SOLUTION MANUAL Personal Financial Planning, 16th Edition by Randy Billingsley, Lawrence J. Gitman All Chapters 1 to 15 complete Verified editon

SOLUTION MANUAL
Personal Financial Planning, 16th Edition
by Billingsley, Gitman, Chapters 1 - 15, Complete




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 bp




Understanding the Financial Planning Process bp bp bp bp

,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 save.Th
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at means knowing where you are financially and planning on how to get where you want to bein
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the future no matter what life throws at you. For example, how should your plan handle the proje
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ction that Social Security costs may exceed revenues by 2035? And what if the governmentdecid
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es to raise tax rates to help cover the federal deficit? An informed financial plan should reflect su
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ch uncertainties and more.
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This chapter overviews the financial planning process and explains its context. Topics include ho
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w financial plans change to accommodate your current stage in life and the role that financialpl
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anners can play in helping you achieve your objectives. After reading this chapter you will have
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a good perspective on how to organize your overall personal financial plan.
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LEARNING GOALS bp




LG1 Identify the benefits of using personal financial planning techniques to manage yourfi
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nances.

Key concept in this section is the planning model as displayed in Exhibit 1.1. Your standard of livin
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g is greatly impacted by your spending habits and your commitment to saving. Your spending is me
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asured by your propensity to consume. Wealth is the total value of all propertyyou own less the
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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 classc
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an reflect on the answers. Hopefully, at least a few will mention investing even if only $10,000of
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the amount. Use their answers to discuss taking care of current needs versus future 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 to
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help 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 i
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s priceless‖. The process of planning allows you to focus on the issues that are most important and
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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 y
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our financial goals. Exhibit 1.6 lists goals by age to demonstrate how goals change over time. U
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se the examples in Exhibit 1.5 to ask students if the assumptions are realistic. Yes,the answer is in
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the exhibit, but many will not have read chapter at this point. For your use, the assumptions are:
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Assumption 1: Saving a few thousand dollars a year should provide enough to fund my child‘sc
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ollege Education. bp



Assumption 2: An emergency fund lasting 3 months should be adequate. bp bp bp bp bp bp bp bp bp bp



Assumption 3: I will be able to retire at 65 and should have plenty to live on in retirement.
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Assumption 4: I‘m relying on the rule of thumb that I will need only 70 percent of my pre-
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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 do
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wn their Personal Financial Goals. There is power in writing down goals [and most any otherplan]
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. Recording the goal and then reviewing three months later will help you to keep focus on the go
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al.

LG3 Explain the life cycle of financial plans, their role in achieving your financial goals, ho
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w 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. Se
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ction 1-3b lists various decisions that you will have to make over your life. The section 1-
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3c addresses Special Planning Concerns. Worksheet 1.2 focuses on the financial benefit to the fa
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mily of the second income. If the second income is from a minimum wage job, it may not be agood
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financial decision. Of course having a job, even a minimum wage job, may give the personpsychic
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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 thro
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ugh the amount of money he spent on purchasing tobacco products. That computation had a
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