Solution Manual for Personal Financial Planning 16th Edition by Randy Billingsley, Lawrence Gitman, Michael Joehnk

SOLUTIONMANUAL i




PersonalFinancialPlanning,16th
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Edition
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byRandyBillingsley,LawrenceJ.Gitman,Chapters1-15,
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Complete
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,Table of Contents i i




Part I: FOUNDATIONS OF FINANCIAL PLANNING.
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1. Understanding the Financial Planning Process. i i i i



2. Developing Your Financial Statements and Plans. i i i i i



3. Preparing Your Taxes. i i



Part II: MANAGING BASIC ASSETS.
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4. Managing Your Cash and Savings. i i i i



5. Making Automobile and Housing
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Decisions. Part III: MANAGING CREDIT.
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6. Using Credit. i



7. Using Consumer Loans.
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Part IV: MANAGING INSURANCE NEEDS.
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8. Insuring Your Life. i i



9. Insuring Your Health. i i



10. Protecting Your Property. i i



Part V: MANAGING INVESTMENTS.
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11. InvestmentPlanning. i



12. Investing in Stocks and Bonds. i i i i



13. Investing in Mutual Funds and Real i i i i i



Estate. Part VI: RETIREMENT AND
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ESTATE PLANNING.
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14. Planning for Retirement. i i



15. Preserving Your Estate. i i

,Chapter 1 i




Understandingthe Financial Planning Process
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How iWill iThis iAffect iMe?
The iheart iof ifinancial iplanning iis imaking isure iyour ivalues iline iup iwith ihow iyou
ispend iand isave. i That imeans iknowing iwhere iyou iare ifinancially iand iplanning ion

ihow ito iget iwhere iyou iwant ito ibe i in ithe ifuture ino imatter iwhat ilife ithrows iat iyou.

iFor iexample, ihow ishould iyour iplan ihandle ithe i projection ithat iSocial iSecurity icosts

imay iexceed irevenues iby i2035? iAnd iwhat iif ithe igovernment i decides ito iraise itax

irates ito ihelp icover ithe ifederal ideficit? iAn iinformed ifinancial iplan ishould i reflect

i such iuncertainties iand i more.




This ichapter ioverviews ithe ifinancial iplanning iprocess iand iexplains iits icontext. iTopics
iinclude ihow i financial iplans ichange ito iaccommodate iyour icurrent i stage iin ilife iand

ithe irole ithat i financial i planners ican iplay iin ihelping iyou iachieve iyour iobjectives.

iAfter ireading ithis ichapter iyou iwill i i have ia igood iperspective ion ihow ito iorganize

i your ioverall ipersonal ifinancial iplan.




LEARNINGGOALS i




LG1 iIdentify ithe ibenefits iof iusing ipersonal ifinancial iplanning itechniques ito
imanage iyour i finances.




Key iconcept iin ithis isection iis ithe iplanning imodel ias idisplayed iin iExhibit i1.1. iYour
istandard i of i living i is igreatly iimpacted iby iyour ispending ihabits iand iyour icommitment


ito isaving. iYour ispending i is imeasured iby iyour ipropensity ito iconsume. iWealth iis

ithe itotal ivalue iof iall ipropertyyou iown i less ithe iamount ithat i you iowe ito iothers.




ACTIVITY: i Ask ithe istudents ito iassume ithat ithey ihave ijust iinherited i$100,000. i What
i will iyoudo i with ithe i money? iWrite idown ithree iways i you iwill ispend ior iuse ithe

i money.

, Ask ithe istudents ito ishare ione iitem iwith ithe iclass iand irecord iwhat ithey isay iso ithat
i the i entire i class i can i reflect i on i the i answers. i Hopefully, i at i least i a i few i will i mention

i investing i even i if i only i $10,000 i of ithe iamount. iUse itheir ianswers ito idiscuss itaking


i care iof icurrent i needs iversus i future ineeds.


Focus ion itheir ipropensity ito iconsume iand iits iimpact ion iaccumulating iwealth. iPoint
iout ithe i FinancialiPlanning iTip, i―Be iSMART iiniPlanning iYour iFinancialiGoals.‖


Use iExhibit i1.2 ito ishow ihow ithe iaverage iperson iearns iand ispends itheir imoney iand
iExhibit i1.6 ito i help ithe istudent i identify iwhere ithey iare i now.




LG2 iDescribe ithe ipersonal ifinancial iplanning iprocess iand idefine iyour igoals.

DwightiEisenhower,iarmyigeneraliandipresident,iisiquoted iasisayingi―Plansiareiuseless;
iPlanning i is ipriceless‖. iThe iprocess iof iplanning iallows iyou ito ifocus ion ithe iissues

ithat iare imost i important i and ito ibe ireadyiwhen ithings ichange.




Exhibit i1.3 ilists ithe iSix iStep iFinancial iPlanning iProcess. iThe ifirst iand imost iimportant
iis i defining i your ifinancial igoals. iExhibit i1.6 ilists igoals iby iage ito idemonstrate ihow

igoals ichange i over itime. i Use ithe iexamples iin iExhibit i 1.5 ito iask istudents iif ithe

iassumptions iare irealistic. iYes,the ianswer iis i in ithe iexhibit, ibut imany iwill inot ihave

iread ichapter iat ithis ipoint. iFor iyour iuse, itheassumptions i are:




Assumption i1: iSaving ia i few ithousand idollars ia iyear i should iprovide ienough ito ifund
i my ichild‘s

college iEducation.
Assumption i2: iAn iemergency ifund ilasting i3 imonths ishould ibe iadequate.
Assumption i3: iI iwill ibe iable ito iretire iat i65 iand ishould ihave iplenty ito ilive ion iin
iretirement. i Assumption i4: i I‘m i relying i on i the i rule i of i thumb i that i I i will i need

i only i 70 i percent i of i my i pre- i retirement i income ito i manage inicely iin iretirement.




There iare iseveral iworksheets iin ithe ibook. iWorksheet i1.1 igives ithe istudent ia iformat
ito iwrite i down itheir iPersonal iFinancial iGoals. iThere iis ipower iin iwriting idown igoals


i[and imost iany iother i plan]. iRecording ithe igoal iand ithen ireviewing ithree imonths

ilater iwill ihelp iyou ito ikeep ifocus ion i the igoal.




LG3 i Explain i the i life i cycle i of i financial i plans, i their i role i in i achieving i your
i financial i goals, i how ito ideal iwith ispecial iplanning iconcerns, iand ithe iuse iof

iprofessional ifinancial iplanners.




Exhibit i1.7 ican ihelp ifocus ithe iattention ion ihow igoals idiffer ibetween ithe ivarious
istages iof ilife. i Section i1-3b ilists ivarious idecisions ithat iyou iwill ihave ito imake iover

iyour ilife. iThe isection i1-3c i addresses iSpecial iPlanning iConcerns. iWorksheet i1.2

ifocuses ion ithe ifinancial ibenefit ito ithe i family iof ithe isecond iincome. iIf ithe isecond

iincome iis ifrom ia iminimum iwage ijob, iit imay inot ibe ia i good ifinancial idecision. i Of

icourse ihaving ia i job, ieven ia i minimum iwage i job, i may igive ithe iperson i psychic

i income ithat i will ioverride ithe i financial iimpact.




While i perhaps i off i topic, i I i recall i a i high i school i science i teacher i who i was i a
i smoker. i He i walked i through ithe iamount i of imoney ihe ispent i on ipurchasing itobacco