Solution Manual For
Personal Financial Planning,
16th Edition By Randy Billingsley,
,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 Be In 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 Government Decides 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 Financial Planners 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
Your Finances.
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 Property You Own Less The Amount That You Owe To Others.
Activity: Ask The Students To Assume That They Have Just Inherited $100,000. What Will
You Do 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
The Financial 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 To Help 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‘S College 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 Other Plan]. 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 A Good Financial Decision. Of Course Having A Job, Even
A Minimum Wage Job, May Give The Person Psychic 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
Lot To Do With My Decision To Not Smoke. How This Relates To The Course Is That This Is
An Illustration Of How The Financial Impact Of A Decision Can Drive The Decision.
Lg4 Examine The Economic Environment’s Influence On Personal Financial Planning.
For Older Folks, The Financial Crisis Of 2008-2009 Is Fresh In Our Memory. To The Student
Of 2021, That Crisis Is More Of History Than Life. If You Can Share A War Story On How
You Were Personally Impacted, It Will Help Bring The Impact Of The World Economy On
Financial Plans To Life. The Book Speaks How To Manage This Type Of Crisis, But You Had
To Go Through It To Really Understand The Impact It Had.
The Value Of Professional Advice Is Greatly Understated. If By Talking To A Professional You
Can Prevent Making A Mistake -- That Can Be Of A Great Value. Section 1-3e Speaks To The
Use Of Professional Financial Planners. Exhibit 1.9 Lists Out The Various Certifications That
Planners Have.
Economic Or Business Cycles Are Real. Perhaps The Most Useful Thing About The Cycles Is
The Knowledge That If Things Are Bad, You Know They Will Get Better. Of Course, When
Life Is Good, You Know That The Bad Cycle Will Come Around Again. Thus, Financial
Planning Requires Saving In The Good Times For The Bad Times. See The ―Test Yourself‖
Question 1-17 For A Short Discussion Of Business Cycles.
The Power Of Compounding Is Rarely Understood. Exhibit 1.8 Shows How The Amount
$10,000 Will Grow Over Time. The Longer The Investment Stays Invested, The Greater The
Amount – The Power Of Compound Interest.
Lg5 Evaluate The Impact Of Age, Education, And Geographic Location On Personal Income.
Exhibit 1.12 Says It All.
Lg6 Understand The Importance Of Career Choices And Their Relationship To Personal
Financial Planning.
Exhibit 1.13 Shows That The Choice Of A College Major Has A Financial Impact. Of Course
Money Cannot Buy Happiness, But Having A Bit Helps. If You Really Want To Be An
Elementary School Teacher, You Must Recognize That You Will Not Have As Much Wealth As
A Lawyer Or Financial Analyst.
The Summary Of The Learning Goals At The End Of The Chapter Should Aid The Student In
Reviewing The Chapter When Exam Time Comes. It Will Be Useful To Point Out To The
Student How To Use This Material.
Link To Solutions To Financial Planning Exercises
Personal Financial Planning,
16th Edition By Randy Billingsley,
,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 Be In 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 Government Decides 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 Financial Planners 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
Your Finances.
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 Property You Own Less The Amount That You Owe To Others.
Activity: Ask The Students To Assume That They Have Just Inherited $100,000. What Will
You Do 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
The Financial 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 To Help 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‘S College 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 Other Plan]. 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 A Good Financial Decision. Of Course Having A Job, Even
A Minimum Wage Job, May Give The Person Psychic 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
Lot To Do With My Decision To Not Smoke. How This Relates To The Course Is That This Is
An Illustration Of How The Financial Impact Of A Decision Can Drive The Decision.
Lg4 Examine The Economic Environment’s Influence On Personal Financial Planning.
For Older Folks, The Financial Crisis Of 2008-2009 Is Fresh In Our Memory. To The Student
Of 2021, That Crisis Is More Of History Than Life. If You Can Share A War Story On How
You Were Personally Impacted, It Will Help Bring The Impact Of The World Economy On
Financial Plans To Life. The Book Speaks How To Manage This Type Of Crisis, But You Had
To Go Through It To Really Understand The Impact It Had.
The Value Of Professional Advice Is Greatly Understated. If By Talking To A Professional You
Can Prevent Making A Mistake -- That Can Be Of A Great Value. Section 1-3e Speaks To The
Use Of Professional Financial Planners. Exhibit 1.9 Lists Out The Various Certifications That
Planners Have.
Economic Or Business Cycles Are Real. Perhaps The Most Useful Thing About The Cycles Is
The Knowledge That If Things Are Bad, You Know They Will Get Better. Of Course, When
Life Is Good, You Know That The Bad Cycle Will Come Around Again. Thus, Financial
Planning Requires Saving In The Good Times For The Bad Times. See The ―Test Yourself‖
Question 1-17 For A Short Discussion Of Business Cycles.
The Power Of Compounding Is Rarely Understood. Exhibit 1.8 Shows How The Amount
$10,000 Will Grow Over Time. The Longer The Investment Stays Invested, The Greater The
Amount – The Power Of Compound Interest.
Lg5 Evaluate The Impact Of Age, Education, And Geographic Location On Personal Income.
Exhibit 1.12 Says It All.
Lg6 Understand The Importance Of Career Choices And Their Relationship To Personal
Financial Planning.
Exhibit 1.13 Shows That The Choice Of A College Major Has A Financial Impact. Of Course
Money Cannot Buy Happiness, But Having A Bit Helps. If You Really Want To Be An
Elementary School Teacher, You Must Recognize That You Will Not Have As Much Wealth As
A Lawyer Or Financial Analyst.
The Summary Of The Learning Goals At The End Of The Chapter Should Aid The Student In
Reviewing The Chapter When Exam Time Comes. It Will Be Useful To Point Out To The
Student How To Use This Material.
Link To Solutions To Financial Planning Exercises
