Solution Manual for Personal Financial Planning 15th Edition by Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Solution Manual for Personal Financial Planning1
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Personal Financial Planning 15th Edition by Randy Billingsle
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y, Lawrence J. Gitman, Michael D. Joehnk
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Understanding the Financi G G




al Planning ProcessChapte
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HowGWillGThisGAffectGMe?
TheGheartGofGfinancialGplanningGisGmakingGsureGyourGvaluesGlineGupGwithGhowGyouGspendGandGsav
e.GThatGmeansGknowingGwhereGyouGareGfinanciallyGandGplanningGonGhowGtoGgetGwhereGyouGwantGto
GbeGinGtheGfutureGnoGmatterGwhatGlifeGthrowsGatGyou.GForGexample,GhowGshouldGyourGplanGhandleGt
heGprojectionGthatGSocialGSecurityGcostsGmayGexceedGrevenuesGbyG2035?GAndGwhatGifGtheGgovern
mentGdecidesGtoGraiseGtaxGratesGtoGhelpGcoverGtheGfederalGdeficit?GAnGinformedGfinancialGplanGshou
ldGreflectG suchGuncertaintiesGandG more.

ThisGchapterGoverviewsGtheGfinancialGplanningGprocessGandGexplainsGitsGcontext.GTopicsGinclude
GhowGfinancialGplansGchangeGtoG accommodateG yourGcurrentGstageGinGlifeGandGtheGroleGthatGfinanc

ialGplannersGcanGplayGinGhelpingGyouGachieveGyourGobjectives.GAfterGreadingGthisGchapterGyouGwi
llGhaveGaGgoodGperspectiveGonGhowGtoGorganizeG yourGoverallGpersonalGfinancialGplan.


LEARNING GOALS G




LG1GIdentifyGtheGbenefitsGofGusingGpersonalGfinancialGplanningGtechniquesGtoGmanageGyourG
finances.

KeyGconceptGinGthisGsectionGisGtheGplanningGmodelGasGdisplayedGinGExhibitG1.1.GYourGstandardGo
fGlivingGisGgreatlyGimpactedGbyGyourGspendingGhabitsGandGyourGcommitmentGtoGsaving.GYourGspe
ndingGisGmeasuredGbyGyourGpropensityGtoGconsume.GWealthGisGtheGtotalGvalueGofGallGpropertyG
youGownGlessGtheGamountGthatG youGoweGtoGothers.

ACTIVITY:G AskGtheGstudentsGtoGassumeGthatGtheyGhaveGjustG inheritedG$100,000.GWhatGwillGyouG
doGwithGtheG money?GWriteGdownGthreeGwaysG youGwillGspendGorGuseGtheG money.

,AskGtheGstudentsGtoGshareGoneGitemGwithGtheGclassGandGrecordGwhatGtheyGsayGsoGthatGtheGentireGcl
assGcanGreflectGonGtheGanswers.GHopefully,GatGleastGaGfewGwillGmentionGinvestingGevenGifGonlyG$1
0,000GofGtheGamount.GUseGtheirGanswersGtoGdiscussGtakingG careGofGcurrentG needsGversusGfutureGne
eds.
FocusGonGtheirGpropensityGtoGconsumeGandGitsGimpactGonGaccumulatingGwealth.GPointGoutGt
heGFinancialGPlanningGTip,G ―BeGSMARTG inGPlanningG YourGFinancialGGoals.‖
UseGExhibitG1.2GtoGshowGhowGtheGaverageGpersonGearnsGandGspendsGtheirGmoneyGandGExhibitG1.6Gt
oGhelpGtheGstudentG identifyGwhereGtheyGareG now.

LG2GDescribeGtheGpersonalGfinancialGplanningGprocessGandGdefineGyourGgoals.

DwightG Eisenhower,GarmyG generalGandGpresident,GisGquotedGasGsayingG―PlansGareGuseless;GPlannin
gGisGpriceless‖.GTheGprocessGofGplanningGallowsGyouGtoGfocusGonGtheGissuesGthatGareGmostGimport
antGandGtoGbeGreadyGwhenGthingsGchange.

ExhibitG1.3GlistsGtheGSixGStepGFinancialGPlanningGProcess.GTheGfirstGandGmostGimportantGisGdefi
ningGyourGfinancialGgoals.GExhibitG1.6GlistsGgoalsGbyGageGtoGdemonstrateGhowGgoalsGchangeGov
erGtime.GUseGtheGexamplesGinGExhibitG1.5GtoGaskGstudentsGifGtheGassumptionsGareGrealistic.GYes,Gt
heGanswerGisGinGtheGexhibit,GbutGmanyGwillGnotGhaveGreadGchapterGatGthisGpoint.GForGyourGuse,Gt
heGassumptionsGare:

AssumptionG1:GSavingGaGfewGthousandGdollarsGaGyearGshouldGprovideGenoughGtoGfundGmyGchild
‘sGcollegeGEducation.
AssumptionG2:GAnGemergencyGfundGlastingG3GmonthsGshouldGbeGadequate.
AssumptionG3:GIGwillGbeGableGtoGretireGatG65GandGshouldGhaveGplentyGtoGliveGonGinGretireme
nt.GAssumptionG4:GI‘mGrelyingGonGtheGruleGofGthumbGthatGIGwillGneedGonlyG70GpercentGofGm
yGpre-GretirementG incomeGtoG manageGnicelyGinGretirement.

ThereGareGseveralGworksheetsGinGtheGbook.GWorksheetG1.1GgivesGtheGstudentGaGformatGtoGwriteGd
ownGtheirGPersonalGFinancialGGoals.GThereGisGpowerGinGwritingGdownGgoalsG[andGmostGanyGotherG
plan].GRecordingGtheGgoalGandGthenGreviewingGthreeGmonthsGlaterGwillGhelpGyouGtoGkeepGfocusGo
nGtheGgoal.

LG3GExplainGtheGlifeGcycleGofGfinancialGplans,GtheirGroleGinGachievingGyourGfinancialGgoals
,GhowGtoGdealGwithGspecialGplanningGconcerns,GandGtheGuseGofGprofessionalGfinancialGplann
ers.

ExhibitG1.7GcanGhelpGfocusGtheGattentionGonGhowGgoalsGdifferGbetweenGtheGvariousGstagesGofGlife.
GSectionG1-3bGlistsGvariousGdecisionsGthatGyouGwillGhaveGtoGmakeGoverG yourGlife.GTheGsectionG1-

3cGaddressesGSpecialGPlanningGConcerns.GWorksheetG1.2GfocusesGonGtheGfinancialGbenefitGtoGtheG
familyGofGtheGsecondGincome.GIfGtheGsecondGincomeGisGfromGaGminimumGwageGjob,GitGmayGnotGb
eGaGgoodGfinancialGdecision.G OfGcourseGhavingGaGjob,GevenGaG minimumGwageG job,G mayGgiveGtheGp
ersonGpsychicG incomeGthatG willGoverrideGtheG financialGimpact.

WhileGperhapsGoffGtopic,GIGrecallGaGhighGschoolGscienceGteacherGwhoGwasGaGsmoker.GHeGwalkedG
throughGtheGamountGofGmoneyGheGspentGonGpurchasingGtobaccoG products.GThatGcomputationGhadG
a

, lotGtoGdoGwithGmyGdecisionGtoGnotG smoke.GHowGthisGrelatesGtoGtheGcourseGisGthatGthisGisGanGillustra
tionGofGhowGtheGfinancialGimpactGofGaGdecisionGcanGdriveGtheGdecision.

LG4GExamineGtheGeconomicGenvironment’sGinfluenceGonGpersonalGfinancialGplanning.

ForGolderGfolks,GtheGfinancialGcrisisGofG2008-
2009GisGfreshGinGourGmemory.GToGtheGstudentGofG2021,GthatGcrisisGisGmoreGofGhistoryGthanGlife.GIfG
youGcanGshareGaGwarGstoryGonGhowGyouGwereGpersonallyGimpacted,GitGwillGhelpGbringGtheGimpactG
ofGtheGworldGeconomyGonGfinancialGplansGtoGlife.GTheGbookGspeaksGhowGtoGmanageGthisGtypeGofGc
risis,GbutGyouGhadGtoGgoGthroughGitGtoGreallyGunderstandGtheGimpactG itG had.

TheGvalueGofGprofessionalGadviceGisGgreatlyGunderstated.GIfGbyGtalkingGtoGaGprofessionalGyouGcanGp
reventGmakingGaGmistakeG--GthatGcanGbeGofGaGgreatGvalue.GSectionG1-
3eGspeaksGtoGtheGuseGofGprofessionalGfinancialGplanners.GExhibitG1.9GlistsGoutGtheGvariousGcertificati
onsGthatGplannersGhave.

EconomicGorGbusinessGcyclesGareGreal.GPerhapsGtheGmostGusefulGthingGaboutGtheGcyclesGisGtheGkn
owledgeGthatGifGthingsGareGbad,GyouGknowGtheyGwillGgetGbetter.GOfGcourse,GwhenGlifeGisGgood,Gyo
uGknowGthatGtheGbadGcycleGwillGcomeGaroundGagain.GThus,G financialGplanningGrequiresGsavingGinGt
heGgoodGtimesG forGtheGbadGtimes.GG SeeGtheG―TestG Yourself‖GquestionG1-
17GforG aGshortG discussionGofGbusinessGcycles.

TheGpowerGofGcompoundingGisGrarelyGunderstood.GExhibitG1.8GshowsGhowGtheGamountG$10,0
00GwillGgrowGoverGtime.GTheGlongerGtheGinvestmentGstaysGinvested,GtheGgreaterGtheGamountG–
GtheGpowerGofGcompoundG interest.




LG5GEvaluateGtheGimpactGofGage,Geducation,GandGgeographicGlocationGonGpersonalGincome.

ExhibitG1.12GsaysGitGall.

LG6GUnderstandGtheGimportanceGofGcareerGchoicesGandGtheirGrelationshipGtoGpersonalGfinan
cialGplanning.

ExhibitG 1.13GshowsGthatGtheGchoiceGofGaGcollegeG majorGhasGaGfinancialGimpact.GOfGcourseGmoneyGc
annotGbuyGhappiness,GbutGhavingGaGbitGhelps.GIfGyouGreallyGwantGtoGbeGanGelementaryGschoolGteach
er,GyouGmustGrecognizeGthatGyouGwillGnotGhaveGasGmuchGwealthGasGaGlawyerGorGfinancialGanalyst.
TheGsummaryGofGtheGlearningGgoalsGatGtheGendGofGtheGchapterGshouldGaidGtheGstudentGinGreviewi
ngGtheGchapterGwhenGexamGtimeGcomes.GItGwillGbeGusefulGtoGpointGoutGtoGtheGstudentGhowGtoGuse
GthisGmaterial.



LinkGtoGSolutionsGtoGFinancialGPlanningGExercises

Pre-tests