solution manual for
personal financial planning 16th edition by randy
billingsley, lawrence j. gitman, michael d. joehnk
,understanding the
financial planning process
chapter 1
how will this affect me?
the heart of financial planning is making sure your values line up with how you spend and
save.that means knowing where you are financially and planning on how to get where you want
to bein the future no matter what life throws at you. for example, how should your plan handle
the projection that social security costs may exceed revenues by 2035? and what if the
governmentdecides to raise tax rates to help cover the federal deficit? an informed financial plan
should reflect such uncertainties and more.
this chapter overviews the financial planning process and explains its context. topics include
how financial plans change to accommodate your current stage in life and the role that
financialplanners can play in helping you achieve your objectives. after reading this chapter
you will have a good perspective on how to organize your overall personal financial plan.
learning goals
lg1 identify the benefits of using personal financial planning techniques to manage
yourfinances.
key concept in this section is the planning model as displayed in exhibit 1.1. your standard of
living is greatly impacted by your spending habits and your commitment to saving. your
spending is measured by your propensity to consume. wealth is the total value of all
propertyyou own less the amount that you owe to others.
activity: ask the students to assume that they have just inherited $100,000. what will youdo with
the money? write down three ways you will spend or use the money.
,ask the students to share one item with the class and record what they say so that the entire class
can reflect on the answers. hopefully, at least a few will mention investing even if only $10,000
of the amount. use their answers to discuss taking care of current needs versus future needs.
focus on their propensity to consume and its impact on accumulating wealth. point out
thefinancial planning tip, ―be smart in planning your financial goals.‖
use exhibit 1.2 to show how the average person earns and spends their money and exhibit 1.6
tohelp the student identify where they are now.
lg2 describe the personal financial planning process and define your goals.
dwight eisenhower, army general and president, is quoted as saying ―plans are useless; planning
is priceless‖. the process of planning allows you to focus on the issues that are most important
and to be ready when things change.
exhibit 1.3 lists the six step financial planning process. the first and most important is defining
your financial goals. exhibit 1.6 lists goals by age to demonstrate how goals change over time.
use the examples in exhibit 1.5 to ask students if the assumptions are realistic. yes,the answer is
in the exhibit, but many will not have read chapter at this point. for your use, the assumptions
are:
assumption 1: saving a few thousand dollars a year should provide enough to fund my
child‘scollege education.
assumption 2: an emergency fund lasting 3 months should be adequate.
assumption 3: i will be able to retire at 65 and should have plenty to live on in retirement.
assumption 4: i‘m relying on the rule of thumb that i will need only 70 percent of my pre-
retirement income to manage nicely in retirement.
there are several worksheets in the book. worksheet 1.1 gives the student a format to write
down their personal financial goals. there is power in writing down goals [and most any
otherplan]. recording the goal and then reviewing three months later will help you to keep
focus on the goal.
lg3 explain the life cycle of financial plans, their role in achieving your financial goals,
how to deal with special planning concerns, and the use of professional financial
planners.
exhibit 1.7 can help focus the attention on how goals differ between the various stages of life.
section 1-3b lists various decisions that you will have to make over your life. the section 1-3c
addresses special planning concerns. worksheet 1.2 focuses on the financial benefit to the family
of the second income. if the second income is from a minimum wage job, it may not be agood
financial decision. of course having a job, even a minimum wage job, may give the
personpsychic income that will override the financial impact.
, while perhaps off topic, i recall a high school science teacher who was a smoker. he walked
through the amount of money he spent on purchasing tobacco products. that computation had a
personal financial planning 16th edition by randy
billingsley, lawrence j. gitman, michael d. joehnk
,understanding the
financial planning process
chapter 1
how will this affect me?
the heart of financial planning is making sure your values line up with how you spend and
save.that means knowing where you are financially and planning on how to get where you want
to bein the future no matter what life throws at you. for example, how should your plan handle
the projection that social security costs may exceed revenues by 2035? and what if the
governmentdecides to raise tax rates to help cover the federal deficit? an informed financial plan
should reflect such uncertainties and more.
this chapter overviews the financial planning process and explains its context. topics include
how financial plans change to accommodate your current stage in life and the role that
financialplanners can play in helping you achieve your objectives. after reading this chapter
you will have a good perspective on how to organize your overall personal financial plan.
learning goals
lg1 identify the benefits of using personal financial planning techniques to manage
yourfinances.
key concept in this section is the planning model as displayed in exhibit 1.1. your standard of
living is greatly impacted by your spending habits and your commitment to saving. your
spending is measured by your propensity to consume. wealth is the total value of all
propertyyou own less the amount that you owe to others.
activity: ask the students to assume that they have just inherited $100,000. what will youdo with
the money? write down three ways you will spend or use the money.
,ask the students to share one item with the class and record what they say so that the entire class
can reflect on the answers. hopefully, at least a few will mention investing even if only $10,000
of the amount. use their answers to discuss taking care of current needs versus future needs.
focus on their propensity to consume and its impact on accumulating wealth. point out
thefinancial planning tip, ―be smart in planning your financial goals.‖
use exhibit 1.2 to show how the average person earns and spends their money and exhibit 1.6
tohelp the student identify where they are now.
lg2 describe the personal financial planning process and define your goals.
dwight eisenhower, army general and president, is quoted as saying ―plans are useless; planning
is priceless‖. the process of planning allows you to focus on the issues that are most important
and to be ready when things change.
exhibit 1.3 lists the six step financial planning process. the first and most important is defining
your financial goals. exhibit 1.6 lists goals by age to demonstrate how goals change over time.
use the examples in exhibit 1.5 to ask students if the assumptions are realistic. yes,the answer is
in the exhibit, but many will not have read chapter at this point. for your use, the assumptions
are:
assumption 1: saving a few thousand dollars a year should provide enough to fund my
child‘scollege education.
assumption 2: an emergency fund lasting 3 months should be adequate.
assumption 3: i will be able to retire at 65 and should have plenty to live on in retirement.
assumption 4: i‘m relying on the rule of thumb that i will need only 70 percent of my pre-
retirement income to manage nicely in retirement.
there are several worksheets in the book. worksheet 1.1 gives the student a format to write
down their personal financial goals. there is power in writing down goals [and most any
otherplan]. recording the goal and then reviewing three months later will help you to keep
focus on the goal.
lg3 explain the life cycle of financial plans, their role in achieving your financial goals,
how to deal with special planning concerns, and the use of professional financial
planners.
exhibit 1.7 can help focus the attention on how goals differ between the various stages of life.
section 1-3b lists various decisions that you will have to make over your life. the section 1-3c
addresses special planning concerns. worksheet 1.2 focuses on the financial benefit to the family
of the second income. if the second income is from a minimum wage job, it may not be agood
financial decision. of course having a job, even a minimum wage job, may give the
personpsychic income that will override the financial impact.
, while perhaps off topic, i recall a high school science teacher who was a smoker. he walked
through the amount of money he spent on purchasing tobacco products. that computation had a
