SOLUTION MANUALR
Personal Financial Planning,16th Edition
R R R R
by Billingsley, Gitman, Chapters 1 - 15, Complete
R R R R R R R
Table of Contents
R R R
,Part RI: RFOUNDATIONS ROF RFINANCIAL RPLANNING.
1. RUnderstanding Rthe RFinancial RPlanning RProcess.
2. RDeveloping RYour RFinancial RStatements Rand RPlans.
3. RPreparing RYour RTaxes.
Part RII: RMANAGING RBASIC RASSETS.
4. RManaging RYour RCash Rand RSavings.
5. RMaking RAutomobile Rand RHousing RDecisions.
Part RIII: RMANAGING RCREDIT.
6. RUsing RCredit.
7. RUsing RConsumer RLoans.
Part RIV: RMANAGING RINSURANCE RNEEDS.
8. RInsuring RYour RLife.
9. RInsuring RYour RHealth.
10. RProtecting RYour RProperty.
Part RV: RMANAGING RINVESTMENTS.
11. RInvestment RPlanning.
12. RInvesting Rin RStocks Rand RBonds.
13. RInvesting Rin RMutual RFunds Rand RReal REstate.
Part RVI: RRETIREMENT RAND RESTATE RPLANNING.
14. RPlanning Rfor RRetirement.
15. RPreserving RYour REstate.
Chapter 1 R
Understanding the Financial Planning Process
R R R R
How RWill RThis RAffect RMe?
The Rheart Rof Rfinancial Rplanning Ris Rmaking Rsure Ryour Rvalues Rline Rup Rwith Rhow Ryou
Rspend Rand Rsave.RThat Rmeans Rknowing Rwhere Ryou Rare Rfinancially Rand Rplanning Ron
Rhow Rto Rget Rwhere Ryou Rwant Rto RbeRin Rthe Rfuture Rno Rmatter Rwhat Rlife Rthrows Rat
Ryou. RFor Rexample, Rhow Rshould Ryour Rplan Rhandle Rthe Rprojection Rthat RSocial RSecurity
Rcosts Rmay Rexceed Rrevenues Rby R2035? RAnd Rwhat Rif Rthe RgovernmentRdecides Rto Rraise
Rtax Rrates Rto Rhelp Rcover Rthe Rfederal Rdeficit? RAn Rinformed Rfinancial Rplan Rshould Rreflect
Rsuch Runcertainties Rand Rmore.
This Rchapter Roverviews Rthe Rfinancial Rplanning Rprocess Rand Rexplains Rits Rcontext. RTopics
Rinclude Rhow Rfinancial Rplans Rchange Rto Raccommodate Ryour Rcurrent Rstage Rin Rlife Rand
Rthe Rrole Rthat RfinancialRplanners Rcan Rplay Rin Rhelping Ryou Rachieve Ryour Robjectives.
RAfter Rreading Rthis Rchapter Ryou Rwill Rhave Ra Rgood Rperspective Ron Rhow Rto Rorganize
Ryour Roverall Rpersonal Rfinancial Rplan.
LEARNING RGOALS
,LG1 RIdentify Rthe Rbenefits Rof Rusing Rpersonal Rfinancial Rplanning Rtechniques Rto
Rmanage RyourRfinances.
Key Rconcept Rin Rthis Rsection Ris Rthe Rplanning Rmodel Ras Rdisplayed Rin RExhibit R1.1. RYour
Rstandard Rof Rliving Ris Rgreatly Rimpacted Rby Ryour Rspending Rhabits Rand Ryour Rcommitment
Rto Rsaving. RYour Rspending Ris Rmeasured Rby Ryour Rpropensity Rto Rconsume. RWealth Ris
Rthe Rtotal Rvalue Rof Rall RpropertyRyou Rown Rless Rthe Ramount Rthat Ryou Rowe Rto Rothers.
ACTIVITY: R Ask Rthe Rstudents Rto Rassume Rthat Rthey Rhave Rjust Rinherited R$100,000.
RWhat Rwill RyouRdo Rwith Rthe Rmoney? RWrite Rdown Rthree Rways Ryou Rwill Rspend Ror Ruse
Rthe Rmoney.
, Ask Rthe Rstudents Rto Rshare Rone Ritem Rwith Rthe Rclass Rand Rrecord Rwhat Rthey Rsay Rso
Rthat Rthe Rentire Rclass Rcan Rreflect Ron Rthe Ranswers. RHopefully, Rat Rleast Ra Rfew Rwill
Rmention Rinvesting Reven Rif Ronly R$10,000 Rof Rthe Ramount. R Use Rtheir Ranswers Rto
Rdiscuss Rtaking Rcare Rof Rcurrent Rneeds Rversus Rfuture Rneeds.
Focus Ron Rtheir Rpropensity Rto Rconsume Rand Rits Rimpact Ron Raccumulating Rwealth. RPoint
Rout RtheRFinancial RPlanning RTip, R―Be RSMART Rin RPlanning RYour RFinancial RGoals.‖
Use RExhibit R1.2 Rto Rshow Rhow Rthe Raverage Rperson Rearns Rand Rspends Rtheir Rmoney
Rand RExhibit R1.6 RtoRhelp Rthe Rstudent Ridentify Rwhere Rthey Rare Rnow.
LG2 RDescribe Rthe Rpersonal Rfinancial Rplanning Rprocess Rand Rdefine Ryour Rgoals.
Dwight REisenhower, Rarmy Rgeneral Rand Rpresident, Ris Rquoted Ras Rsaying R―Plans Rare
Ruseless; RPlanning Ris Rpriceless‖. RThe Rprocess Rof Rplanning Rallows Ryou Rto Rfocus Ron Rthe
Rissues Rthat Rare Rmost Rimportant Rand Rto Rbe Rready Rwhen Rthings Rchange.
Exhibit R1.3 Rlists Rthe RSix RStep RFinancial RPlanning RProcess. RThe Rfirst Rand Rmost
Rimportant Ris Rdefining Ryour Rfinancial Rgoals. RExhibit R1.6 Rlists Rgoals Rby Rage Rto
Rdemonstrate Rhow Rgoals Rchange Rover Rtime. RUse Rthe Rexamples Rin RExhibit R1.5 Rto Rask
Rstudents Rif Rthe Rassumptions Rare Rrealistic. RYes,Rthe Ranswer Ris Rin Rthe Rexhibit, Rbut
Rmany Rwill Rnot Rhave Rread Rchapter Rat Rthis Rpoint. RFor Ryour Ruse, Rthe Rassumptions
Rare:
Assumption R1: RSaving Ra Rfew Rthousand Rdollars Ra Ryear Rshould Rprovide Renough Rto
Rfund Rmy Rchild‘sRcollege REducation.
Assumption R2: RAn Remergency Rfund Rlasting R3 Rmonths Rshould Rbe Radequate.
Assumption R3: RI Rwill Rbe Rable Rto Rretire Rat R65 Rand Rshould Rhave Rplenty Rto Rlive
Ron Rin Rretirement. RAssumption R4: RI‘m Rrelying Ron Rthe Rrule Rof Rthumb Rthat RI Rwill
Rneed Ronly R70 Rpercent Rof Rmy Rpre- Rretirement Rincome Rto Rmanage Rnicely Rin
Rretirement.
There Rare Rseveral Rworksheets Rin Rthe Rbook. RWorksheet R1.1 Rgives Rthe Rstudent Ra
Rformat Rto Rwrite Rdown Rtheir RPersonal RFinancial RGoals. RThere Ris Rpower Rin Rwriting
Rdown Rgoals R[and Rmost Rany RotherRplan]. RRecording Rthe Rgoal Rand Rthen Rreviewing
Rthree Rmonths Rlater Rwill Rhelp Ryou Rto Rkeep Rfocus Ron Rthe Rgoal.
LG3 RExplain Rthe Rlife Rcycle Rof Rfinancial Rplans, Rtheir Rrole Rin Rachieving Ryour
Rfinancial Rgoals, Rhow Rto Rdeal Rwith Rspecial Rplanning Rconcerns, Rand Rthe Ruse Rof
Rprofessional Rfinancial Rplanners.
Exhibit R1.7 Rcan Rhelp Rfocus Rthe Rattention Ron Rhow Rgoals Rdiffer Rbetween Rthe Rvarious
Rstages Rof Rlife. RSection R1-3b Rlists Rvarious Rdecisions Rthat Ryou Rwill Rhave Rto Rmake Rover
Ryour Rlife. RThe Rsection R1-3c Raddresses RSpecial RPlanning RConcerns. RWorksheet R1.2
Rfocuses Ron Rthe Rfinancial Rbenefit Rto Rthe Rfamily Rof Rthe Rsecond Rincome. RIf Rthe Rsecond
Rincome Ris Rfrom Ra Rminimum Rwage Rjob, Rit Rmay Rnot Rbe RaRgood Rfinancial Rdecision. ROf
Rcourse Rhaving Ra Rjob, Reven Ra Rminimum Rwage Rjob, Rmay Rgive Rthe RpersonRpsychic
Rincome Rthat Rwill Roverride Rthe Rfinancial Rimpact.
While Rperhaps Roff Rtopic, RI Rrecall Ra Rhigh Rschool Rscience Rteacher Rwho Rwas Ra Rsmoker.
RHe Rwalked Rthrough Rthe Ramount Rof Rmoney Rhe Rspent Ron Rpurchasing Rtobacco Rproducts.
R That Rcomputation Rhad Ra
Personal Financial Planning,16th Edition
R R R R
by Billingsley, Gitman, Chapters 1 - 15, Complete
R R R R R R R
Table of Contents
R R R
,Part RI: RFOUNDATIONS ROF RFINANCIAL RPLANNING.
1. RUnderstanding Rthe RFinancial RPlanning RProcess.
2. RDeveloping RYour RFinancial RStatements Rand RPlans.
3. RPreparing RYour RTaxes.
Part RII: RMANAGING RBASIC RASSETS.
4. RManaging RYour RCash Rand RSavings.
5. RMaking RAutomobile Rand RHousing RDecisions.
Part RIII: RMANAGING RCREDIT.
6. RUsing RCredit.
7. RUsing RConsumer RLoans.
Part RIV: RMANAGING RINSURANCE RNEEDS.
8. RInsuring RYour RLife.
9. RInsuring RYour RHealth.
10. RProtecting RYour RProperty.
Part RV: RMANAGING RINVESTMENTS.
11. RInvestment RPlanning.
12. RInvesting Rin RStocks Rand RBonds.
13. RInvesting Rin RMutual RFunds Rand RReal REstate.
Part RVI: RRETIREMENT RAND RESTATE RPLANNING.
14. RPlanning Rfor RRetirement.
15. RPreserving RYour REstate.
Chapter 1 R
Understanding the Financial Planning Process
R R R R
How RWill RThis RAffect RMe?
The Rheart Rof Rfinancial Rplanning Ris Rmaking Rsure Ryour Rvalues Rline Rup Rwith Rhow Ryou
Rspend Rand Rsave.RThat Rmeans Rknowing Rwhere Ryou Rare Rfinancially Rand Rplanning Ron
Rhow Rto Rget Rwhere Ryou Rwant Rto RbeRin Rthe Rfuture Rno Rmatter Rwhat Rlife Rthrows Rat
Ryou. RFor Rexample, Rhow Rshould Ryour Rplan Rhandle Rthe Rprojection Rthat RSocial RSecurity
Rcosts Rmay Rexceed Rrevenues Rby R2035? RAnd Rwhat Rif Rthe RgovernmentRdecides Rto Rraise
Rtax Rrates Rto Rhelp Rcover Rthe Rfederal Rdeficit? RAn Rinformed Rfinancial Rplan Rshould Rreflect
Rsuch Runcertainties Rand Rmore.
This Rchapter Roverviews Rthe Rfinancial Rplanning Rprocess Rand Rexplains Rits Rcontext. RTopics
Rinclude Rhow Rfinancial Rplans Rchange Rto Raccommodate Ryour Rcurrent Rstage Rin Rlife Rand
Rthe Rrole Rthat RfinancialRplanners Rcan Rplay Rin Rhelping Ryou Rachieve Ryour Robjectives.
RAfter Rreading Rthis Rchapter Ryou Rwill Rhave Ra Rgood Rperspective Ron Rhow Rto Rorganize
Ryour Roverall Rpersonal Rfinancial Rplan.
LEARNING RGOALS
,LG1 RIdentify Rthe Rbenefits Rof Rusing Rpersonal Rfinancial Rplanning Rtechniques Rto
Rmanage RyourRfinances.
Key Rconcept Rin Rthis Rsection Ris Rthe Rplanning Rmodel Ras Rdisplayed Rin RExhibit R1.1. RYour
Rstandard Rof Rliving Ris Rgreatly Rimpacted Rby Ryour Rspending Rhabits Rand Ryour Rcommitment
Rto Rsaving. RYour Rspending Ris Rmeasured Rby Ryour Rpropensity Rto Rconsume. RWealth Ris
Rthe Rtotal Rvalue Rof Rall RpropertyRyou Rown Rless Rthe Ramount Rthat Ryou Rowe Rto Rothers.
ACTIVITY: R Ask Rthe Rstudents Rto Rassume Rthat Rthey Rhave Rjust Rinherited R$100,000.
RWhat Rwill RyouRdo Rwith Rthe Rmoney? RWrite Rdown Rthree Rways Ryou Rwill Rspend Ror Ruse
Rthe Rmoney.
, Ask Rthe Rstudents Rto Rshare Rone Ritem Rwith Rthe Rclass Rand Rrecord Rwhat Rthey Rsay Rso
Rthat Rthe Rentire Rclass Rcan Rreflect Ron Rthe Ranswers. RHopefully, Rat Rleast Ra Rfew Rwill
Rmention Rinvesting Reven Rif Ronly R$10,000 Rof Rthe Ramount. R Use Rtheir Ranswers Rto
Rdiscuss Rtaking Rcare Rof Rcurrent Rneeds Rversus Rfuture Rneeds.
Focus Ron Rtheir Rpropensity Rto Rconsume Rand Rits Rimpact Ron Raccumulating Rwealth. RPoint
Rout RtheRFinancial RPlanning RTip, R―Be RSMART Rin RPlanning RYour RFinancial RGoals.‖
Use RExhibit R1.2 Rto Rshow Rhow Rthe Raverage Rperson Rearns Rand Rspends Rtheir Rmoney
Rand RExhibit R1.6 RtoRhelp Rthe Rstudent Ridentify Rwhere Rthey Rare Rnow.
LG2 RDescribe Rthe Rpersonal Rfinancial Rplanning Rprocess Rand Rdefine Ryour Rgoals.
Dwight REisenhower, Rarmy Rgeneral Rand Rpresident, Ris Rquoted Ras Rsaying R―Plans Rare
Ruseless; RPlanning Ris Rpriceless‖. RThe Rprocess Rof Rplanning Rallows Ryou Rto Rfocus Ron Rthe
Rissues Rthat Rare Rmost Rimportant Rand Rto Rbe Rready Rwhen Rthings Rchange.
Exhibit R1.3 Rlists Rthe RSix RStep RFinancial RPlanning RProcess. RThe Rfirst Rand Rmost
Rimportant Ris Rdefining Ryour Rfinancial Rgoals. RExhibit R1.6 Rlists Rgoals Rby Rage Rto
Rdemonstrate Rhow Rgoals Rchange Rover Rtime. RUse Rthe Rexamples Rin RExhibit R1.5 Rto Rask
Rstudents Rif Rthe Rassumptions Rare Rrealistic. RYes,Rthe Ranswer Ris Rin Rthe Rexhibit, Rbut
Rmany Rwill Rnot Rhave Rread Rchapter Rat Rthis Rpoint. RFor Ryour Ruse, Rthe Rassumptions
Rare:
Assumption R1: RSaving Ra Rfew Rthousand Rdollars Ra Ryear Rshould Rprovide Renough Rto
Rfund Rmy Rchild‘sRcollege REducation.
Assumption R2: RAn Remergency Rfund Rlasting R3 Rmonths Rshould Rbe Radequate.
Assumption R3: RI Rwill Rbe Rable Rto Rretire Rat R65 Rand Rshould Rhave Rplenty Rto Rlive
Ron Rin Rretirement. RAssumption R4: RI‘m Rrelying Ron Rthe Rrule Rof Rthumb Rthat RI Rwill
Rneed Ronly R70 Rpercent Rof Rmy Rpre- Rretirement Rincome Rto Rmanage Rnicely Rin
Rretirement.
There Rare Rseveral Rworksheets Rin Rthe Rbook. RWorksheet R1.1 Rgives Rthe Rstudent Ra
Rformat Rto Rwrite Rdown Rtheir RPersonal RFinancial RGoals. RThere Ris Rpower Rin Rwriting
Rdown Rgoals R[and Rmost Rany RotherRplan]. RRecording Rthe Rgoal Rand Rthen Rreviewing
Rthree Rmonths Rlater Rwill Rhelp Ryou Rto Rkeep Rfocus Ron Rthe Rgoal.
LG3 RExplain Rthe Rlife Rcycle Rof Rfinancial Rplans, Rtheir Rrole Rin Rachieving Ryour
Rfinancial Rgoals, Rhow Rto Rdeal Rwith Rspecial Rplanning Rconcerns, Rand Rthe Ruse Rof
Rprofessional Rfinancial Rplanners.
Exhibit R1.7 Rcan Rhelp Rfocus Rthe Rattention Ron Rhow Rgoals Rdiffer Rbetween Rthe Rvarious
Rstages Rof Rlife. RSection R1-3b Rlists Rvarious Rdecisions Rthat Ryou Rwill Rhave Rto Rmake Rover
Ryour Rlife. RThe Rsection R1-3c Raddresses RSpecial RPlanning RConcerns. RWorksheet R1.2
Rfocuses Ron Rthe Rfinancial Rbenefit Rto Rthe Rfamily Rof Rthe Rsecond Rincome. RIf Rthe Rsecond
Rincome Ris Rfrom Ra Rminimum Rwage Rjob, Rit Rmay Rnot Rbe RaRgood Rfinancial Rdecision. ROf
Rcourse Rhaving Ra Rjob, Reven Ra Rminimum Rwage Rjob, Rmay Rgive Rthe RpersonRpsychic
Rincome Rthat Rwill Roverride Rthe Rfinancial Rimpact.
While Rperhaps Roff Rtopic, RI Rrecall Ra Rhigh Rschool Rscience Rteacher Rwho Rwas Ra Rsmoker.
RHe Rwalked Rthrough Rthe Ramount Rof Rmoney Rhe Rspent Ron Rpurchasing Rtobacco Rproducts.
R That Rcomputation Rhad Ra
