‘If 40% of your salary is gone by the 5th…’: Expert warns on debt & monthly budget

Most people know their credit score. Many keep tabs on how much they save each month. But there’s one powerful number almost nobody tracks—and ignoring it could quietly lead you into a debt trap.

CA Abhishek Walia, a seasoned financial expert, wants every Indian earner to understand the Debt-to-Income Ratio (DTI). “People often ask me if they can afford the EMI on a new loan,” Walia says. “But very few step back to check how those payments stack up against their total income. That’s where DTI comes in.”

So what exactly is DTI? It’s simple math:

Debt-to-Income Ratio (DTI) = (Total monthly EMIs / Net monthly income) x 100

Essentially, this ratio measures how much of your income is already committed to debt payments like home loans, car EMIs, credit card dues, or even BNPL (Buy Now Pay Later) schemes.

Here’s how to interpret your DTI:

Under 20%: Excellent. You’re on solid financial ground and can comfortably handle your current debts.

20–35%: Manageable. You’re doing okay, but new loans should be considered cautiously.

35–50%: Risky zone. A significant portion of your income is tied up, leaving little room for emergencies or new expenses.

50%+: Red alert. You’re dangerously overleveraged and at high risk if your income dips or expenses rise.

Consider someone earning ₹80,000 per month and paying ₹42,000 in combined EMIs. That’s a DTI above 50%—meaning over half the salary is consumed by debt before other living expenses even begin. “Even a small financial shock—a job loss, medical emergency, or big repair bill—can push such individuals over the edge,” warns Walia.

One of the biggest mistakes people make is evaluating each EMI in isolation, without considering their cumulative impact on monthly income. “Whenever you’re planning to borrow,” advises Walia, “don’t just ask yourself, ‘Can I afford this EMI?’ Instead, ask, ‘What will my DTI be after this new loan?’”

Creditworthiness isn’t only about paying on time. It’s also about having enough free income to handle life’s unexpected challenges. A healthy DTI ensures you can save, invest, and enjoy life without living under constant financial pressure.

In a world obsessed with credit scores, CA Abhishek Walia believes DTI might just be the financial metric that keeps you truly safe. And if 40% of your salary is gone by the 5th of every month—it’s definitely time to run the numbers.