Solution Manual for Personal Financial Planning 15th Edition by Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk All Chapters Newest version updated 2025

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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.CI CI CI




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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Understanding the Financial Planning Pro CI CICI CI C
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cess Chapter 1 CI CI




How Will This Affect Me? CI CI CI CI



The heart of financial planning is making sure your values line up with how you spend and save.
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That means knowing where you are financially and planning on how to get where you want to be i
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n the future no matter what life throws at you. For example, how should your plan handle the proj
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ection that Social Security costs may exceed revenues by 2035? And what if the government deci
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des to raise tax rates to help cover the federal deficit? An informed financial plan should reflect s
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uch uncertainties and more.
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This chapter overviews the financial planning process and explains its context. Topics include h
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ow financial plans change to accommodate your current stage in life and the role that financial pl
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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 CI




LG1 Identify the benefits of using personal financial planning techniques to manage your fi
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,nances.

Key concept in this section is the planning model as displayed in Exhibit 1.1. Your standard of l
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iving is greatly impacted by your spending habits and your commitment to saving. Your spendi
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ng is measured by your propensity to consume. Wealth is the total value of all property you o
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wn 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 you d
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o 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 class
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can reflect on the answers. Hopefully, at least a few will mention investing even if only $10,000
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of 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 the Financi
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al 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 h
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elp 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 a
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nd 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 definin
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g 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
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is in the exhibit, but many will not have read chapter at this point. For your use, the assumptions
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are:

Assumption 1: Saving a few thousand dollars a year should provide enough to fund my child‘s
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college Education. CI



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



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 other plan
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]. Recording the goal and then reviewing three months later will help you to keep focus on the g
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oal.

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. S
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ection 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 f
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amily of the second income. If the second income is from a minimum wage job, it may not be a g
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ood financial decision. Of course having a job, even a minimum wage job, may give the person p
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sychic 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 th
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rough the amount of money he spent on purchasing tobacco products. That computation had a
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