Personal Finance 14th Edition – Solution Manual
by E. Thomas Garman (Author), Jonathan Fox (Author)
14th Edition
,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.
,ANSWERS TO CHAPTER CONCEPT CHECKS
LO1.1 Recognize the keys to achieving financial success.
1. Explain the five steps in the financial planning process.
Correct 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.
Correct 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.
Correct 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?
Correct 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.
Correct 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
, product. The phases of the business cycle include expansion (preferred stage—production
is high, unemployment low, interest rates low or falling, stock market and consumer
demand high), peak, contraction, downturn, trough, and recovery.
2. Describe two statistics that help predict the future direction of the economy.
Correct Answer; Forecasting the state of the economy involves predicting, estimating, or
calculating what will happen in advance. We need to be able to forecast the state of the
economy, inflation, and interest rates so that we have advance warning of the directions
and strength of changes in economic trends since they will affect our personal finances.
Two statistics we could watch are the consumer confidence index (how consumers feel
about the economy and their personal finances) and the index of leading economic
indicators (composite index, averages ten components of economic growth).
by E. Thomas Garman (Author), Jonathan Fox (Author)
14th Edition
,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.
,ANSWERS TO CHAPTER CONCEPT CHECKS
LO1.1 Recognize the keys to achieving financial success.
1. Explain the five steps in the financial planning process.
Correct 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.
Correct 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.
Correct 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?
Correct 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.
Correct 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
, product. The phases of the business cycle include expansion (preferred stage—production
is high, unemployment low, interest rates low or falling, stock market and consumer
demand high), peak, contraction, downturn, trough, and recovery.
2. Describe two statistics that help predict the future direction of the economy.
Correct Answer; Forecasting the state of the economy involves predicting, estimating, or
calculating what will happen in advance. We need to be able to forecast the state of the
economy, inflation, and interest rates so that we have advance warning of the directions
and strength of changes in economic trends since they will affect our personal finances.
Two statistics we could watch are the consumer confidence index (how consumers feel
about the economy and their personal finances) and the index of leading economic
indicators (composite index, averages ten components of economic growth).
