I am 51 years old and my wife is 46.We have twins and they are in the second year of their higher secondary. We run a fast food centre and our monthly profit is Rs 85,000. But of late we are facing labour shortage and it is impacting our profits.

Our monthly expenses are Rs 20,000 and our savings are Rs 30,000. Since we don’t understand the world of investments, we have put money only in insurance products and fixed deposits and their current value is Rs 25 lakh.

We have a taken loan of Rs 7 lakh from a NBFC at an interest of 17 per cent. Is it advisable to close the loan?

We have two plots in Chennai worth Rs 70 lakh. Our concern is that our children are not keen on higher studies and want to start a mobile showroom. Is it advisable to set up a shop for our children? We also wish to know how to invest our monthly surpluses. How much do we need to save for our retirement?

— Ramesh

Children’s likes and dislikes change often. It is not advisable to take an immediate call on their future. For running a business, higher education would be beneficial for them.

But if they insist on doing business only, ask them to work at some mobile shop for at least two years to understand its dynamics.

Let them save the salary and it can be a part of the capital for a mobile showroom. After this you can consider setting up the shop for them.

Business loan

Taking a business loan allows you to write off the interest paid as expenses under section 37. However, your current value of insurance itself is close to Rs 18 lakh and so you could have very well taken a loan against your policies and your borrowing cost could have been just 10.5 per cent.

It is still not late though and so take a loan against your policie . Ensure that the loan raised through policies is utilised for closure of the loan. The interest paid on the policies can also be adjusted as expenses in your books. Hold your fixed deposits as emergency funds.

Retirement

Since you have not mentioned the retirement age we presume it would be 60. At 51, you are finding it difficult to run your business due to labour shortage. In later years, it may be even more challenging. Hence you need to accumulate the corpus in the next nine years. The current monthly expenses of Rs 20,000 will be Rs 36,770 at 60. To receive such a monthly income at retirement for the subsequent 20 years, you should have a corpus of Rs 80 lakh and it should earn a return of one per cent over and above inflation.

After factoring the maturity proceeds of insurance and FD you need to accumulate Rs 50 lakh in the next 108 months. If you save monthly, a sum of Rs 25,000 which earns 12 per cent, you can reach the target. Invest through mutual funds in large-cap schemes to reach the target.

Protect your family through a health insurance policy. Take a standalone policy for Rs 5 lakh each. For your children take a floater policy for Rs 3 lakh.

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(The author is CEO, >myassetsconsolidation.com )

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