Most of us will never save three years of expenses. The idea behind the number is still worth your attention.
When Chennai-based mutual fund distributor Muthukrishnan Dhandapani posted on X, he opened with a disclaimer: “I’m no Nostradamus.” Then he said it plainly: no fresh loans, no long-term commitments like buying a house, and an emergency corpus that covers three years of family expenses.
The internet split in two. One camp called it wisdom. The other pointed out that plenty of middle-class families can’t manage three months of reserves, let alone three years.
Both camps are right, and that is what makes this advice worth examining.
The number is not the message
Treat “three years” as a direction, not a deadline. Dhandapani himself added that the sky isn’t falling and that good times return, because “such is the nature of cycles.” That’s not a doomsday call. It’s a call to stop adding fixed obligations while the ground is moving and volatile.
His post landed the same week the Nifty 50 slipped 0.28% to 22,716.20 and the Sensex fell 0.33% to 72,529.07, a second straight down session. That’s a nudge, not a crash. But markets don’t announce trouble in advance, and neither do layoffs. They arrive on a Tuesday morning as a calendar invite from HR.
The hidden reality: an EMI is a promise made by your future self
A loan is not a number. It’s a contract that assumes your income will exist, unchanged, for 15 or 20 years. Nobody can promise that, and layoffs are being announced across several companies right now.
Cash reserves don’t earn spectacular returns. What they buy is the right to say no: to a bad job offer, a forced sale of your investments at a loss, or a high-interest personal loan taken in panic. Liquidity buys options, and options are worth the most when everyone else is out of them.
Uncommon scenarios most advice ignores
The two-income trap. Many couples work in the same industry or city. If both incomes sit in one sector, you don’t have two salaries, you have one risk counted twice. Stress-test your household assuming both paychecks pause together.
The floating-rate surprise. Many home loans are linked to benchmark rates. If rates rise, your EMI doesn’t always rise. Often the tenure quietly stretches instead, so you don’t feel the pain until you check the statement and find your 15-year loan is now a 22-year one. Check your loan statement, not just your SMS alerts.
The forced seller’s penalty. Someone with a long SIP and no cash is not a long-term investor. They are a long-term investor until the first crisis, when they redeem at the bottom to pay bills. The emergency fund isn’t there to earn returns. It exists to stop you from sabotaging the investments that do.
The 10X exception: sometimes borrowing is the smart move
Here’s the contradiction nobody wants to say out loud: “never borrow” is also bad advice in some cases. A low-cost education loan that lifts earning power, or a small business loan with a clear payback, can be rational. The distinction isn’t loan versus no loan. It’s does this debt grow my income, or only my lifestyle?
Likewise, avoiding a house purchase isn’t automatically conservative. If you need a home to live in, renting indefinitely carries its own risks. Dhandapani’s caution is aimed at discretionary long-term commitments, such as a second property or an upgrade you’re stretching to afford. Waiting a year on a purchase you could have made is a small cost. A 20-year EMI you can’t service is a large one.
Unheard tips that cost little
- Build in layers, not in one heroic jump. Aim for one month of expenses, then three, then six. Each layer changes how you sleep. Three years can be a decade-long goal.
- Open a credit line while you’re employed and secure, then don’t use it. Lenders are generous to people with steady paychecks and cold to people who just lost one. An unused line is a free safety net. Learn its terms first, because credit is a last resort, not a plan.
- Cut the “invisible EMIs.” Everyone sees the car loan. Few add up the no-cost EMIs, subscriptions and buy-now-pay-later balances. Total them, and you may find your real fixed obligations are 15 to 20% higher than you assumed.
- Insure before you invest. Health and term cover protect your corpus from a single bad event. Skipping them to invest more is how one hospital stay wipes out five years of savings.
- Hold income security above job titles. Dhandapani urged exactly this. A prestigious designation in a shaky team is weaker than a modest role with a dependable income and a skill the market pays for. Keep your skills current and your network warm, so you can leave in weeks, not months.
About the iPhone queue
One user wondered why people are lining up for the latest iPhone in uncertain times. It’s an uncomfortable but fair observation. It isn’t about phones, though. It’s about how easily spending normalizes itself when payments are broken into small monthly slices. Ask of any purchase, “If my income paused for six months, would this payment still be comfortable?” If not, the item is too early, not too expensive.
The honest take
Dhandapani’s advice can’t be applied to the letter by most families, and nobody should feel guilty about that. A family living paycheck to paycheck needs a different first step: cheaper debt, a small buffer, and a health policy. But the principle holds up across income levels. When uncertainty rises, reduce what you owe and increase what you can reach quickly.
Cycles turn. People with cash and calm when they turn are the ones who get to act on opportunity instead of reacting to pressure.
This article is for information and reflects one adviser’s opinion, not a forecast or personalized financial advice. Speak to a SEBI-registered adviser for your own situation