Solution Manual for Personal Financial Planning
j j j j j
15th Edition by Randy Billingsley, Lawrence J.
j j j j j j j
j Gitman, Michael D. Joehnk
j j j
,SOLUTION MANUAL FOR j j
Personal Financial Planning 15th Edition by Randy Billingsley,
j j j j j j j
Lawrence J. Gitman, Michael D. Joehnk
j j j j j j
Understanding the Financial j j
Planning ProcessChapter 1
j j j j
How jWill jThis jAffect jMe?
The jheart jof jfinancial jplanning jis jmaking jsure jyour jvalues jline jup jwith jhow jyou jspend jand jsave.
jThat jmeans jknowing jwhere jyou jare jfinancially jand jplanning jon jhow jto jget jwhere jyou jwant jto
jbejin jthe jfuture jno jmatter jwhat jlife jthrows jat jyou. jFor jexample, jhow jshould jyour jplan jhandle
jthe jprojection jthat jSocial jSecurity jcosts jmay jexceed jrevenues jby j2035? jAnd jwhat jif jthe
jgovernmentjdecides jto jraise jtax jrates jto jhelp jcover jthe jfederal jdeficit? jAn jinformed jfinancial
jplan jshould jreflect j such juncertainties jand j more.
This jchapter joverviews jthe jfinancial jplanning jprocess jand jexplains jits jcontext. jTopics jinclude
jhow jfinancial jplans jchange jto jaccommodate jyour jcurrent jstage jin jlife jand jthe jrole jthat
jfinancialjplanners jcan jplay jin jhelping jyou jachieve jyour jobjectives. jAfter jreading jthis jchapter
jyou jwill jhave ja jgood jperspective jon jhow jto jorganize j your joverall jpersonal jfinancial jplan.
LEARNING GOALS j
LG1 jIdentify jthe jbenefits jof jusing jpersonal jfinancial jplanning jtechniques jto jmanage jyour
jfinances.
Key jconcept jin jthis jsection jis jthe jplanning jmodel jas jdisplayed jin jExhibit j1.1. jYour jstandard jof
jliving j is jgreatly jimpacted jby jyour jspending jhabits jand jyour jcommitment jto jsaving. jYour
jspending jis jmeasured jby jyour jpropensity jto jconsume. jWealth jis jthe jtotal jvalue jof jall
jpropertyjyou jown jless jthe jamount jthat j you jowe jto jothers.
ACTIVITY: j Ask jthe jstudents jto jassume jthat jthey jhave jjust j inherited j$100,000. j What j will jyou
jdo j with jthe j money? j Write jdown jthree jways j you jwill jspend jor juse jthe j money.
,Ask jthe jstudents jto jshare jone jitem jwith jthe jclass jand jrecord jwhat jthey jsay jso jthat jthe jentire
jclass jcan jreflect jon jthe janswers. jHopefully, jat jleast ja jfew jwill jmention jinvesting jeven jif jonly
j$10,000 jof jthe jamount. jUse jtheir j answers jto jdiscuss jtaking j care jof jcurrent j needs j versus j future
jneeds.
Focus jon jtheir jpropensity jto jconsume jand jits jimpact jon jaccumulating jwealth. jPoint jout
jthejFinancial jPlanning jTip, j ―Be jSMART j in jPlanning j Your j Financial jGoals.‖
Use jExhibit j1.2 jto jshow jhow jthe javerage jperson jearns jand jspends jtheir jmoney jand jExhibit j1.6
jtojhelp jthe jstudent j identify jwhere jthey jare j now.
LG2 jDescribe jthe jpersonal jfinancial jplanning jprocess jand jdefine jyour jgoals.
Dwight j Eisenhower, jarmy j general jand j president, j is jquoted jas jsaying j ―Plans jare juseless;
jPlanning jis jpriceless‖. jThe jprocess jof jplanning jallows jyou jto jfocus jon jthe jissues jthat jare jmost
jimportant jand jto j be jready jwhen jthings jchange.
Exhibit j1.3 jlists jthe jSix jStep jFinancial jPlanning jProcess. jThe jfirst jand jmost jimportant jis
jdefining jyour jfinancial jgoals. jExhibit j1.6 jlists jgoals jby jage jto jdemonstrate jhow jgoals jchange
jover jtime. jUse jthe jexamples jin jExhibit j 1.5 jto jask jstudents jif jthe jassumptions jare jrealistic. jYes,
jthe janswer jis jin jthe jexhibit, jbut jmany jwill jnot jhave jread jchapter jat jthis jpoint. jFor jyour juse,
jthejassumptions jare:
Assumption j1: jSaving ja jfew jthousand jdollars ja jyear jshould jprovide jenough jto jfund jmy jchild‘s
jcollege jEducation.
Assumption j2: jAn jemergency jfund jlasting j3 j months jshould jbe jadequate.
Assumption j3: jI jwill jbe jable jto jretire jat j65 jand jshould jhave jplenty jto jlive jon jin
jretirement. jAssumption j4: jI‘m jrelying jon jthe jrule jof jthumb jthat jI jwill jneed jonly j70
jpercent jof jmy jpre-jretirement j income jto j manage j nicely jin jretirement.
There jare jseveral jworksheets jin jthe jbook. jWorksheet j1.1 jgives jthe jstudent ja jformat jto jwrite
jdown jtheir jPersonal jFinancial jGoals. jThere jis jpower jin jwriting jdown jgoals j[and jmost jany jother
jplan]. jRecording jthe jgoal jand jthen jreviewing jthree jmonths jlater jwill jhelp jyou jto jkeep jfocus
jonjthe jgoal.
LG3 jExplain jthe jlife jcycle jof jfinancial jplans, jtheir jrole jin jachieving jyour jfinancial jgoals, jhow
jto jdeal jwith jspecial jplanning jconcerns, jand jthe juse jof jprofessional jfinancial jplanners.
Exhibit j1.7 jcan jhelp jfocus jthe jattention jon jhow jgoals jdiffer jbetween jthe jvarious jstages jof jlife.
jSection j1-3b jlists jvarious jdecisions jthat jyou jwill jhave jto jmake jover jyour jlife. jThe jsection j1-3c
jaddresses jSpecial jPlanning jConcerns. jWorksheet j1.2 jfocuses jon jthe jfinancial jbenefit jto jthe
jfamily jof jthe jsecond jincome. jIf jthe jsecond jincome jis jfrom ja jminimum jwage jjob, jit jmay jnot jbe
jajgood jfinancial jdecision. j Of jcourse jhaving ja j job, j even ja j minimum jwage j job, j may jgive jthe
jpersonjpsychic j income jthat j will joverride jthe j financial j impact.
While jperhaps joff jtopic, jI jrecall ja jhigh jschool jscience jteacher jwho jwas ja jsmoker. jHe jwalked
jthrough jthe jamount jof jmoney jhe jspent j on jpurchasing jtobacco j products. jThat j computation
jhad ja
, lot jto jdo jwith jmy jdecision jto jnot j smoke. jHow jthis jrelates jto jthe jcourse jis jthat jthis jis jan
jillustration jof jhow jthe j financial jimpact jof ja jdecision jcan jdrive jthe jdecision.
LG4 jExamine jthe jeconomic jenvironment’s jinfluence jon jpersonal jfinancial jplanning.
For jolder jfolks, jthe jfinancial jcrisis jof j2008-2009 jis jfresh jin jour jmemory. jTo jthe jstudent jof j2021,
jthat jcrisis jis jmore jof jhistory jthan jlife. jIf jyou jcan jshare ja jwar jstory jon jhow jyou jwere jpersonally
jimpacted, jit jwill jhelp jbring jthe jimpact jof jthe jworld jeconomy jon jfinancial jplans jto jlife. jThe
jbookjspeaks jhow jto jmanage jthis jtype jof jcrisis, jbut jyou jhad jto jgo jthrough jit jto jreally
junderstand jthe jimpact j it j had.
The jvalue jof jprofessional jadvice jis jgreatly junderstated. jIf jby jtalking jto ja jprofessional jyou jcan
jprevent j making ja j mistake j-- jthat j can jbe jof ja jgreat jvalue. j Section j1-3e jspeaks jto jthe juse jof
jprofessional jfinancial jplanners. j Exhibit j 1.9 jlists jout jthe jvarious jcertifications jthat j planners jhave.
Economic jor jbusiness jcycles jare jreal. jPerhaps jthe jmost juseful jthing jabout jthe jcycles jis jthe
jknowledge jthat jif jthings jare jbad, jyou jknow jthey jwill jget jbetter. jOf jcourse, jwhen jlife jis jgood,
jyou jknow jthat jthe jbad jcycle jwill jcome jaround jagain. jThus, j financial jplanning jrequires jsaving j in
jt he jgood jt imes j for j the jbad jtimes. j j See jthe j ―Test j Yourself‖ jquestion j1-17 j for j a jshort j discussion
jof jbusiness jcycles.
The jpower jof jcompounding jis jrarely junderstood. jExhibit j1.8 jshows jhow jthe jamount
j$10,000jwill jgrow jover jtime. jThe jlonger jthe jinvestment jstays jinvested, jthe jgreater jthe
jamount j– jthe jpower jof jcompound j interest.
LG5 jEvaluate jthe jimpact jof jage, jeducation, jand jgeographic jlocation jon jpersonal jincome.
Exhibit j1.12 jsays jit jall.
LG6 jUnderstand jthe jimportance jof jcareer jchoices jand jtheir jrelationship jto jpersonaljfinancial
jplanning.
Exhibit j 1.13 jshows jthat jthe jchoice jof ja jcollege j major jhas ja jfinancial jimpact. j Of jcourse jmoney
jcannot jbuy jhappiness, jbut jhaving ja jbit jhelps. jIf jyou jreally jwant jto jbe jan jelementary jschool
jteacher, jyou jmust jrecognize jthat jyou jwill jnot jhave jas jmuch jwealth jas ja jlawyer jor jfinancial
janalyst.
The jsummary jof jthe jlearning jgoals jat jthe jend jof jthe jchapter jshould jaid jthe jstudent jin
jreviewing jthe jchapter jwhen jexam jtime jcomes. jIt jwill jbe juseful jto jpoint jout jto jthe jstudent
jhow jto juse jthis jmaterial.
Link jto jSolutions jto jFinancial jPlanning jExercises
Pre-tests
j j j j j
15th Edition by Randy Billingsley, Lawrence J.
j j j j j j j
j Gitman, Michael D. Joehnk
j j j
,SOLUTION MANUAL FOR j j
Personal Financial Planning 15th Edition by Randy Billingsley,
j j j j j j j
Lawrence J. Gitman, Michael D. Joehnk
j j j j j j
Understanding the Financial j j
Planning ProcessChapter 1
j j j j
How jWill jThis jAffect jMe?
The jheart jof jfinancial jplanning jis jmaking jsure jyour jvalues jline jup jwith jhow jyou jspend jand jsave.
jThat jmeans jknowing jwhere jyou jare jfinancially jand jplanning jon jhow jto jget jwhere jyou jwant jto
jbejin jthe jfuture jno jmatter jwhat jlife jthrows jat jyou. jFor jexample, jhow jshould jyour jplan jhandle
jthe jprojection jthat jSocial jSecurity jcosts jmay jexceed jrevenues jby j2035? jAnd jwhat jif jthe
jgovernmentjdecides jto jraise jtax jrates jto jhelp jcover jthe jfederal jdeficit? jAn jinformed jfinancial
jplan jshould jreflect j such juncertainties jand j more.
This jchapter joverviews jthe jfinancial jplanning jprocess jand jexplains jits jcontext. jTopics jinclude
jhow jfinancial jplans jchange jto jaccommodate jyour jcurrent jstage jin jlife jand jthe jrole jthat
jfinancialjplanners jcan jplay jin jhelping jyou jachieve jyour jobjectives. jAfter jreading jthis jchapter
jyou jwill jhave ja jgood jperspective jon jhow jto jorganize j your joverall jpersonal jfinancial jplan.
LEARNING GOALS j
LG1 jIdentify jthe jbenefits jof jusing jpersonal jfinancial jplanning jtechniques jto jmanage jyour
jfinances.
Key jconcept jin jthis jsection jis jthe jplanning jmodel jas jdisplayed jin jExhibit j1.1. jYour jstandard jof
jliving j is jgreatly jimpacted jby jyour jspending jhabits jand jyour jcommitment jto jsaving. jYour
jspending jis jmeasured jby jyour jpropensity jto jconsume. jWealth jis jthe jtotal jvalue jof jall
jpropertyjyou jown jless jthe jamount jthat j you jowe jto jothers.
ACTIVITY: j Ask jthe jstudents jto jassume jthat jthey jhave jjust j inherited j$100,000. j What j will jyou
jdo j with jthe j money? j Write jdown jthree jways j you jwill jspend jor juse jthe j money.
,Ask jthe jstudents jto jshare jone jitem jwith jthe jclass jand jrecord jwhat jthey jsay jso jthat jthe jentire
jclass jcan jreflect jon jthe janswers. jHopefully, jat jleast ja jfew jwill jmention jinvesting jeven jif jonly
j$10,000 jof jthe jamount. jUse jtheir j answers jto jdiscuss jtaking j care jof jcurrent j needs j versus j future
jneeds.
Focus jon jtheir jpropensity jto jconsume jand jits jimpact jon jaccumulating jwealth. jPoint jout
jthejFinancial jPlanning jTip, j ―Be jSMART j in jPlanning j Your j Financial jGoals.‖
Use jExhibit j1.2 jto jshow jhow jthe javerage jperson jearns jand jspends jtheir jmoney jand jExhibit j1.6
jtojhelp jthe jstudent j identify jwhere jthey jare j now.
LG2 jDescribe jthe jpersonal jfinancial jplanning jprocess jand jdefine jyour jgoals.
Dwight j Eisenhower, jarmy j general jand j president, j is jquoted jas jsaying j ―Plans jare juseless;
jPlanning jis jpriceless‖. jThe jprocess jof jplanning jallows jyou jto jfocus jon jthe jissues jthat jare jmost
jimportant jand jto j be jready jwhen jthings jchange.
Exhibit j1.3 jlists jthe jSix jStep jFinancial jPlanning jProcess. jThe jfirst jand jmost jimportant jis
jdefining jyour jfinancial jgoals. jExhibit j1.6 jlists jgoals jby jage jto jdemonstrate jhow jgoals jchange
jover jtime. jUse jthe jexamples jin jExhibit j 1.5 jto jask jstudents jif jthe jassumptions jare jrealistic. jYes,
jthe janswer jis jin jthe jexhibit, jbut jmany jwill jnot jhave jread jchapter jat jthis jpoint. jFor jyour juse,
jthejassumptions jare:
Assumption j1: jSaving ja jfew jthousand jdollars ja jyear jshould jprovide jenough jto jfund jmy jchild‘s
jcollege jEducation.
Assumption j2: jAn jemergency jfund jlasting j3 j months jshould jbe jadequate.
Assumption j3: jI jwill jbe jable jto jretire jat j65 jand jshould jhave jplenty jto jlive jon jin
jretirement. jAssumption j4: jI‘m jrelying jon jthe jrule jof jthumb jthat jI jwill jneed jonly j70
jpercent jof jmy jpre-jretirement j income jto j manage j nicely jin jretirement.
There jare jseveral jworksheets jin jthe jbook. jWorksheet j1.1 jgives jthe jstudent ja jformat jto jwrite
jdown jtheir jPersonal jFinancial jGoals. jThere jis jpower jin jwriting jdown jgoals j[and jmost jany jother
jplan]. jRecording jthe jgoal jand jthen jreviewing jthree jmonths jlater jwill jhelp jyou jto jkeep jfocus
jonjthe jgoal.
LG3 jExplain jthe jlife jcycle jof jfinancial jplans, jtheir jrole jin jachieving jyour jfinancial jgoals, jhow
jto jdeal jwith jspecial jplanning jconcerns, jand jthe juse jof jprofessional jfinancial jplanners.
Exhibit j1.7 jcan jhelp jfocus jthe jattention jon jhow jgoals jdiffer jbetween jthe jvarious jstages jof jlife.
jSection j1-3b jlists jvarious jdecisions jthat jyou jwill jhave jto jmake jover jyour jlife. jThe jsection j1-3c
jaddresses jSpecial jPlanning jConcerns. jWorksheet j1.2 jfocuses jon jthe jfinancial jbenefit jto jthe
jfamily jof jthe jsecond jincome. jIf jthe jsecond jincome jis jfrom ja jminimum jwage jjob, jit jmay jnot jbe
jajgood jfinancial jdecision. j Of jcourse jhaving ja j job, j even ja j minimum jwage j job, j may jgive jthe
jpersonjpsychic j income jthat j will joverride jthe j financial j impact.
While jperhaps joff jtopic, jI jrecall ja jhigh jschool jscience jteacher jwho jwas ja jsmoker. jHe jwalked
jthrough jthe jamount jof jmoney jhe jspent j on jpurchasing jtobacco j products. jThat j computation
jhad ja
, lot jto jdo jwith jmy jdecision jto jnot j smoke. jHow jthis jrelates jto jthe jcourse jis jthat jthis jis jan
jillustration jof jhow jthe j financial jimpact jof ja jdecision jcan jdrive jthe jdecision.
LG4 jExamine jthe jeconomic jenvironment’s jinfluence jon jpersonal jfinancial jplanning.
For jolder jfolks, jthe jfinancial jcrisis jof j2008-2009 jis jfresh jin jour jmemory. jTo jthe jstudent jof j2021,
jthat jcrisis jis jmore jof jhistory jthan jlife. jIf jyou jcan jshare ja jwar jstory jon jhow jyou jwere jpersonally
jimpacted, jit jwill jhelp jbring jthe jimpact jof jthe jworld jeconomy jon jfinancial jplans jto jlife. jThe
jbookjspeaks jhow jto jmanage jthis jtype jof jcrisis, jbut jyou jhad jto jgo jthrough jit jto jreally
junderstand jthe jimpact j it j had.
The jvalue jof jprofessional jadvice jis jgreatly junderstated. jIf jby jtalking jto ja jprofessional jyou jcan
jprevent j making ja j mistake j-- jthat j can jbe jof ja jgreat jvalue. j Section j1-3e jspeaks jto jthe juse jof
jprofessional jfinancial jplanners. j Exhibit j 1.9 jlists jout jthe jvarious jcertifications jthat j planners jhave.
Economic jor jbusiness jcycles jare jreal. jPerhaps jthe jmost juseful jthing jabout jthe jcycles jis jthe
jknowledge jthat jif jthings jare jbad, jyou jknow jthey jwill jget jbetter. jOf jcourse, jwhen jlife jis jgood,
jyou jknow jthat jthe jbad jcycle jwill jcome jaround jagain. jThus, j financial jplanning jrequires jsaving j in
jt he jgood jt imes j for j the jbad jtimes. j j See jthe j ―Test j Yourself‖ jquestion j1-17 j for j a jshort j discussion
jof jbusiness jcycles.
The jpower jof jcompounding jis jrarely junderstood. jExhibit j1.8 jshows jhow jthe jamount
j$10,000jwill jgrow jover jtime. jThe jlonger jthe jinvestment jstays jinvested, jthe jgreater jthe
jamount j– jthe jpower jof jcompound j interest.
LG5 jEvaluate jthe jimpact jof jage, jeducation, jand jgeographic jlocation jon jpersonal jincome.
Exhibit j1.12 jsays jit jall.
LG6 jUnderstand jthe jimportance jof jcareer jchoices jand jtheir jrelationship jto jpersonaljfinancial
jplanning.
Exhibit j 1.13 jshows jthat jthe jchoice jof ja jcollege j major jhas ja jfinancial jimpact. j Of jcourse jmoney
jcannot jbuy jhappiness, jbut jhaving ja jbit jhelps. jIf jyou jreally jwant jto jbe jan jelementary jschool
jteacher, jyou jmust jrecognize jthat jyou jwill jnot jhave jas jmuch jwealth jas ja jlawyer jor jfinancial
janalyst.
The jsummary jof jthe jlearning jgoals jat jthe jend jof jthe jchapter jshould jaid jthe jstudent jin
jreviewing jthe jchapter jwhen jexam jtime jcomes. jIt jwill jbe juseful jto jpoint jout jto jthe jstudent
jhow jto juse jthis jmaterial.
Link jto jSolutions jto jFinancial jPlanning jExercises
Pre-tests
