Solution Manual for Personal Financial Planning 15th Edition by Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk pdf

Solution Manual for Personal Financial Planning
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b 15th Edition by Randy Billingsley, Lawrence J.
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b Gitman, Michael D. Joehnk
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,SOLUTION MANUAL FOR b b




Personal Financial Planning 15th Edition by Randy b b b b b b




Billingsley, Lawrence J. Gitman, Michael D. Joehnk
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Understanding the b b




FinancialPlanningProcess
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Chapter 1
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How Will This Affect Me?b b b b



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 in
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the future no matter what life throws at you. For example, how should your plan handle the
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projection that Social Security costs may exceed revenues by 2035? And what if the government
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decides to raise tax rates to help cover the federal deficit? An informed financial plan should
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reflect such uncertainties and more.
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This chapter overviews the financial planning process and explains its context. Topics include how
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financial plans change to accommodate your current stage in life and the role that financial planners
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can play in helping you achieve your objectives. After reading this chapter you will have a good
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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 your
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finances.
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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 property you own less
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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 do
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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 class can
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reflect on the answers. Hopefully, at least a few will mention investing even if only $10,000 of the
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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
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Financial 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 is
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priceless‖. The process of planning allows you to focus on the issues that are most important and to
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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 are:
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Assumption 1: Saving a few thousand dollars a year should provide enough to fund my child‘s
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college Education.
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Assumption 2: An emergency fund lasting 3 months should be adequate. b b b b b b b b b b



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 down
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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 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 family
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of the second income. If the second income is from a minimum wage job, it may not be a good
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financial decision. Of course having a job, even a minimum wage job, may give the person psychic
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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
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through the amount of money he spent on purchasing tobacco products. That computation had a
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, lot to do with my decision to not smoke. How this relates to the course is that this is an illustration
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of how the financial impact of a decision can drive the decision.
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LG4 Examine the economic environment’s influence on personal financial planning.
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For older folks, the financial crisis of 2008-2009 is fresh in our memory. To the student of 2021,
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that crisis is more of history than life. If you can share a war story on how you were personally
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impacted, it will help bring the impact of the world economy on financial plans to life. The book
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speaks how to manage this type of crisis, but you had to go through it to really understand the
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impact it had.
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The value of professional advice is greatly understated. If by talking to a professional you can
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prevent making a mistake -- that can be of a great value. Section 1-3e speaks to the use of
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professional financial planners. Exhibit 1.9 lists out the various certifications that planners have.
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Economic or business cycles are real. Perhaps the most useful thing about the cycles is the
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knowledge that if things are bad, you know they will get better. Of course, when life is good, you
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know that the bad cycle will come around again. Thus, financial planning requires saving in the
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good times for the bad times. See the ―Test Yourself‖ question 1-17 for a short discussion of
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business cycles.
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The power of compounding is rarely understood. Exhibit 1.8 shows how the amount $10,000 will
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grow over time. The longer the investment stays invested, the greater the amount – the power of
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compound interest.
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LG5 Evaluate the impact of age, education, and geographic location on personal income.
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Exhibit 1.12 says it all. b b b b




LG6 Understand the importance of career choices and their relationship to personal financial
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planning.
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Exhibit 1.13 shows that the choice of a college major has a financial impact. Of course money
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cannot buy happiness, but having a bit helps. If you really want to be an elementary school teacher,
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you must recognize that you will not have as much wealth as a lawyer or financial analyst.
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The summary of the learning goals at the end of the chapter should aid the student in reviewing the
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chapter when exam time comes. It will be useful to point out to the student how to use this
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material.
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Link to Solutions to Financial Planning Exercises
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Pre-tests