SOLUTION MANUAL
Personal Finance, 14th Edition
By E. Thomas Garman, Chapter 1 - 17
,TABLE OF CONTENTS
Party I:y FINANCIALy PLANNING.
1.y Understandingy Personaly Finance.
2.y Careery Planning.
3.y Financialy Statements,y Goals,y andy Budgets.
Party II:y MONEYy MANAGEMENT.
4.y Managingy Incomey Taxes.
5.y Managingy Checkingy andy Savingsy Accounts.
6.y Buildingy andy Maintainingy Goody Credit.
7.y Credity Cardsy andy Consumery Loans.
8.y Vehiclesy andy Othery Majory Purchases.
9.y Obtainingy Affordabley Housing.
Party III:y INCOMEy ANDy ASSETy PROTECTION.
10.y Managingy Propertyy andy Liabilityy Risk.
11.y Planningy fory Healthy Carey Expenses.
12.y Lifey Insurancey Planning.
Party IV:y INVESTMENTS.
13.y Investmenty Fundamentals.
,14.y Investingy iny Stocksy andy Bonds.
15.y Mutualy andy Exchange-Tradedy Funds.
16.y Realy Estatey andy High-Risky Investments.
17.y Retirementy andy Estatey Planning.
Solution and Answer Guide y y y
GARMAN/FOX,Y PERSONALY FINANCEY 14E,Y CHAPTERY 1:Y THINKINGY LIKEY AY FINANCIALY PLANNER
TABLE OF CONTENTS
Y Y
Answersy toy Chaptery Concepty Checks ....................................................................................... 2
Whaty Doy Youy Recommendy Now? ............................................................................................ 4
Let’sy Talky Abouty It .................................................................................................................................................... 5
Doy they Math ................................................................................................................................. 6
Financialy Planningy Cases ............................................................................................................. 8
Extendedy Learning...................................................................................................................... 10
, ANSWERS TO CHAPTER CONCEPT CHECKS
Y Y Y Y
LO1.1y Recognizey they keysy toy achievingy financialy success.
1. Explainy they fivey stepsy iny they financialy planningy process.
Answer:y Therey arey fivey fundamentaly stepsy toy they personaly financialy planningy process:y
(1)y evaluatey youry financialy healthy toy youry educationy andy careery choice;y (2)y definey youry
financialy goals;y (3)y developy ay plany ofy actiony toy achievey youry goals;y (4)y implementy
spendingy andy savingy plansy toy monitory andy controly progressy towardy youry goals;y andy (5)y
reviewy youry financialy progressy andy makey changesy asy appropriate.
2. Distinguishy amongy financialy success,y financialy security,y andy financialy happiness.
Answer:y Financialy successy isy they achievementy ofy financialy aspirationsy thaty arey desired,y
planned,y ory attempted.y Successy isy definedy byy they individualy ory familyy thaty seeksy it.y
Financialy successy mayy bey definedy asy beingy abley toy livey accordingy toy one’sy standardy ofy
living.y Financialy securityy isy thaty comfortabley feelingy thaty youry financialy resourcesy willy bey
adequatey toy fulfilly anyy needsy youy havey asy welly asy youry wants.y Financialy happinessy isy
they experiencey youy havey wheny youy arey satisfiedy withy moneyy matters.y Peopley whoy arey
happyy abouty theiry financesy willy seey ay spillovery intoy positivey feelingsy abouty lifey iny
general.
3. Summarizey whaty youy willy accomplishy studyingy personaly finance.
Answer:y Severaly thingsy cany bey accomplishedy byy studyingy personaly finance.y Recognizey howy
toy managey unexpectedy andy expectedy financialy events.y Payy asy littley asy possibley iny incomey
taxes.y Understandy howy toy effectivelyy comparisony shopy fory vehiclesy andy homes.y Protecty
whaty wey own.y Investy wisely.y Accumulatey andy protecty they wealthy thaty wey mayy choosey toy
spendy duringy oury non-workingy yearsy (e.g.,y retirement)y ory donate.
4. Whaty arey they buildingy blocksy toy achievingy financialy success?
Answer:y They buildingy blocksy fory achievingy financialy successy includey ay foundationy ofy
regulary incomey thaty providesy they meansy toy supporty youry lifestyley andy savey fory desiredy
goalsy iny they future.y They foundationy supportsy ay basey ofy variousy bankingy accounts,y
insurancey protection,y andy employeey benefits.y Theny wey cany establishy goals,y ay
recordkeepingy system,y ay budget,y andy any emergencyy savingsy fund.y Wey willy alsoy managey
variousy expensesy suchy asy housing,y transportation,y insurance,y andy they paymenty ofy taxes.y
Wey willy alsoy needy toy handley credit,y savings,y andy educationaly costs.y Finally,y wey investy iny
variousy investmenty alternativesy suchy asy mutualy funds,y stocks,y andy bonds,y ofteny fory
retirement.y Asy ay resulty ofy ally thesey buildingy blocks,y wey arey morey apty toy havey ay
financiallyy successfuly life.
LO1.2y Understandy howy they economyy affectsy youry personaly financialy success.
1. Summarizey they phasesy ofy they businessy cycle.
Personal Finance, 14th Edition
By E. Thomas Garman, Chapter 1 - 17
,TABLE OF CONTENTS
Party I:y FINANCIALy PLANNING.
1.y Understandingy Personaly Finance.
2.y Careery Planning.
3.y Financialy Statements,y Goals,y andy Budgets.
Party II:y MONEYy MANAGEMENT.
4.y Managingy Incomey Taxes.
5.y Managingy Checkingy andy Savingsy Accounts.
6.y Buildingy andy Maintainingy Goody Credit.
7.y Credity Cardsy andy Consumery Loans.
8.y Vehiclesy andy Othery Majory Purchases.
9.y Obtainingy Affordabley Housing.
Party III:y INCOMEy ANDy ASSETy PROTECTION.
10.y Managingy Propertyy andy Liabilityy Risk.
11.y Planningy fory Healthy Carey Expenses.
12.y Lifey Insurancey Planning.
Party IV:y INVESTMENTS.
13.y Investmenty Fundamentals.
,14.y Investingy iny Stocksy andy Bonds.
15.y Mutualy andy Exchange-Tradedy Funds.
16.y Realy Estatey andy High-Risky Investments.
17.y Retirementy andy Estatey Planning.
Solution and Answer Guide y y y
GARMAN/FOX,Y PERSONALY FINANCEY 14E,Y CHAPTERY 1:Y THINKINGY LIKEY AY FINANCIALY PLANNER
TABLE OF CONTENTS
Y Y
Answersy toy Chaptery Concepty Checks ....................................................................................... 2
Whaty Doy Youy Recommendy Now? ............................................................................................ 4
Let’sy Talky Abouty It .................................................................................................................................................... 5
Doy they Math ................................................................................................................................. 6
Financialy Planningy Cases ............................................................................................................. 8
Extendedy Learning...................................................................................................................... 10
, ANSWERS TO CHAPTER CONCEPT CHECKS
Y Y Y Y
LO1.1y Recognizey they keysy toy achievingy financialy success.
1. Explainy they fivey stepsy iny they financialy planningy process.
Answer:y Therey arey fivey fundamentaly stepsy toy they personaly financialy planningy process:y
(1)y evaluatey youry financialy healthy toy youry educationy andy careery choice;y (2)y definey youry
financialy goals;y (3)y developy ay plany ofy actiony toy achievey youry goals;y (4)y implementy
spendingy andy savingy plansy toy monitory andy controly progressy towardy youry goals;y andy (5)y
reviewy youry financialy progressy andy makey changesy asy appropriate.
2. Distinguishy amongy financialy success,y financialy security,y andy financialy happiness.
Answer:y Financialy successy isy they achievementy ofy financialy aspirationsy thaty arey desired,y
planned,y ory attempted.y Successy isy definedy byy they individualy ory familyy thaty seeksy it.y
Financialy successy mayy bey definedy asy beingy abley toy livey accordingy toy one’sy standardy ofy
living.y Financialy securityy isy thaty comfortabley feelingy thaty youry financialy resourcesy willy bey
adequatey toy fulfilly anyy needsy youy havey asy welly asy youry wants.y Financialy happinessy isy
they experiencey youy havey wheny youy arey satisfiedy withy moneyy matters.y Peopley whoy arey
happyy abouty theiry financesy willy seey ay spillovery intoy positivey feelingsy abouty lifey iny
general.
3. Summarizey whaty youy willy accomplishy studyingy personaly finance.
Answer:y Severaly thingsy cany bey accomplishedy byy studyingy personaly finance.y Recognizey howy
toy managey unexpectedy andy expectedy financialy events.y Payy asy littley asy possibley iny incomey
taxes.y Understandy howy toy effectivelyy comparisony shopy fory vehiclesy andy homes.y Protecty
whaty wey own.y Investy wisely.y Accumulatey andy protecty they wealthy thaty wey mayy choosey toy
spendy duringy oury non-workingy yearsy (e.g.,y retirement)y ory donate.
4. Whaty arey they buildingy blocksy toy achievingy financialy success?
Answer:y They buildingy blocksy fory achievingy financialy successy includey ay foundationy ofy
regulary incomey thaty providesy they meansy toy supporty youry lifestyley andy savey fory desiredy
goalsy iny they future.y They foundationy supportsy ay basey ofy variousy bankingy accounts,y
insurancey protection,y andy employeey benefits.y Theny wey cany establishy goals,y ay
recordkeepingy system,y ay budget,y andy any emergencyy savingsy fund.y Wey willy alsoy managey
variousy expensesy suchy asy housing,y transportation,y insurance,y andy they paymenty ofy taxes.y
Wey willy alsoy needy toy handley credit,y savings,y andy educationaly costs.y Finally,y wey investy iny
variousy investmenty alternativesy suchy asy mutualy funds,y stocks,y andy bonds,y ofteny fory
retirement.y Asy ay resulty ofy ally thesey buildingy blocks,y wey arey morey apty toy havey ay
financiallyy successfuly life.
LO1.2y Understandy howy they economyy affectsy youry personaly financialy success.
1. Summarizey they phasesy ofy they businessy cycle.
