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