SOLUTION MANUAL Personal Financial Planning, 16th Edition By BILLINGSLEY, GITMAN Chapters 1 - 15, Completed

SOLUTION MANUAL
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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 b




Understanding the Financial Planning Process b b b b

,How Will This Affect Me?
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The heart of financial planning is making sure your values line up with how you spend and
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save.That means knowing where you are financially and planning on how to get where you want
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to bein the future no matter what life throws at you. For example, how should your plan handle
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the projection that Social Security costs may exceed revenues by 2035? And what if the
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governmentdecides to raise tax rates to help cover the federal deficit? An informed financial
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plan should reflect such uncertainties and more.
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This chapter overviews the financial planning process and explains its context. Topics include
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how financial plans change to accommodate your current stage in life and the role that
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financialplanners can play in helping you achieve your objectives. After reading this chapter
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you will have a good perspective on how to organize your overall personal financial plan.
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LEARNING GOALS b




LG1 Identify the benefits of using personal financial planning techniques to manage
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yourfinances.
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Key concept in this section is the planning model as displayed in Exhibit 1.1. Your standard of
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living is greatly impacted by your spending habits and your commitment to saving. Your spending
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is measured by your propensity to consume. Wealth is the total value of all propertyyou own
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less the amount that you owe to others.
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ACTIVITY: Ask the students to assume that they have just inherited $100,000. What will youdo
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with the money? Write down three ways you will spend or use the money.
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, Ask the students to share one item with the class and record what they say so that the entire
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class can reflect on the answers. Hopefully, at least a few will mention investing even if only
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$10,000 of the amount. Use their answers to discuss taking care of current needs versus future
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needs.
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Focus on their propensity to consume and its impact on accumulating wealth. Point out theFinancial
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Planning Tip, ―Be SMART in Planning Your Financial Goals.‖
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Use Exhibit 1.2 to show how the average person earns and spends their money and Exhibit 1.6
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tohelp the student identify where they are now.
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LG2 Describe the personal financial planning process and define your goals.
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Dwight Eisenhower, army general and president, is quoted as saying ―Plans are useless; Planning
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is priceless‖. The process of planning allows you to focus on the issues that are most important
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and to be ready when things change.
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Exhibit 1.3 lists the Six Step Financial Planning Process. The first and most important is defining
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your financial goals. Exhibit 1.6 lists goals by age to demonstrate how goals change over time.
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Use the examples in Exhibit 1.5 to ask students if the assumptions are realistic. Yes,the answer is
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in the exhibit, but many will not have read chapter at this point. For your use, the assumptions
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are:
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Assumption 1: Saving a few thousand dollars a year should provide enough to fund my
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child‗scollege Education.
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Assumption 2: An emergency fund lasting 3 months should be adequate.
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Assumption 3: I will be able to retire at 65 and should have plenty to live on in
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retirement. Assumption 4: I‗m relying on the rule of thumb that I will need only 70 percent
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of my pre-retirement income to manage nicely in retirement.
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There are several worksheets in the book. Worksheet 1.1 gives the student a format to write
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down their Personal Financial Goals. There is power in writing down goals [and most any
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otherplan]. Recording the goal and then reviewing three months later will help you to keep
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focus on the goal.
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LG3 Explain the life cycle of financial plans, their role in achieving your financial goals,
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how to deal with special planning concerns, and the use of professional financial planners.
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Exhibit 1.7 can help focus the attention on how goals differ between the various stages of life.
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Section 1-3b lists various decisions that you will have to make over your life. The section 1-3c
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addresses Special Planning Concerns. Worksheet 1.2 focuses on the financial benefit to the
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family of the second income. If the second income is from a minimum wage job, it may not be
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agood financial decision. Of course having a job, even a minimum wage job, may give the
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personpsychic income that will override the financial impact.
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While perhaps off topic, I recall a high school science teacher who was a smoker. He walked
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through the amount of money he spent on purchasing tobacco products. That computation had a
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