Solution Manual for Personal Financial
vv vv vv vv
vv Planning15th Edition by Randy Billingsley,
v vv vv vv vv
vv Lawrence J. Gitman, Michael D. Joehnk
vv vv vv vv vv
,SOLUTION MANUAL FOR vv vv
Personal Financial Planning 15th Edition by Randy vv vv vv vv vv vv
Billingsley, Lawrence J. Gitman, Michael D. Joehnk
vv vv vv vv vv vv vv
Understanding the vv
Financial Planning
vv vv
ProcessChapter 1
vv v vv
How Will This Affect Me?
vv vv vv vv
The heart of financial planning is making sure your values line up with how you spend and
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
save.That means knowing where you are financially and planning on how to get where you
vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv
want to bein the future no matter what life throws at you. For example, how should your
vv vv vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv
plan handle the projection that Social Security costs may exceed revenues by 2035? And
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
what if the governmentdecides to raise tax rates to help cover the federal deficit? An
vv vv vv vv v vv vv vv vv vv vv vv vv vv vv vv
informed financial plan should reflect such uncertainties and more.
vv vv vv vv vv vv vv vv vv
This chapter overviews the financial planning process and explains its context. Topics
vv vv vv vv vv vv vv vv vv vv vv
include how financial plans change to accommodate your current stage in life and the role
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
that financialplanners can play in helping you achieve your objectives. After reading this
vv vv v vv vv vv vv vv vv vv vv vv vv vv
chapter you will have a good perspective on how to organize your overall personal
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
financial plan.
vv vv
LEARNING GOALS vv
LG1 Identify the benefits of using personal financial planning techniques to manage
vv vv vv vv vv vv vv vv vv vv vv
yourfinances.
vv v
Key concept in this section is the planning model as displayed in Exhibit 1.1. Your
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
standard of living is greatly impacted by your spending habits and your commitment to
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
saving. Your spending is measured by your propensity to consume. Wealth is the total
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
value of all propertyyou own less the amount that you owe to others.
vv vv vv vv v vv vv vv vv vv vv vv vv vv
ACTIVITY: Ask the students to assume that they have just inherited $100,000. What
v v vv vv vv vv vv vv vv vv vv vv vv
will youdo with the money? Write down three ways you will spend or use the money.
vv vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv
,Ask the students to share one item with the class and record what they say so that the
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
entire class can reflect on the answers. Hopefully, at least a few will mention investing
vv vv v vv vv vv vv vv vv vv vv vv vv vv vv
even if only $10,000 of the amount. Use their answers to discuss taking care of current
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
needs versus future needs.
vv vv vv vv
Focus on their propensity to consume and its impact on accumulating wealth. Point
vv vv vv vv vv vv vv vv vv vv vv vv
out theFinancial Planning Tip, ―Be SMART in Planning Your Financial Goals.‖
vv vv v vv vv vv vv vv vv vv vv vv
Use Exhibit 1.2 to show how the average person earns and spends their money and Exhibit
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
1.6 tohelp the student identify where they are now.
vv vv v vv vv vv vv vv vv vv
LG2 Describe the personal financial planning process and define your goals.
vv vv vv vv vv vv vv vv vv vv
Dwight Eisenhower, army general and president, is quoted as saying ―Plans are useless;
vv vv vv vv vv vv vv vv vv vv vv vv
Planning is priceless‖. The process of planning allows you to focus on the issues that are
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
most important and to be ready when things change.
vv vv vv vv vv vv vv vv vv
Exhibit 1.3 lists the Six Step Financial Planning Process. The first and most important is
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
defining your financial goals. Exhibit 1.6 lists goals by age to demonstrate how goals
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
change over time. Use the examples in Exhibit 1.5 to ask students if the assumptions are
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
realistic. Yes,the answer is in the exhibit, but many will not have read chapter at this
vv vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv
point. For your use, theassumptions are:
vv vv vv vv vv v vv
Assumption 1: Saving a few thousand dollars a year should provide enough to fund my
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
child‘scollege Education.
vv v vv
Assumption 2: An emergency fund lasting 3 months should be adequate.
vv vv vv vv vv vv vv vv vv vv
Assumption 3: I will be able to retire at 65 and should have plenty to live on in
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
retirement.Assumption 4: I‘m relying on the rule of thumb that I will need only 70
vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv
percent of my pre-retirement income to manage nicely in retirement.
vv vv vv vv v vv vv vv vv vv vv
There are several worksheets in the book. Worksheet 1.1 gives the student a format to
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
write down their Personal Financial Goals. There is power in writing down goals [and
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
most any otherplan]. Recording the goal and then reviewing three months later will help
vv vv vv v vv vv vv vv vv vv vv vv vv vv vv
you to keep focus onthe goal.
vv vv vv vv vv v vv
LG3 Explain the life cycle of financial plans, their role in achieving your financial
vv vv vv vv vv vv vv vv vv vv vv vv vv
goals, how to deal with special planning concerns, and the use of professional
vv vv vv vv vv vv vv vv vv vv vv vv vv
financial planners.
vv vv
Exhibit 1.7 can help focus the attention on how goals differ between the various stages of
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
life. Section 1-3b lists various decisions that you will have to make over your life. The
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
section 1-3c addresses Special Planning Concerns. Worksheet 1.2 focuses on the financial
vv vv vv vv vv vv vv vv vv vv vv vv
benefit to the family of the second income. If the second income is from a minimum
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
wage job, it may not be agood financial decision. Of course having a job, even a
vv vv vv vv vv vv vv v vv vv vv vv vv vv vv vv vv
minimum wage job, may give the personpsychic income that will override the financial
vv vv vv vv vv vv vv v vv vv vv vv vv vv
impact.
vv
While perhaps off topic, I recall a high school science teacher who was a smoker. He
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
walked through the amount of money he spent on purchasing tobacco products. That
vv vv vv vv vv vv vv vv vv vv vv vv vv
computation had a
vv vv vv
, lot to do with my decision to not smoke. How this relates to the course is that this is
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
anillustration of how the financial impact of a decision can drive the decision.
vv v vv vv vv vv vv vv vv vv vv vv vv vv
LG4 Examine the economic environment’s influence on personal financial planning.
vv vv vv vv vv vv vv vv vv
For older folks, the financial crisis of 2008-2009 is fresh in our memory. To the student
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
of 2021,that crisis is more of history than life. If you can share a war story on how you
vv vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
were personally impacted, it will help bring the impact of the world economy on financial
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
plans to life. The bookspeaks how to manage this type of crisis, but you had to go
vv vv vv vv vv v vv vv vv vv vv vv vv vv vv vv vv vv
through it to really understand the impact it had.
vv vv vv vv vv vv vv vv vv
The value of professional advice is greatly understated. If by talking to a professional you
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
can prevent making a mistake -- that can be of a great value. Section 1-3e speaks to the
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
use of professional financial planners. Exhibit 1.9 lists out the various certifications that
vv vv vv vv vv vv vv vv vv vv vv vv vv
planners have.
vv vv
Economic or business cycles are real. Perhaps the most useful thing about the cycles is
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
the knowledge that if things are bad, you know they will get better. Of course, when life
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
is good, you know that the bad cycle will come around again. Thus, financial planning
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
requires saving int he good times for the bad times. See the ―Test Yourself‖ question 1-
vv vv vv v vv vv vv vv vv vv vv v v vv vv vv vv vv
17 for a short discussion of business cycles.
vv vv vv vv vv vv vv
The power of compounding is rarely understood. Exhibit 1.8 shows how the amount
vv vv vv vv vv vv vv vv vv vv vv vv
$10,000will grow over time. The longer the investment stays invested, the greater the
vv v vv vv vv vv vv vv vv vv vv vv vv vv
amount – the power of compound interest.
vv vv vv vv vv vv vv
LG5 Evaluate the impact of age, education, and geographic location on personal income.
vv vv vv vv vv vv vv vv vv vv vv vv
Exhibit 1.12 says it all. vv vv vv vv
LG6 Understand the importance of career choices and their relationship to
vv vv vv vv vv vv vv vv vv vv
personalfinancial planning.
vv v vv
Exhibit 1.13 shows that the choice of a college major has a financial impact. Of course
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
moneycannot buy happiness, but having a bit helps. If you really want to be an elementary
vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
school teacher, you must recognize that you will not have as much wealth as a lawyer or
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
financial analyst.
vv vv
The summary of the learning goals at the end of the chapter should aid the student in
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
reviewing the chapter when exam time comes. It will be useful to point out to the
vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv
student how to use this material.
vv vv vv vv vv vv
Link to Solutions to Financial Planning Exercises
vv vv vv vv vv vv
Pre-tests
vv vv vv vv
vv Planning15th Edition by Randy Billingsley,
v vv vv vv vv
vv Lawrence J. Gitman, Michael D. Joehnk
vv vv vv vv vv
,SOLUTION MANUAL FOR vv vv
Personal Financial Planning 15th Edition by Randy vv vv vv vv vv vv
Billingsley, Lawrence J. Gitman, Michael D. Joehnk
vv vv vv vv vv vv vv
Understanding the vv
Financial Planning
vv vv
ProcessChapter 1
vv v vv
How Will This Affect Me?
vv vv vv vv
The heart of financial planning is making sure your values line up with how you spend and
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
save.That means knowing where you are financially and planning on how to get where you
vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv
want to bein the future no matter what life throws at you. For example, how should your
vv vv vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv
plan handle the projection that Social Security costs may exceed revenues by 2035? And
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
what if the governmentdecides to raise tax rates to help cover the federal deficit? An
vv vv vv vv v vv vv vv vv vv vv vv vv vv vv vv
informed financial plan should reflect such uncertainties and more.
vv vv vv vv vv vv vv vv vv
This chapter overviews the financial planning process and explains its context. Topics
vv vv vv vv vv vv vv vv vv vv vv
include how financial plans change to accommodate your current stage in life and the role
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
that financialplanners can play in helping you achieve your objectives. After reading this
vv vv v vv vv vv vv vv vv vv vv vv vv vv
chapter you will have a good perspective on how to organize your overall personal
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
financial plan.
vv vv
LEARNING GOALS vv
LG1 Identify the benefits of using personal financial planning techniques to manage
vv vv vv vv vv vv vv vv vv vv vv
yourfinances.
vv v
Key concept in this section is the planning model as displayed in Exhibit 1.1. Your
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
standard of living is greatly impacted by your spending habits and your commitment to
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
saving. Your spending is measured by your propensity to consume. Wealth is the total
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
value of all propertyyou own less the amount that you owe to others.
vv vv vv vv v vv vv vv vv vv vv vv vv vv
ACTIVITY: Ask the students to assume that they have just inherited $100,000. What
v v vv vv vv vv vv vv vv vv vv vv vv
will youdo with the money? Write down three ways you will spend or use the money.
vv vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv
,Ask the students to share one item with the class and record what they say so that the
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
entire class can reflect on the answers. Hopefully, at least a few will mention investing
vv vv v vv vv vv vv vv vv vv vv vv vv vv vv
even if only $10,000 of the amount. Use their answers to discuss taking care of current
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
needs versus future needs.
vv vv vv vv
Focus on their propensity to consume and its impact on accumulating wealth. Point
vv vv vv vv vv vv vv vv vv vv vv vv
out theFinancial Planning Tip, ―Be SMART in Planning Your Financial Goals.‖
vv vv v vv vv vv vv vv vv vv vv vv
Use Exhibit 1.2 to show how the average person earns and spends their money and Exhibit
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
1.6 tohelp the student identify where they are now.
vv vv v vv vv vv vv vv vv vv
LG2 Describe the personal financial planning process and define your goals.
vv vv vv vv vv vv vv vv vv vv
Dwight Eisenhower, army general and president, is quoted as saying ―Plans are useless;
vv vv vv vv vv vv vv vv vv vv vv vv
Planning is priceless‖. The process of planning allows you to focus on the issues that are
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
most important and to be ready when things change.
vv vv vv vv vv vv vv vv vv
Exhibit 1.3 lists the Six Step Financial Planning Process. The first and most important is
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
defining your financial goals. Exhibit 1.6 lists goals by age to demonstrate how goals
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
change over time. Use the examples in Exhibit 1.5 to ask students if the assumptions are
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
realistic. Yes,the answer is in the exhibit, but many will not have read chapter at this
vv vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv
point. For your use, theassumptions are:
vv vv vv vv vv v vv
Assumption 1: Saving a few thousand dollars a year should provide enough to fund my
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
child‘scollege Education.
vv v vv
Assumption 2: An emergency fund lasting 3 months should be adequate.
vv vv vv vv vv vv vv vv vv vv
Assumption 3: I will be able to retire at 65 and should have plenty to live on in
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
retirement.Assumption 4: I‘m relying on the rule of thumb that I will need only 70
vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv
percent of my pre-retirement income to manage nicely in retirement.
vv vv vv vv v vv vv vv vv vv vv
There are several worksheets in the book. Worksheet 1.1 gives the student a format to
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
write down their Personal Financial Goals. There is power in writing down goals [and
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
most any otherplan]. Recording the goal and then reviewing three months later will help
vv vv vv v vv vv vv vv vv vv vv vv vv vv vv
you to keep focus onthe goal.
vv vv vv vv vv v vv
LG3 Explain the life cycle of financial plans, their role in achieving your financial
vv vv vv vv vv vv vv vv vv vv vv vv vv
goals, how to deal with special planning concerns, and the use of professional
vv vv vv vv vv vv vv vv vv vv vv vv vv
financial planners.
vv vv
Exhibit 1.7 can help focus the attention on how goals differ between the various stages of
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
life. Section 1-3b lists various decisions that you will have to make over your life. The
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
section 1-3c addresses Special Planning Concerns. Worksheet 1.2 focuses on the financial
vv vv vv vv vv vv vv vv vv vv vv vv
benefit to the family of the second income. If the second income is from a minimum
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
wage job, it may not be agood financial decision. Of course having a job, even a
vv vv vv vv vv vv vv v vv vv vv vv vv vv vv vv vv
minimum wage job, may give the personpsychic income that will override the financial
vv vv vv vv vv vv vv v vv vv vv vv vv vv
impact.
vv
While perhaps off topic, I recall a high school science teacher who was a smoker. He
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
walked through the amount of money he spent on purchasing tobacco products. That
vv vv vv vv vv vv vv vv vv vv vv vv vv
computation had a
vv vv vv
, lot to do with my decision to not smoke. How this relates to the course is that this is
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
anillustration of how the financial impact of a decision can drive the decision.
vv v vv vv vv vv vv vv vv vv vv vv vv vv
LG4 Examine the economic environment’s influence on personal financial planning.
vv vv vv vv vv vv vv vv vv
For older folks, the financial crisis of 2008-2009 is fresh in our memory. To the student
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
of 2021,that crisis is more of history than life. If you can share a war story on how you
vv vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
were personally impacted, it will help bring the impact of the world economy on financial
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
plans to life. The bookspeaks how to manage this type of crisis, but you had to go
vv vv vv vv vv v vv vv vv vv vv vv vv vv vv vv vv vv
through it to really understand the impact it had.
vv vv vv vv vv vv vv vv vv
The value of professional advice is greatly understated. If by talking to a professional you
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
can prevent making a mistake -- that can be of a great value. Section 1-3e speaks to the
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
use of professional financial planners. Exhibit 1.9 lists out the various certifications that
vv vv vv vv vv vv vv vv vv vv vv vv vv
planners have.
vv vv
Economic or business cycles are real. Perhaps the most useful thing about the cycles is
vv vv vv vv vv vv vv vv vv vv vv vv vv vv
the knowledge that if things are bad, you know they will get better. Of course, when life
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
is good, you know that the bad cycle will come around again. Thus, financial planning
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
requires saving int he good times for the bad times. See the ―Test Yourself‖ question 1-
vv vv vv v vv vv vv vv vv vv vv v v vv vv vv vv vv
17 for a short discussion of business cycles.
vv vv vv vv vv vv vv
The power of compounding is rarely understood. Exhibit 1.8 shows how the amount
vv vv vv vv vv vv vv vv vv vv vv vv
$10,000will grow over time. The longer the investment stays invested, the greater the
vv v vv vv vv vv vv vv vv vv vv vv vv vv
amount – the power of compound interest.
vv vv vv vv vv vv vv
LG5 Evaluate the impact of age, education, and geographic location on personal income.
vv vv vv vv vv vv vv vv vv vv vv vv
Exhibit 1.12 says it all. vv vv vv vv
LG6 Understand the importance of career choices and their relationship to
vv vv vv vv vv vv vv vv vv vv
personalfinancial planning.
vv v vv
Exhibit 1.13 shows that the choice of a college major has a financial impact. Of course
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
moneycannot buy happiness, but having a bit helps. If you really want to be an elementary
vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
school teacher, you must recognize that you will not have as much wealth as a lawyer or
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
financial analyst.
vv vv
The summary of the learning goals at the end of the chapter should aid the student in
vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv vv
reviewing the chapter when exam time comes. It will be useful to point out to the
vv v vv vv vv vv vv vv vv vv vv vv vv vv vv vv
student how to use this material.
vv vv vv vv vv vv
Link to Solutions to Financial Planning Exercises
vv vv vv vv vv vv
Pre-tests
