Financial Health Check

My husband and I are self-employed. He runs a printing press and I am a garment designer. Most of our investment is in our printing presses and the business. We live in our own house but are concerned about the future. We have two children aged 15 and 12 and we are in our forties. I want to know how and where to invest, apart from our business, to be secure financially in the future.
Payal Singh, Delhi

Being self-employed you carry a higher risk of not being adequately funded for your retirement as compared to a salaried person who gets his provident fund contribution deducted on a mandatory monthly basis. A good benchmark to make minimum provision for your retirement is to benchmark yourself with a salaried person. Such a person contributes 12 per cent of his gross salary towards his provident fund each month, the company he works for matches this, making the total saving per month 24 per cent of gross income. You can do the same, look at the income you draw from your company and mark 24 per cent of it towards your retirement corpus. While the employed have the government sponsored PF funds that ensure 9.5 per cent today, your return will be lower and you need to manage this investment yourself. Maximise the PPF contribution and look at longer term post office products like a MIS-recurring deposit combination that is even today returning more than 12 per cent. For the rest look at a combination of mutual funds and bonds to build both safety and growth into your portfolio. An additional factor to be kept in mind is the value of the business when you plan to retire may be so much that if sold, your retirement could be well funded. This is a call that only you can take – how much will your business be worth when you retire? Take a conservative figure and then deploy your money in risk-free instruments to balance the risk that you have taken by investing in your own business.

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