Solution Manual for Personal Financial
H H H H
H Planning15th Edition by Randy Billingsley,
H H H H H
H Lawrence J. Gitman, Michael D. Joehnk
H H H H H
,SOLUTION MANUAL FOR H H
Personal Financial Planning 15th Edition by Randy Billingsley,
H H H H H H H
Lawrence J. Gitman, Michael D. Joehnk
H H H H H H
Understanding the Financial H H
Planning ProcessChapter 1
H H H H
How HWill HThis HAffect HMe?
The Hheart Hof Hfinancial Hplanning His Hmaking Hsure Hyour Hvalues Hline Hup Hwith Hhow Hyou Hspend Hand
Hsave.HThat Hmeans Hknowing Hwhere Hyou Hare Hfinancially Hand Hplanning Hon Hhow Hto Hget Hwhere Hyou
Hwant Hto HbeHin Hthe Hfuture Hno Hmatter Hwhat Hlife Hthrows Hat Hyou. HFor Hexample, Hhow Hshould Hyour
Hplan Hhandle Hthe Hprojection Hthat HSocial HSecurity Hcosts Hmay Hexceed Hrevenues Hby H2035? HAnd
Hwhat Hif Hthe HgovernmentH decides Hto Hraise Htax Hrates Hto Hhelp Hcover Hthe Hfederal Hdeficit? HAn
Hinformed Hfinancial Hplan Hshould Hreflect H such Huncertainties Hand H more.
This Hchapter Hoverviews Hthe Hfinancial Hplanning Hprocess Hand Hexplains Hits Hcontext. HTopics
Hinclude Hhow Hfinancial Hplans Hchange Hto Haccommodate Hyour Hcurrent Hstage Hin Hlife Hand Hthe Hrole
Hthat HfinancialH
planners Hcan Hplay Hin Hhelping Hyou Hachieve Hyour Hobjectives. HAfter Hreading Hthis
Hchapter Hyou Hwill Hhave Ha Hgood Hperspective Hon Hhow Hto Horganize H your Hoverall Hpersonal
Hfinancial Hplan.
LEARNING GOALS H
LG1 HIdentify Hthe Hbenefits Hof Husing Hpersonal Hfinancial Hplanning Htechniques Hto Hmanage Hyour
finances.
H
Key Hconcept Hin Hthis Hsection His Hthe Hplanning Hmodel Has Hdisplayed Hin HExhibit H1.1. HYour
Hstandard Hof Hliving H is Hgreatly Himpacted Hby Hyour Hspending Hhabits Hand Hyour Hcommitment Hto
Hsaving. HYour Hspending His Hmeasured Hby Hyour Hpropensity Hto Hconsume. HWealth His Hthe Htotal
Hvalue Hof Hall HpropertyH you Hown Hless Hthe Hamount Hthat H you Howe Hto Hothers.
ACTIVITY: H Ask Hthe Hstudents Hto Hassume Hthat Hthey Hhave Hjust H inherited H$100,000. H What Hwill
HyouH
do Hwith Hthe Hmoney? HWrite Hdown Hthree Hways H you Hwill Hspend Hor Huse Hthe H money.
,Ask Hthe Hstudents Hto Hshare Hone Hitem Hwith Hthe Hclass Hand Hrecord Hwhat Hthey Hsay Hso Hthat Hthe
Hentire Hclass Hcan Hreflect Hon Hthe Hanswers. HHopefully, Hat Hleast Ha Hfew Hwill Hmention Hinvesting
Heven Hif Honly H$10,000 Hof Hthe Hamount. HUse Htheir H answers Hto Hdiscuss Htaking H care Hof Hcurrent
H needs H versus H future Hneeds.
Focus Hon Htheir Hpropensity Hto Hconsume Hand Hits Himpact Hon Haccumulating Hwealth. HPoint
Hout HtheH Financial HPlanning HTip, H ―Be HSMART H in HPlanning H Your HFinancial HGoals.‖
Use HExhibit H1.2 Hto Hshow Hhow Hthe Haverage Hperson Hearns Hand Hspends Htheir Hmoney Hand HExhibit
H 1.6 HtoH
help Hthe Hstudent H identify Hwhere HtheyHare H now.
LG2 HDescribe Hthe Hpersonal Hfinancial Hplanning Hprocess Hand Hdefine Hyour Hgoals.
Dwight H Eisenhower, Harmy Hgeneral Hand H president, His Hquoted Has Hsaying H ―Plans Hare Huseless;
HPlanning His Hpriceless‖. HThe Hprocess Hof Hplanning Hallows Hyou Hto Hfocus Hon Hthe Hissues Hthat Hare
Hmost Himportant Hand Hto H be Hready Hwhen Hthings Hchange.
Exhibit H1.3 Hlists Hthe HSix HStep HFinancial HPlanning HProcess. HThe Hfirst Hand Hmost Himportant His
Hdefining Hyour Hfinancial Hgoals. HExhibit H1.6 Hlists Hgoals Hby Hage Hto Hdemonstrate Hhow Hgoals
Hchange Hover Htime. HUse Hthe Hexamples Hin HExhibit H 1.5 Hto Hask Hstudents Hif Hthe Hassumptions Hare
Hrealistic. HYes,H
the Hanswer His Hin Hthe Hexhibit, Hbut Hmany Hwill Hnot Hhave Hread Hchapter Hat Hthis
Hpoint. HFor Hyour Huse, HtheH assumptions Hare:
Assumption H1: HSaving Ha Hfew Hthousand Hdollars Ha Hyear Hshould Hprovide Henough Hto Hfund Hmy
Hchild‘sH
college HEducation.
Assumption H2: HAnHemergency Hfund Hlasting H3 Hmonths Hshould Hbe Hadequate.
Assumption H3: HI Hwill Hbe Hable Hto Hretire Hat H65 Hand Hshould Hhave Hplenty Hto Hlive Hon Hin
Hretirement. HAssumption H4: HI‘m Hrelying Hon Hthe Hrule Hof Hthumb Hthat HI Hwill Hneed Honly H70
Hpercent Hof Hmy Hpre-H
retirement H income Hto H manage Hnicely Hin Hretirement.
There Hare Hseveral Hworksheets Hin Hthe Hbook. HWorksheet H1.1 Hgives Hthe Hstudent Ha Hformat Hto
Hwrite Hdown Htheir HPersonal HFinancial HGoals. HThere His Hpower Hin Hwriting Hdown Hgoals H[and Hmost
Hany HotherHplan]. HRecording Hthe Hgoal Hand Hthen Hreviewing Hthree Hmonths Hlater Hwill Hhelp Hyou
Hto Hkeep Hfocus HonHthe Hgoal.
LG3 HExplain Hthe Hlife Hcycle Hof Hfinancial Hplans, Htheir Hrole Hin Hachieving Hyour Hfinancial Hgoals,
Hhow Hto Hdeal Hwith Hspecial Hplanning Hconcerns, Hand Hthe Huse Hof Hprofessional Hfinancial
Hplanners.
Exhibit H1.7 Hcan Hhelp Hfocus Hthe Hattention Hon Hhow Hgoals Hdiffer Hbetween Hthe Hvarious Hstages Hof
Hlife. HSection H1-3b Hlists Hvarious Hdecisions Hthat Hyou Hwill Hhave Hto Hmake Hover Hyour Hlife. HThe
Hsection H1-3c Haddresses HSpecial HPlanning HConcerns. HWorksheet H1.2 Hfocuses Hon Hthe Hfinancial
Hbenefit Hto Hthe Hfamily Hof Hthe Hsecond Hincome. HIf Hthe Hsecond Hincome His Hfrom Ha Hminimum
Hwage Hjob, Hit Hmay Hnot Hbe HaH good Hfinancial Hdecision. H Of Hcourse Hhaving Ha Hjob, Heven Ha H minimum
Hwage H job, H may Hgive Hthe HpersonH psychic H income Hthat H will Hoverride Hthe H financial Himpact.
While Hperhaps Hoff Htopic, HI Hrecall Ha Hhigh Hschool Hscience Hteacher Hwho Hwas Ha Hsmoker. HHe
Hwalked Hthrough Hthe Hamount H of Hmoney Hhe Hspent H on Hpurchasing Htobacco H products. HThat
H computation Hhad Ha
, lot Hto Hdo Hwith Hmy Hdecision Hto Hnot H smoke. HHow Hthis Hrelates Hto Hthe Hcourse His Hthat Hthis His Han
illustration Hof Hhow Hthe Hfinancial Himpact Hof Ha Hdecision Hcan Hdrive Hthe Hdecision.
H
LG4 HExamine Hthe Heconomic Henvironment’s Hinfluence Hon Hpersonal Hfinancial Hplanning.
For Holder Hfolks, Hthe Hfinancial Hcrisis Hof H2008-2009 His Hfresh Hin Hour Hmemory. HTo Hthe Hstudent Hof
H2021,H that Hcrisis His Hmore Hof Hhistory Hthan Hlife. HIf Hyou Hcan Hshare Ha Hwar Hstory Hon Hhow Hyou Hwere
Hpersonally Himpacted, Hit Hwill Hhelp Hbring Hthe Himpact Hof Hthe Hworld Heconomy Hon Hfinancial Hplans
Hto Hlife. HThe HbookH speaks Hhow Hto Hmanage Hthis Htype Hof Hcrisis, Hbut Hyou Hhad Hto Hgo Hthrough Hit Hto
Hreally Hunderstand Hthe Himpact H it H had.
The Hvalue Hof Hprofessional Hadvice His Hgreatly Hunderstated. HIf Hby Htalking Hto Ha Hprofessional Hyou
Hcan Hprevent Hmaking Ha Hmistake H-- Hthat H can Hbe Hof Ha Hgreat Hvalue. H Section H1-3e Hspeaks Hto Hthe
Huse Hof Hprofessional Hfinancial Hplanners. H Exhibit H 1.9 Hlists Hout Hthe Hvarious Hcertifications Hthat
H planners Hhave.
Economic Hor Hbusiness Hcycles Hare Hreal. HPerhaps Hthe Hmost Huseful Hthing Habout Hthe Hcycles His Hthe
Hknowledge Hthat Hif Hthings Hare Hbad, Hyou Hknow Hthey Hwill Hget Hbetter. HOf Hcourse, Hwhen Hlife His
Hgood, Hyou Hknow Hthat Hthe Hbad Hcycle Hwill Hcome Haround Hagain. H Thus, H financial Hplanning
Hrequires Hsaving H inH t he HgoodHtimes H for Hthe Hbad Htimes. H H See Hthe H―Test H Yourself‖ Hquestion H1-17
H for H a Hshort H discussion Hof Hbusiness Hcycles.
The Hpower Hof Hcompounding His Hrarely Hunderstood. HExhibit H1.8 Hshows Hhow Hthe Hamount
H$10,000H
will Hgrow Hover Htime. HThe Hlonger Hthe Hinvestment Hstays Hinvested, Hthe Hgreater Hthe
Hamount H– Hthe Hpower Hof Hcompound H interest.
LG5 HEvaluate Hthe Himpact Hof Hage, Heducation, Hand Hgeographic Hlocation Hon Hpersonal Hincome.
Exhibit H1.12 Hsays Hit Hall.
LG6 HUnderstand Hthe Himportance Hof Hcareer Hchoices Hand Htheir Hrelationship Hto Hpersonal
financial Hplanning.
H
Exhibit H 1.13 Hshows Hthat Hthe Hchoice Hof Ha Hcollege H major Hhas Ha Hfinancial Himpact. HOfHcourse
HmoneyH cannot Hbuy Hhappiness, Hbut Hhaving Ha Hbit Hhelps. HIf Hyou Hreally Hwant Hto Hbe Han Helementary
Hschool Hteacher, Hyou Hmust Hrecognize Hthat Hyou Hwill Hnot Hhave Has Hmuch Hwealth Has Ha Hlawyer Hor
Hfinancial Hanalyst.
The Hsummary Hof Hthe Hlearning Hgoals Hat Hthe Hend Hof Hthe Hchapter Hshould Haid Hthe Hstudent Hin
Hreviewing H
the Hchapter Hwhen Hexam Htime Hcomes. HIt Hwill Hbe Huseful Hto Hpoint Hout Hto Hthe
Hstudent Hhow Hto Huse Hthis Hmaterial.
Link Hto HSolutions Hto HFinancial HPlanning HExercises
Pre-tests
H H H H
H Planning15th Edition by Randy Billingsley,
H H H H H
H Lawrence J. Gitman, Michael D. Joehnk
H H H H H
,SOLUTION MANUAL FOR H H
Personal Financial Planning 15th Edition by Randy Billingsley,
H H H H H H H
Lawrence J. Gitman, Michael D. Joehnk
H H H H H H
Understanding the Financial H H
Planning ProcessChapter 1
H H H H
How HWill HThis HAffect HMe?
The Hheart Hof Hfinancial Hplanning His Hmaking Hsure Hyour Hvalues Hline Hup Hwith Hhow Hyou Hspend Hand
Hsave.HThat Hmeans Hknowing Hwhere Hyou Hare Hfinancially Hand Hplanning Hon Hhow Hto Hget Hwhere Hyou
Hwant Hto HbeHin Hthe Hfuture Hno Hmatter Hwhat Hlife Hthrows Hat Hyou. HFor Hexample, Hhow Hshould Hyour
Hplan Hhandle Hthe Hprojection Hthat HSocial HSecurity Hcosts Hmay Hexceed Hrevenues Hby H2035? HAnd
Hwhat Hif Hthe HgovernmentH decides Hto Hraise Htax Hrates Hto Hhelp Hcover Hthe Hfederal Hdeficit? HAn
Hinformed Hfinancial Hplan Hshould Hreflect H such Huncertainties Hand H more.
This Hchapter Hoverviews Hthe Hfinancial Hplanning Hprocess Hand Hexplains Hits Hcontext. HTopics
Hinclude Hhow Hfinancial Hplans Hchange Hto Haccommodate Hyour Hcurrent Hstage Hin Hlife Hand Hthe Hrole
Hthat HfinancialH
planners Hcan Hplay Hin Hhelping Hyou Hachieve Hyour Hobjectives. HAfter Hreading Hthis
Hchapter Hyou Hwill Hhave Ha Hgood Hperspective Hon Hhow Hto Horganize H your Hoverall Hpersonal
Hfinancial Hplan.
LEARNING GOALS H
LG1 HIdentify Hthe Hbenefits Hof Husing Hpersonal Hfinancial Hplanning Htechniques Hto Hmanage Hyour
finances.
H
Key Hconcept Hin Hthis Hsection His Hthe Hplanning Hmodel Has Hdisplayed Hin HExhibit H1.1. HYour
Hstandard Hof Hliving H is Hgreatly Himpacted Hby Hyour Hspending Hhabits Hand Hyour Hcommitment Hto
Hsaving. HYour Hspending His Hmeasured Hby Hyour Hpropensity Hto Hconsume. HWealth His Hthe Htotal
Hvalue Hof Hall HpropertyH you Hown Hless Hthe Hamount Hthat H you Howe Hto Hothers.
ACTIVITY: H Ask Hthe Hstudents Hto Hassume Hthat Hthey Hhave Hjust H inherited H$100,000. H What Hwill
HyouH
do Hwith Hthe Hmoney? HWrite Hdown Hthree Hways H you Hwill Hspend Hor Huse Hthe H money.
,Ask Hthe Hstudents Hto Hshare Hone Hitem Hwith Hthe Hclass Hand Hrecord Hwhat Hthey Hsay Hso Hthat Hthe
Hentire Hclass Hcan Hreflect Hon Hthe Hanswers. HHopefully, Hat Hleast Ha Hfew Hwill Hmention Hinvesting
Heven Hif Honly H$10,000 Hof Hthe Hamount. HUse Htheir H answers Hto Hdiscuss Htaking H care Hof Hcurrent
H needs H versus H future Hneeds.
Focus Hon Htheir Hpropensity Hto Hconsume Hand Hits Himpact Hon Haccumulating Hwealth. HPoint
Hout HtheH Financial HPlanning HTip, H ―Be HSMART H in HPlanning H Your HFinancial HGoals.‖
Use HExhibit H1.2 Hto Hshow Hhow Hthe Haverage Hperson Hearns Hand Hspends Htheir Hmoney Hand HExhibit
H 1.6 HtoH
help Hthe Hstudent H identify Hwhere HtheyHare H now.
LG2 HDescribe Hthe Hpersonal Hfinancial Hplanning Hprocess Hand Hdefine Hyour Hgoals.
Dwight H Eisenhower, Harmy Hgeneral Hand H president, His Hquoted Has Hsaying H ―Plans Hare Huseless;
HPlanning His Hpriceless‖. HThe Hprocess Hof Hplanning Hallows Hyou Hto Hfocus Hon Hthe Hissues Hthat Hare
Hmost Himportant Hand Hto H be Hready Hwhen Hthings Hchange.
Exhibit H1.3 Hlists Hthe HSix HStep HFinancial HPlanning HProcess. HThe Hfirst Hand Hmost Himportant His
Hdefining Hyour Hfinancial Hgoals. HExhibit H1.6 Hlists Hgoals Hby Hage Hto Hdemonstrate Hhow Hgoals
Hchange Hover Htime. HUse Hthe Hexamples Hin HExhibit H 1.5 Hto Hask Hstudents Hif Hthe Hassumptions Hare
Hrealistic. HYes,H
the Hanswer His Hin Hthe Hexhibit, Hbut Hmany Hwill Hnot Hhave Hread Hchapter Hat Hthis
Hpoint. HFor Hyour Huse, HtheH assumptions Hare:
Assumption H1: HSaving Ha Hfew Hthousand Hdollars Ha Hyear Hshould Hprovide Henough Hto Hfund Hmy
Hchild‘sH
college HEducation.
Assumption H2: HAnHemergency Hfund Hlasting H3 Hmonths Hshould Hbe Hadequate.
Assumption H3: HI Hwill Hbe Hable Hto Hretire Hat H65 Hand Hshould Hhave Hplenty Hto Hlive Hon Hin
Hretirement. HAssumption H4: HI‘m Hrelying Hon Hthe Hrule Hof Hthumb Hthat HI Hwill Hneed Honly H70
Hpercent Hof Hmy Hpre-H
retirement H income Hto H manage Hnicely Hin Hretirement.
There Hare Hseveral Hworksheets Hin Hthe Hbook. HWorksheet H1.1 Hgives Hthe Hstudent Ha Hformat Hto
Hwrite Hdown Htheir HPersonal HFinancial HGoals. HThere His Hpower Hin Hwriting Hdown Hgoals H[and Hmost
Hany HotherHplan]. HRecording Hthe Hgoal Hand Hthen Hreviewing Hthree Hmonths Hlater Hwill Hhelp Hyou
Hto Hkeep Hfocus HonHthe Hgoal.
LG3 HExplain Hthe Hlife Hcycle Hof Hfinancial Hplans, Htheir Hrole Hin Hachieving Hyour Hfinancial Hgoals,
Hhow Hto Hdeal Hwith Hspecial Hplanning Hconcerns, Hand Hthe Huse Hof Hprofessional Hfinancial
Hplanners.
Exhibit H1.7 Hcan Hhelp Hfocus Hthe Hattention Hon Hhow Hgoals Hdiffer Hbetween Hthe Hvarious Hstages Hof
Hlife. HSection H1-3b Hlists Hvarious Hdecisions Hthat Hyou Hwill Hhave Hto Hmake Hover Hyour Hlife. HThe
Hsection H1-3c Haddresses HSpecial HPlanning HConcerns. HWorksheet H1.2 Hfocuses Hon Hthe Hfinancial
Hbenefit Hto Hthe Hfamily Hof Hthe Hsecond Hincome. HIf Hthe Hsecond Hincome His Hfrom Ha Hminimum
Hwage Hjob, Hit Hmay Hnot Hbe HaH good Hfinancial Hdecision. H Of Hcourse Hhaving Ha Hjob, Heven Ha H minimum
Hwage H job, H may Hgive Hthe HpersonH psychic H income Hthat H will Hoverride Hthe H financial Himpact.
While Hperhaps Hoff Htopic, HI Hrecall Ha Hhigh Hschool Hscience Hteacher Hwho Hwas Ha Hsmoker. HHe
Hwalked Hthrough Hthe Hamount H of Hmoney Hhe Hspent H on Hpurchasing Htobacco H products. HThat
H computation Hhad Ha
, lot Hto Hdo Hwith Hmy Hdecision Hto Hnot H smoke. HHow Hthis Hrelates Hto Hthe Hcourse His Hthat Hthis His Han
illustration Hof Hhow Hthe Hfinancial Himpact Hof Ha Hdecision Hcan Hdrive Hthe Hdecision.
H
LG4 HExamine Hthe Heconomic Henvironment’s Hinfluence Hon Hpersonal Hfinancial Hplanning.
For Holder Hfolks, Hthe Hfinancial Hcrisis Hof H2008-2009 His Hfresh Hin Hour Hmemory. HTo Hthe Hstudent Hof
H2021,H that Hcrisis His Hmore Hof Hhistory Hthan Hlife. HIf Hyou Hcan Hshare Ha Hwar Hstory Hon Hhow Hyou Hwere
Hpersonally Himpacted, Hit Hwill Hhelp Hbring Hthe Himpact Hof Hthe Hworld Heconomy Hon Hfinancial Hplans
Hto Hlife. HThe HbookH speaks Hhow Hto Hmanage Hthis Htype Hof Hcrisis, Hbut Hyou Hhad Hto Hgo Hthrough Hit Hto
Hreally Hunderstand Hthe Himpact H it H had.
The Hvalue Hof Hprofessional Hadvice His Hgreatly Hunderstated. HIf Hby Htalking Hto Ha Hprofessional Hyou
Hcan Hprevent Hmaking Ha Hmistake H-- Hthat H can Hbe Hof Ha Hgreat Hvalue. H Section H1-3e Hspeaks Hto Hthe
Huse Hof Hprofessional Hfinancial Hplanners. H Exhibit H 1.9 Hlists Hout Hthe Hvarious Hcertifications Hthat
H planners Hhave.
Economic Hor Hbusiness Hcycles Hare Hreal. HPerhaps Hthe Hmost Huseful Hthing Habout Hthe Hcycles His Hthe
Hknowledge Hthat Hif Hthings Hare Hbad, Hyou Hknow Hthey Hwill Hget Hbetter. HOf Hcourse, Hwhen Hlife His
Hgood, Hyou Hknow Hthat Hthe Hbad Hcycle Hwill Hcome Haround Hagain. H Thus, H financial Hplanning
Hrequires Hsaving H inH t he HgoodHtimes H for Hthe Hbad Htimes. H H See Hthe H―Test H Yourself‖ Hquestion H1-17
H for H a Hshort H discussion Hof Hbusiness Hcycles.
The Hpower Hof Hcompounding His Hrarely Hunderstood. HExhibit H1.8 Hshows Hhow Hthe Hamount
H$10,000H
will Hgrow Hover Htime. HThe Hlonger Hthe Hinvestment Hstays Hinvested, Hthe Hgreater Hthe
Hamount H– Hthe Hpower Hof Hcompound H interest.
LG5 HEvaluate Hthe Himpact Hof Hage, Heducation, Hand Hgeographic Hlocation Hon Hpersonal Hincome.
Exhibit H1.12 Hsays Hit Hall.
LG6 HUnderstand Hthe Himportance Hof Hcareer Hchoices Hand Htheir Hrelationship Hto Hpersonal
financial Hplanning.
H
Exhibit H 1.13 Hshows Hthat Hthe Hchoice Hof Ha Hcollege H major Hhas Ha Hfinancial Himpact. HOfHcourse
HmoneyH cannot Hbuy Hhappiness, Hbut Hhaving Ha Hbit Hhelps. HIf Hyou Hreally Hwant Hto Hbe Han Helementary
Hschool Hteacher, Hyou Hmust Hrecognize Hthat Hyou Hwill Hnot Hhave Has Hmuch Hwealth Has Ha Hlawyer Hor
Hfinancial Hanalyst.
The Hsummary Hof Hthe Hlearning Hgoals Hat Hthe Hend Hof Hthe Hchapter Hshould Haid Hthe Hstudent Hin
Hreviewing H
the Hchapter Hwhen Hexam Htime Hcomes. HIt Hwill Hbe Huseful Hto Hpoint Hout Hto Hthe
Hstudent Hhow Hto Huse Hthis Hmaterial.
Link Hto HSolutions Hto HFinancial HPlanning HExercises
Pre-tests
