Solution Manual for Personal Financial Planning, 16th Edition 2024 by Randy Billingsley, Lawrence J. Gitman, Verified

SOLUTION MANUALnd




Personal Financial Planning,16th Edition
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by Billingsley, Gitman, Chapters 1 - 15, Complete
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Table of Contents
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,Part I: FOUNDATIONS OF FINANCIAL PLANNING.
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1. Understanding the Financial Planning Process.
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2. Developing Your Financial Statements and Plans.
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3. Preparing Your Taxes.
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Part II: MANAGING BASIC ASSETS.
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4. Managing Your Cash and Savings.
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5. Making Automobile and Housing Decisions.
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Part III: MANAGING CREDIT.
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6. Using Credit.
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7. Using Consumer Loans.
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Part IV: MANAGING INSURANCE NEEDS.
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8. Insuring Your Life.
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9. Insuring Your Health.
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10. Protecting Your Property.
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Part V: MANAGING INVESTMENTS.
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11. Investment Planning.
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12. Investing in Stocks and Bonds.
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13. Investing in Mutual Funds and Real Estate.
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Part VI: RETIREMENT AND ESTATE PLANNING.
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14. Planning for Retirement.
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15. Preserving Your Estate.
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Chapter 1 nd




Understanding the Financial Planning Process nd nd nd nd

,How ndWill ndThis ndAffect ndMe?
The ndheart ndof ndfinancial ndplanning ndis ndmaking ndsure ndyour ndvalues ndline ndup ndwith ndhow ndyou ndspend
ndand ndsave.dnThat ndmeans ndknowing ndwhere ndyou ndare ndfinancially ndand ndplanning ndon ndhow ndto ndget

ndwhere ndyou ndwant ndto ndbed nin ndthe ndfuture ndno ndmatter ndwhat ndlife ndthrows ndat ndyou. ndFor ndexample,

ndhow ndshould ndyour ndplan ndhandle ndthe ndprojection ndthat ndSocial ndSecurity ndcosts ndmay ndexceed

ndrevenues ndby nd2035? ndAnd ndwhat ndif ndthe ndgovernmentd ndecides ndto ndraise ndtax ndrates ndto ndhelp ndcover

ndthe ndfederal nddeficit? ndAn ndinformed ndfinancial ndplan ndshould ndreflect nd such nduncertainties ndand nd more.




This ndchapter ndoverviews ndthe ndfinancial ndplanning ndprocess ndand ndexplains ndits ndcontext. ndTopics
ndinclude ndhow ndfinancial ndplans ndchange ndto ndaccommodate ndyour ndcurrent ndstage ndin ndlife ndand ndthe

ndrole ndthat ndfinanciald
nplanners ndcan ndplay ndin ndhelping ndyou ndachieve ndyour ndobjectives. ndAfter

ndreading ndthis ndchapter ndyou ndwill ndhave nda ndgood ndperspective ndon ndhow ndto ndorganize nd your

ndoverall ndpersonal ndfinancial ndplan.




LEARNING GOALS nd




LG1 ndIdentify ndthe ndbenefits ndof ndusing ndpersonal ndfinancial ndplanning ndtechniques ndto ndmanage
ndyourdfinances.
n




Key ndconcept ndin ndthis ndsection ndis ndthe ndplanning ndmodel ndas nddisplayed ndin ndExhibit nd1.1. ndYour
ndstandard ndof ndliving ndis ndgreatly ndimpacted ndby ndyour ndspending ndhabits ndand ndyour ndcommitment ndto

ndsaving. ndYour ndspending ndis ndmeasured ndby ndyour ndpropensity ndto ndconsume. ndWealth ndis ndthe ndtotal

ndvalue ndof ndall ndpropertyd nyou ndown ndless ndthe ndamount ndthat nd you ndowe ndto ndothers.




ACTIVITY: n d Ask ndthe ndstudents ndto ndassume ndthat ndthey ndhave ndjust ndinherited nd$100,000. ndWhat ndwill
ndyoud
ndo ndwith ndthe nd money? ndWrite nddown ndthree ndways ndyou ndwill ndspend ndor nduse ndthe nd money.

, Ask ndthe ndstudents ndto ndshare ndone nditem ndwith ndthe ndclass ndand ndrecord ndwhat ndthey ndsay ndso ndthat ndthe
ndentire ndclass d
cn an ndreflect ndon ndthe ndanswers. ndHopefully, ndat ndleast nda ndfew ndwill ndmention ndinvesting
ndeven ndif ndonly nd$10,000 d nof ndthe ndamount. n d Use ndtheir ndanswers ndto nddiscuss ndtaking ndcare ndof ndcurrent

nd needs ndversus ndfuture ndneeds.

Focus ndon ndtheir ndpropensity ndto ndconsume ndand ndits ndimpact ndon ndaccumulating ndwealth. ndPoint ndout
nFinancial ndPlanning ndTip, nd ―Be ndSMART nd in ndPlanning nd Your ndFinancial ndGoals.‖
ndthed

Use ndExhibit nd1.2 ndto ndshow ndhow ndthe ndaverage ndperson ndearns ndand ndspends ndtheir ndmoney ndand
ndExhibit nd1.6 ndtodnhelp ndthe ndstudent nd identify ndwhere ndthey ndare nd now.




LG2 ndDescribe ndthe ndpersonal ndfinancial ndplanning ndprocess ndand nddefine ndyour ndgoals.

Dwight ndEisenhower, ndarmy ndgeneral ndand ndpresident, ndis ndquoted ndas ndsaying nd ―Plans ndare nduseless;
ndPlanning ndis ndpriceless‖. ndThe ndprocess ndof ndplanning ndallows ndyou ndto ndfocus ndon ndthe ndissues ndthat ndare

ndmost ndimportant ndand ndto ndbe ndready ndwhen ndthings ndchange.




Exhibit nd1.3 ndlists ndthe ndSix ndStep ndFinancial ndPlanning ndProcess. ndThe ndfirst ndand ndmost ndimportant ndis
nddefining ndyour ndfinancial ndgoals. ndExhibit nd1.6 ndlists ndgoals ndby ndage ndto nddemonstrate ndhow ndgoals

ndchange ndover ndtime. ndUse ndthe ndexamples ndin ndExhibit nd 1.5 ndto ndask ndstudents ndif ndthe ndassumptions

ndare ndrealistic. ndYes,dnthe ndanswer ndis ndin ndthe ndexhibit, ndbut ndmany ndwill ndnot ndhave ndread ndchapter ndat

ndthis ndpoint. ndFor ndyour nduse, ndthe ndassumptions ndare:




Assumption nd1: ndSaving nda ndfew ndthousand nddollars nda ndyear ndshould ndprovide ndenough ndto ndfund
ndmy ndchild‗sd
ncollege ndEducation.

Assumption nd2: ndAn ndemergency ndfund ndlasting nd3 ndmonths ndshould ndbe ndadequate.
Assumption nd3: ndI ndwill ndbe ndable ndto ndretire ndat nd65 ndand ndshould ndhave ndplenty ndto ndlive ndon ndin
ndretirement. d nAssumption nd4: ndI‗m ndrelying ndon ndthe ndrule ndof ndthumb ndthat ndI ndwill ndneed ndonly nd70

ndpercent ndof ndmy ndpre-dnretirement nd income ndto nd manage nd nicely ndin ndretirement.




There ndare ndseveral ndworksheets ndin ndthe ndbook. ndWorksheet nd1.1 ndgives ndthe ndstudent nda ndformat ndto
ndwrite nddown ndtheir ndPersonal ndFinancial ndGoals. ndThere ndis ndpower ndin ndwriting nddown ndgoals nd[and

nd most nd any ndotherd
nplan]. ndRecording ndthe ndgoal ndand ndthen ndreviewing ndthree ndmonths ndlater ndwill

ndhelp ndyou ndto ndkeep ndfocus ndon ndthe ndgoal.




LG3 ndExplain ndthe ndlife ndcycle ndof ndfinancial ndplans, ndtheir ndrole ndin ndachieving ndyour ndfinancial
ndgoals, ndhow ndto nddeal ndwith ndspecial ndplanning ndconcerns, ndand ndthe nduse ndof nd professional

ndfinancial ndplanners.




Exhibit nd1.7 ndcan ndhelp ndfocus ndthe ndattention ndon ndhow ndgoals nddiffer ndbetween ndthe ndvarious ndstages
ndof ndlife. ndSection nd1-3b ndlists ndvarious nddecisions ndthat ndyou ndwill ndhave ndto ndmake ndover ndyour ndlife.

ndThe ndsection nd1-3c ndaddresses ndSpecial ndPlanning ndConcerns. ndWorksheet nd1.2 ndfocuses ndon ndthe

ndfinancial ndbenefit ndto ndthe ndfamily ndof ndthe ndsecond ndincome. ndIf ndthe ndsecond ndincome ndis ndfrom nda

ndminimum ndwage ndjob, ndit ndmay ndnot ndbe ndad ngood ndfinancial nddecision. nd Of ndcourse ndhaving nda ndjob,

ndeven nda ndminimum ndwage ndjob, nd may ndgive ndthe ndpersond npsychic nd income ndthat nd will ndoverride ndthe

nd financial ndimpact.




While ndperhaps ndoff ndtopic, ndI ndrecall nda ndhigh ndschool ndscience ndteacher ndwho ndwas nda ndsmoker. ndHe
ndwalked ndthrough ndthe ndamount ndof ndmoney ndhe ndspent ndon ndpurchasing ndtobacco ndproducts. n d That

ndcomputation ndhad nda