soon once extra cash is available. This will free another Rs. 9,000 per month.

These steps will completely change your financial position. You will move from being in debt to becoming a steady saver.

Step Four: Budget with Discipline
You must now make a strict but realistic monthly budget. It must have five core parts.

Living Expenses: Rent, food, transport, utilities

EMIs: For the three loans

Savings: Emergency fund and later, investments

Insurance: Health, life cover, if not already in place

Lifestyle: Entertainment, gadgets, clothing

Write down all expenses for two full months. Then trim 15%–20% wherever possible. For example, reduce mobile bills, switch to home-cooked food, cancel OTT apps, cut travel that’s not needed.

Set a fixed amount to transfer monthly into emergency fund or overdraft clearance. If it's in your savings account, you may end up spending it.

Remember, budgeting is not punishment. It is freedom. It lets you control money instead of money controlling you.

Step Five: Insurance Check
You haven’t shared about insurance. But this is critical.

If you don’t have health insurance, take it immediately. Choose a Rs. 5 lakh individual policy or family floater if you have dependents. Health costs can destroy your finances in one emergency.

If you have dependents (parents, spouse, children), then get a term insurance policy. Take a policy with sum assured of at least 10 to 15 times your annual income.

Please avoid LIC policies that are savings-cum-insurance. They give poor returns. They also lock your money. Only pure term insurance gives high cover at low premium.

If you already have LIC plans (like endowment or ULIP), consider surrendering them if lock-in is over. Then reinvest the money in mutual funds through a Certified Financial Planner.

Step Six: Start SIPs Once Loans Are Under Control
You already have a small mutual fund investment. That’s good. But now is not the time to grow it. Stop new SIPs till overdraft and emergency fund are sorted.

Once your personal loans are repaid, your EMIs will drop from Rs. 71,000 to Rs. 34,000. That means you will save Rs. 37,000 every month.

Then you can begin new mutual fund SIPs. Start with Rs. 5,000 per month, then move to Rs. 10,000 and then Rs. 15,000 over time. Begin with actively managed funds only. Avoid index funds.

Actively managed funds are guided by experienced fund managers. They use detailed research to outperform markets. Index funds copy the market passively. They can’t beat market returns. They are also risky in uncertain conditions.

Invest only through regular plans with help of a Certified Financial Planner and MFD. Direct plans lack guidance. They suit only experts. Wrong fund selection in direct plans can lead to underperformance.

Let your Certified Financial Planner monitor your investments regularly. That way your money will grow smartly and with less risk.

Step Seven: Create a 3-Year Roadmap
Let’s break the next 3 years into clear goals:

First 6 months:

Close salary overdraft

Begin emergency fund

Stop all lifestyle spends

Review budget weekly

6 to 18 months:

Complete emergency fund

Start partial prepayment of Personal Loan 1

Reassess budget once in 2 months

Don’t fall back into overdraft

18 to 36 months:

Close Personal Loan 1

Start paying extra into Personal Loan 2

Start SIP of Rs. 3,000 per month

Gradually increase SIP as EMI burden reduces

Beyond 36 months:

Close Personal Loan 2

Start SIP of Rs. 10,000–15,000

Plan for long-term goals like retirement

Create life cover, medical cover, and estate plan

Avoiding Costly Mistakes
These points can keep your recovery smooth:

Never delay EMI even by 1 day

Don’t take new loans now, even top-up offers

Don’t invest in stocks now—focus only on clearing loans

Don’t go for quick-return ideas or risky bets

Avoid index mutual funds—they don’t protect your wealth in volatile times

Never invest in direct mutual funds unless you are expert

Don’t skip health insurance even for 1 month

Finally
You are at a very important turning point. Though current cash flow feels tight, there is huge hope.

By simply closing the overdraft and planning repayments smartly, you will turn your finances around.

Once the personal loans are gone, your free cash will grow each month. This is when you begin consistent wealth creation through well-chosen mutual funds with help from a Certified Financial Planner.

Your next 3 years are very crucial. Budget hard. Spend mindfully. Track monthly. Stay disciplined.

This strategy gives you long-term peace, not short-term relief. If you follow it sincerely, you will move from debt to security and from security to abundance.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment