SOLUTION MANUAL
ii
Personal Finance, 14th Edition
ii ii ii
By E. Thomas Garman, Chapter 1 - 17
ii ii ii ii ii ii ii
,TABLE OF CONTENTS
Part I: FINANCIAL PLANNING.
1. Understanding Personal Finance.
2. Career Planning.
3. Financial Statements, Goals, and Budgets.
Part II: MONEY MANAGEMENT.
4. Managing Income Taxes.
5. Managing Checking and Savings Accounts.
6. Building and Maintaining Good Credit.
7. Credit Cards and Consumer Loans.
8. Vehicles and Other Major Purchases.
9. Obtaining Affordable Housing.
Part III: INCOME AND ASSET PROTECTION.
10. Managing Property and Liability Risk.
11. Planning for Health Care Expenses.
12. Life Insurance Planning.
Part IV: INVESTMENTS.
13. Investment Fundamentals.
,14. Investing in Stocks and Bonds.
15. Mutual and Exchange-Traded Funds.
16. Real Estate and High-Risk Investments.
17. Retirement and Estate Planning.
SolutionandAnswerGuide
GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
TABLE OF CONTENTS
Answers to Chapter Concept Checks .......................................................................................... 2
What Do You Recommend Now? ............................................................................................... 4
Let’s Talk About It......................................................................................................................... 5
Do the Math................................................................................................................................... 6
Financial Planning Cases ............................................................................................................... 8
Extended Learning ...................................................................................................................... 10
, ANSWERS TO CHAPTER CONCEPT CHECKS
LO1.1 Recognize the keys to achieving financial success.
1. Explain the five steps in the financial planning process.
Answer: There are five fundamental steps to the personal financial planning process: (1)
evaluate your financial health to your education and career choice; (2) define your financial
goals; (3) develop a plan of action to achieve your goals; (4) implement spending and
saving plans to monitor and control progress toward your goals; and (5) review your
financial progress and make changes as appropriate.
2. Distinguish among financial success, financial security, and financial happiness.
Answer: Financial success is the achievement of financial aspirations that are desired,
planned, or attempted. Success is defined by the individual or family that seeks it. Financial
success may be defined as being able to live according to one’s standard of living.
Financial security is that comfortable feeling that your financial resources will be
adequate to fulfill any needs you have as well as your wants. Financial happiness is the
experience you have when you are satisfied with money matters. People who are happy
about their finances will see a spillover into positive feelings about life in general.
3. Summarize what you will accomplish studying personal finance.
Answer: Several things can be accomplished by studying personal finance. Recognize how to
manage unexpected and expected financial events. Pay as little as possible in income taxes.
Understand how to effectively comparison shop for vehicles and homes. Protect what we own.
Invest wisely. Accumulate and protect the wealth that we may choose to spend during our
non-working years (e.g., retirement) or donate.
4. What are the building blocks to achieving financial success?
Answer: The building blocks for achieving financial success include a foundation of
regular income that provides the means to support your lifestyle and save for desired
goals in the future. The foundation supports a base of various banking accounts,
insurance protection, and employee benefits. Then we can establish goals, a recordkeeping
system, a budget, and an emergency savings fund. We will also manage various expenses
such as housing, transportation, insurance, and the payment of taxes. We will also need to
handle credit, savings, and educational costs. Finally, we invest in various investment
alternatives such as mutual funds, stocks, and bonds, often for retirement. As a result of
all these building blocks, we are more apt to have a financially successful life.
LO1.2 Understand how the economy affects your personal financial success.
1. Summarize the phases of the business cycle.
Answer: The business cycle entails a wavelike pattern of rising and falling economic
activity as measured by economic indicators like unemployment rates or the gross domestic
ii
Personal Finance, 14th Edition
ii ii ii
By E. Thomas Garman, Chapter 1 - 17
ii ii ii ii ii ii ii
,TABLE OF CONTENTS
Part I: FINANCIAL PLANNING.
1. Understanding Personal Finance.
2. Career Planning.
3. Financial Statements, Goals, and Budgets.
Part II: MONEY MANAGEMENT.
4. Managing Income Taxes.
5. Managing Checking and Savings Accounts.
6. Building and Maintaining Good Credit.
7. Credit Cards and Consumer Loans.
8. Vehicles and Other Major Purchases.
9. Obtaining Affordable Housing.
Part III: INCOME AND ASSET PROTECTION.
10. Managing Property and Liability Risk.
11. Planning for Health Care Expenses.
12. Life Insurance Planning.
Part IV: INVESTMENTS.
13. Investment Fundamentals.
,14. Investing in Stocks and Bonds.
15. Mutual and Exchange-Traded Funds.
16. Real Estate and High-Risk Investments.
17. Retirement and Estate Planning.
SolutionandAnswerGuide
GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
TABLE OF CONTENTS
Answers to Chapter Concept Checks .......................................................................................... 2
What Do You Recommend Now? ............................................................................................... 4
Let’s Talk About It......................................................................................................................... 5
Do the Math................................................................................................................................... 6
Financial Planning Cases ............................................................................................................... 8
Extended Learning ...................................................................................................................... 10
, ANSWERS TO CHAPTER CONCEPT CHECKS
LO1.1 Recognize the keys to achieving financial success.
1. Explain the five steps in the financial planning process.
Answer: There are five fundamental steps to the personal financial planning process: (1)
evaluate your financial health to your education and career choice; (2) define your financial
goals; (3) develop a plan of action to achieve your goals; (4) implement spending and
saving plans to monitor and control progress toward your goals; and (5) review your
financial progress and make changes as appropriate.
2. Distinguish among financial success, financial security, and financial happiness.
Answer: Financial success is the achievement of financial aspirations that are desired,
planned, or attempted. Success is defined by the individual or family that seeks it. Financial
success may be defined as being able to live according to one’s standard of living.
Financial security is that comfortable feeling that your financial resources will be
adequate to fulfill any needs you have as well as your wants. Financial happiness is the
experience you have when you are satisfied with money matters. People who are happy
about their finances will see a spillover into positive feelings about life in general.
3. Summarize what you will accomplish studying personal finance.
Answer: Several things can be accomplished by studying personal finance. Recognize how to
manage unexpected and expected financial events. Pay as little as possible in income taxes.
Understand how to effectively comparison shop for vehicles and homes. Protect what we own.
Invest wisely. Accumulate and protect the wealth that we may choose to spend during our
non-working years (e.g., retirement) or donate.
4. What are the building blocks to achieving financial success?
Answer: The building blocks for achieving financial success include a foundation of
regular income that provides the means to support your lifestyle and save for desired
goals in the future. The foundation supports a base of various banking accounts,
insurance protection, and employee benefits. Then we can establish goals, a recordkeeping
system, a budget, and an emergency savings fund. We will also manage various expenses
such as housing, transportation, insurance, and the payment of taxes. We will also need to
handle credit, savings, and educational costs. Finally, we invest in various investment
alternatives such as mutual funds, stocks, and bonds, often for retirement. As a result of
all these building blocks, we are more apt to have a financially successful life.
LO1.2 Understand how the economy affects your personal financial success.
1. Summarize the phases of the business cycle.
Answer: The business cycle entails a wavelike pattern of rising and falling economic
activity as measured by economic indicators like unemployment rates or the gross domestic
