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ICICI Pru Smart Kid Regular Premium plan is really smart?

Shitanshu Kapadia
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ICICI Pru Smart Kid Regular Premium plan is really smart?

ICICI Pru Smart Kid Regular Premium Plan

Cost of living is sky-rocketing today, with each passing year we are witnessing increase in the cost due to inflation and other factors. Not only cost of living cost of education is also increasing like anything.

As a responsible parent we have very important role to be play for our child. We have to make sure that our child gets whatever he/she needs to develop his potential and be successful. To convert this dream in to reality we need adequate money and prior financial planning. We have to make sure that we will fulfill our child’s dream, no matters what happens.

Today we will discuss about similar type of insurance plan available in market by ICICI that claims to fulfill your child’s dream no matter what are the uncertainties in your life.

ICICI Pru Smart Kid Regular Premium Plan is endowment regular premium, traditional plan with two options to receive guaranteed educational benefits. Let’s check out ICICI Pru Smart Kid Regular Premium plan is really smart or not.

ICICI Prudential SmartKid Regular Premium Plan key benefits:-  

Like traditional plan this plan provides risk cover and guaranteed and non-guaranteed benefits. It provides two options to receive those benefits. You can take this benefit in last 5 years of the policy or you can opt for benefit at intermediate milestones.

Let us look at the illustration given below:-

ICICI Pru Smart Kid Regular Premium Plan

Above illustration is for a 30 year old parent who has a new-born child. The tenure of the policy is 22 years. The sum assured is Rs 2,50,000 and the premium is Rs 12,717 to be paid for 22 years, so total amount paid in 22 years is Rs 2,79,774.

Benefit on Survival or Death:-

Option:-1 Benefit at Intermediate milestone

If you select option of benefit at intermediate milestone than Fixed amounts, depending on the sum assured are paid at the end of 15, 17, 20 and 22 years.

ICICI Pru Smart Kid

A guaranteed amount equal to 3.5% of the sum assured of the first four years is paid on maturity. Additional non-guaranteed benefit either @6% or 10% will depend on the performance of the company.

Option:-2 Avail of benefits in the last 5 years of the policy

If you select option of benefits in last 5 year of the policy than Fixed amounts, depending on the sum assured are paid at last 5 consecutive years of policy.

ICICI Pru Smart Kid

Similar to option 1 here also guaranteed amount equal to 3.5% of the sum assured of the first four years is paid on maturity & again additional non-guaranteed benefit either @6% or 10% will depend on the performance of the company.

The policy provides for a premium waiver benefit. This means that in case of death of the parent, the future premiums of the policy will be waived. So essentially, the benefit will be paid to the child as per schedule even if the parent is no more.

Additional Rider Benefits:

This is an additional benefit which can be availed along with the base plan, by paying a marginal extra cost.

Income Benefit Rider:-

On the death of the parent (Life Assured) during the term of the product, 10% of the Sum Assured under the rider is paid to the nominee every year, for the remaining years, till the maturity of the policy.

Accident and Disability Benefit Rider:

On the death of the parent (Life Assured) due to an accident, the child gets an additional Sum Assured. In case of accidental death of the parent while travelling by mass surface transport, the nominee will get twice the Sum Assured under the rider.

Catch points:-

(1)    This policy does not gives money whenever you want.  Either you can take payout for last five years or at for intermediate milestone only. If you need money at early stage it is not possible in this plan.

(2)    Rate of return in this plan is in between 3.5% to 6.5%. Compare to current inflation in education and other need this return may not suffice.

(3)    Compare to this policy other investment avenue offers better returns instead of this policy if someone invest in PPF than 8.8% interest can be earned and all money can withdraw after 15 years.

(4)    Non-guaranteed return shown @ 6% or 10% in this policy is approximate & based on assumption actual return may vary and depends upon ICICI.

(5)    Tax benefit on this product is as per current tax law which may change.

Based on above one can say that this policy not seems to be smart or not giving smart returns.TV advertisement may encourage you to purchase this policy (based on premium waiver benefit) but Only premium waiver benefit is not good reason to buy any child plans.

Financial Planning Tips – Before Buying a Home

Shitanshu Kapadia
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Financial Planning Tips – Before Buying a Home

Buying real estate is one of the biggest financial decisions of life. It requires a good amount of research and financial planning. With the increasing property prices and inflation, it is very difficult for most of us to make a lump sum payment while buying a home.

You may go for the home loan option but the challenges are many starting from the loan application to the disbursement stage. The following tips will help you understand what to look for while buying a home. 

Before Buying a Home

Financial Planning Tips – Before Buying a Home

How to do budgeting?

The first step you need to do is budgeting, you need to make yourself ready with details of how much savings and investments you have for making a down payment while buying a house.

Start finding current housing rates in the locality of your choice. Visit various projects interact with real estate brokers, and go through property advertisements and real estate portals. Another way to find rates and upcoming projects is by visiting property shows/exhibitions held in your city.

How much Down payment is to be made? 

Once you come to know the average price you can decide the amount required for making a down payment. If you are planning to take a home loan make inquiries to banks about your loan eligibility. Most of banks provide home loans of around 80% of your property document value. You have to make a 20% down payment on the property’s cost.

A builder may ask for a certain amount in black. As the loan is given on white value only, you need to make a down payment considering the white value cost. This cost includes money given to the builder by cheque, stamp duty, and registration costs.

Any additional cost is involved?

Keep in mind that there are some charges for which you need to prepare your budget accordingly.

If a white component of a property document value does not suffice for the home loan amount required by you, then either you have to arrange additional money or you have to produce a bill of extra work.

Other additional costs that you need to consider are stamp duty and registration costs which depend on the location of the property and the prevailing rate (decided by government authority). You can use tools like a stamp duty calculator to estimate additional costs associated with the property purchase. This helps ensure you have a clear understanding of all expenses and can plan your finances accordingly.

You need to consider the cost of loan processing fees charged by the lender. If you are seeking a lawyer’s advice for the property due diligence or valuation you need to consider lawyer fees also.

Buying a home via a broker may cost you an additional 1% of the property cost. If you are buying a flat then it may cost you additional society share transfer fees. So in total additional cost

In general additional costs that may be incurred are:-

  • Stamp duty and registration
  • Loan processing Fees
  • Extra Document Charges
  • Brokerage Charges
  • Lawyer Fees
  • Society Share transfer fees

How much Home Loan I am eligible for? 

Before buying a home you have to check about your maximum loan eligibility and how much you should borrow. This eligibility mostly depends on your monthly income. Approach the bank you plan to borrow from and ask it to assess your loan eligibility. They will issue you a letter stating your maximum eligibility for a home loan.

Some banks also provide online modules to check this eligibility.

Home loan Tax benefits – Section 24, 80EE & 80C- 10 less known facts

Which Interest rate loan option should I select?

Home loans available from banks have two options either you can opt for a fixed interest rate option or a variable (floating) interest rate option. In fixed interest rate option rate of interest remains the same throughout a home loan. In the floating rate option rate of interest varies.

Choosing a fixed-rate home loan offers an advantage over a floating rate as the rate remains the same even if market interest rates increase, requiring the borrower to make consistent fixed monthly payments. This choice is ideal for individuals who seek to protect themselves from fluctuating interest rates and prefer consistent payments over a set amount and duration for their loan. If you wish to benefit from different home loan interest rates, you should choose the floating rate option.

Finally, after your loan is approved and payment of the black and white amount is done you have to pay the appropriate stamp duty and registration fees to get disbursement of the loan.

Don’t end up taking excessive loans; make sure you take home loans up to the amount you can afford. Your first home doesn’t have to be the home of your dreams.

Do not be afraid to ask for help from financial advisors or real estate professionals when dealing with the challenges of buying a home. They can offer valuable knowledge on the financial aspects of owning a home and assist you in making well-informed choices.

Explore government schemes and incentives aimed at first-time homebuyers, such as subsidized interest rates or tax deductions on home loan repayments. These schemes can help reduce the financial burden of homeownership and make it more affordable.

Conclusion 

Buying a home is a significant financial decision that requires careful planning and consideration. By following these financial tips, you can ensure a smooth and successful home-buying experience while safeguarding your long-term financial well-being.

Download Family Monthly Budget Planner

Shitanshu Kapadia
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0
Download Family Monthly Budget Planner

Most people are too lazy to make household budget plans. They sit back and enjoy life as it comes. They spend money every day on things that they do not need rather than on essential things. Many of them are not bothered to track their spending.

Due to this one day, they may be trapped in a situation where they will need money for an emergency such as an accident, the treatment of a disease, or a loss of job. At this time, they will realize that they do not have any resources to dip into during emergencies. Hence, it is very important to have a family budget plan to track expenses & savings.

Keeping track of family finances is a very difficult task without a proper household budget planner. Often, a spouse is in charge of all financial matters and it can become daunting, especially at month or year-end. Finances are something that many shy away from because of the lack of incoming funds and the abundance of outgoing funds.

Creating a household budget can be a lifesaver. By creating a budget you can better see where your money is going and where it needs to go.

monthly budget planner

Family Monthly Budget Planner

The first thing you need to do is know your monthly income. This will help determine how much money you have coming in each month.

Now start the exercise of knowing your monthly expenses. The first task you need to do is break your expenses into a list of categories like groceries, clothes, utility bills, etc. Make sure to include both fixed (e.g. rent) and variable expenses (e.g. groceries).

To make the list more accurate you can use your bank statement. This is applicable if your spending is through cheque or credit card & if you spend money in cash then get maximum information from last month’s bills.

Now you know your monthly expense it is time to make a budget. Creating a budget may not be an exciting task, but it is vital in keeping your financial house in order. Budgeting is also required to control your expenses. Draw your monthly and yearly budget based on monthly expenses.

When you were going through the list of expenses you might have noticed that some expenses are necessary, but can vary from month to month. Examples include groceries, utility bills, dining out, entertainment, etc.

Determine the expenses that fall into these variable categories. If you feel you are spending more on any category item, create a simple budget (amount) for that category and monitor your spending concerning the budget limit you have set.

If you make a purchase with a credit card or debit card make sure to check your statement on a weekly basis to see if you are within your budget or not. If you are spending money in cash, then withdraw the monthly budgeted amount at the beginning of the month and only spend the cash that you have.

A Simple Excel sheet is attached herewith you can use this to track your expense.

Family budget planners are crucial to ensure we have a good understanding of our family’s financial situation. Begin a financial record to get a true picture of your family’s earnings and spending.

Given budget planner if used properly can help you to limit unnecessary expenses and let you know exactly how much you can afford to spend on non-essential items. A family budget can even help you set up savings for the future and establish habits in your children that can assist them later in their lives.

Creating and maintaining a family monthly budget planner is a proactive approach to achieving financial security and realizing financial aspirations. By prioritizing needs, setting realistic goals, and fostering good financial habits, families can navigate through various financial challenges and build a stable financial future.

FAQs

Is it necessary for every family member to contribute to the budget planning process?

Yes, involving all family members ensures shared responsibility and commitment toward financial goals.

How often should I review my family budget?

It’s advisable to review your budget monthly and make adjustments as needed to reflect any changes in income or expenses.

What if my income fluctuates each month?

Allocate funds based on an average monthly income and adjust the budget accordingly during months of higher or lower earnings.

How can I teach my children about budgeting and financial responsibility?

Start by explaining basic financial concepts and involve them in age-appropriate budgeting activities to instill good money habits from an early age.

What should I do if I consistently overspend in certain budget categories?

Review your spending patterns, identify areas where adjustments can be made, and consider reallocating funds from less essential categories to cover overspending.

How to Stay Away From Emotions while Investing?

Shitanshu Kapadia
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0
How to Stay Away From Emotions while Investing?

Investing can feel like a rollercoaster, characterized by both triumphs and letdowns. Nevertheless, it is crucial to approach this journey with a clear mindset and a logical decision-making approach. Investing based on emotions such as fear, greed, or other feelings can result in making bad decisions and experiencing financial losses. These feelings can cause investors to make hasty decisions in purchasing or selling assets, typically leading to unfavorable results.  Previously, I have discussed – Emotions over investment, in this post we will discuss – How to Stay Away from Emotions While Investing.

Successful investors may be able to cope with this loss but you may not, which may cause strong disappointment and fear while making investments.

So million dollar question is:-

  • What does it take to become a successful investor?
  • How to win over emotion?

Let’s check out what you need to do to stay away from emotions while doing investments.

Investing Money

How to Stay Away From Emotions while Investing?

Set Clear Investment Goals

Differentiating between short-term and long-term investment objectives is crucial. Having short-term goals could involve setting aside money for a trip or buying a car, whereas long-term goals usually revolve around planning for retirement or creating wealth over many years.

A specific investment strategy ensures that your investment choices are in line with your financial goals. Having a clear strategy is essential for reaching your objectives, whether you want to increase your capital, generate income, or preserve wealth.

Do Your Independent Research Before Investment

Knowing what you are buying is key to avoiding emotional setbacks. Always do independent research before making any investment, even if you are taking advice from a financial advisor

Always understand your investment how it will help you to achieve your goals and what risk is involved in that.

Without your own research, you may not take full responsibility for your investment and end up involving negative emotions, which inspires you to make mistakes. You can make use of Fundamental analysis or Technical Analysis for doing research.

Fundamental Analysis

Fundamental analysis is the process of assessing the financial condition and success of a company or asset in order to gauge its inherent worth. Earnings growth, revenue trends, and industry dynamics are factors that are taken into account in fundamental analysis.

Technical Analysis

Technical analysis involves analyzing historical market data, specifically price and volume trends, in order to predict future price changes. Technical analysts utilize charts and indicators to recognize trends and patterns that could signal possible buying or selling chances.

Set Financial Goals

Setting financial goals is the first step to investing. Write down your long-term financial goals and how much volatility you can tolerate comfortably.

Stick to your financial goals, don’t allow short-term ups and downs in the market to make your investment decisions. Read your financial goals whenever emotions try to take over your mind.

Diversification

Diversification can help to control your emotions because it offers some downward protection. Diversification means having different asset classes in an investment portfolio. It includes investment classes such as real estate, and commodities to hedge against market uncertainty.

 A diversified portfolio can hold up relatively well in most market conditions.

Stop Checking Your Investment Portfolio Constantly

Reviewing investments monthly or quarterly is a good idea but some of investor has a habit of checking investment portfolios every day or every hour. If you are doing the same stop doing that. It will not benefit your portfolio in any way, it will just cause more anxiety. Checking your investment too often can cause you to panic/fear and you can make a snap reaction trade. Just stick to your plan and ignore everyday market movements.

Money is always an emotional subject, but often when our emotions get involved with our investments we will make wrong decisions which will end up costing us too much. Keeping emotions out of investing may seem difficult but if you follow the tips above you should be able to accomplish it.

Keep Emotion in Check

Recognizing emotional triggers

The initial step in managing your emotions during investment is to comprehend your emotional triggers. Knowing about these triggers, whether it’s the fear of missing out (FOMO) or the fear of losing money, can assist in making more rational investment choices.

Using rational thinking

Making decisions based on logic, analysis, and evidence instead of emotions is what rational thinking entails. By concentrating on evidence and numbers, investors can prevent emotional biases and uphold a disciplined investment approach.

Seek Professional Advice

Financial advisors offer helpful advice and skill to assist you in navigating the intricacies of investment. Whether you are new to investing or experienced, consulting with a knowledgeable expert can assist in making wise choices and reaching your financial objectives.

FAQs

1. How do emotions affect investment decisions?

Emotions such as fear, greed, and excitement can cloud judgment and lead to impulsive investment decisions that may not align with long-term goals.

2. Is it possible to completely eliminate emotions from investing?

While it’s challenging to completely eliminate emotions from investing, investors can learn to recognize and manage their emotions effectively to make more rational decisions.

3. What are some common emotional biases in investing?

Common emotional biases include confirmation bias, where investors seek out information that confirms their preconceived notions, and loss aversion, where investors fear losses more than they value gains.

4. How can I stay disciplined during market downturns?

Maintaining discipline during market downturns requires sticking to your investment plan, focusing on the long-term, and avoiding knee-jerk reactions to short-term fluctuations.

5. Why is it important to seek professional advice when investing?

Professional financial advisors can provide personalized guidance, expertise, and objective insights to help investors navigate the complexities of the market and make informed decisions.

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