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

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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
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s s and save. That means knowing where you are financially and planning on how to get where
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s s you want to be in the future no matter what life throws at you. For example, how should
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ss your plan handle the projection that Social Security costs may exceed revenues by 2035?
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ss And what if the government decides to raise tax rates to help cover the federal deficit? An
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ss informed financial 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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ss how financial plans change to accommodate your current stage in life and the role that
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ss financial planners can play in helping you achieve your objectives. After reading this chapter
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ss you will have a good perspective on how to organize your overall personal financial plan.
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,LEARNINGGOALS


LG1 Identify the benefits of using personal financial planning techniques to manage your
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ss finances.


Key concept in this section is the planning model as displayed in Exhibit 1.1. Your standard of
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ss living is greatly impacted by your spending habits and your commitment to saving. Your
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ss spending is measured by your propensity to consume. Wealth is the total value of all
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ss property you own less the amount that you owe to others.
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ACTIVITY: s s Ask the studentsto assume that theyhave just inherited $100,000. What will you
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ss do 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
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s s that the entire class can reflect on the answers. Hopefully, at least a few will
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ss mention investing even if only ss ss s s ss




$10,000 of the amount. Use their answers to discuss taking care of current
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s s needs versus future needs. s s ss ss




Focus on their propensityto consume and its impact on accumulating wealth. Point out the
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ss 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
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ss to 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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DwightooEisenhower,army generaland president, isquoted assaying ―Plansare useless;Planning s ss s ss ss s ss s ss s ss s




ss is priceless‖. The process of planning allows you to focus on the issues that are most
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s s important and to be ready when things change. ss ss ss ss ss ss ss




Exhibit 1.3 lists the Six Step Financial Planning Process. The first and most important is
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ss defining your financial goals. Exhibit 1.6 lists goals by age to demonstrate how goals change
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ss over time. Use the examples in Exhibit 1.5 to ask students ifthe assumptions are realistic. Yes,
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ss the answer is in the exhibit, but manywill not have read chapter at this point. For
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ss your use, the assumptions are:
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Assumption 1: Saving a few thousand dollars a year should provide enough to fund s s s s ss s s ss ss ss s s s s s s ss ss s s




s s my child‘s college Education.
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Assumption 2: Anooemergency fund lasting 3 months should be adequate. ss ss ss ss ss s s ss ss ss




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