Solution ssand s s Answer s s Guide: s s Garman/Fox, s s Personal s s Finance ss14e, ss Chapter s s 1: ssThinking s s Like ss a
Financial
SolutionandAnswerGuide
GARMAN/FOX, PERSONAL S S S S S S FINANCE S S S S 14E, S S CHAPTER S S S S 1: S S THINKING S S S S LIKE S S S S A S S
FINANCIAL
S S PLANNER S S S S
TABLE OF CONTENTS SS SS
Answers to Chapter Concept Checks ................................................................................................... 2
ss ss ss ss
What Do You Recommend Now? ......................................................................................................... 4
ss ss ss ss
Let’s Talk About It .................................................................................................................................. 5
ss ss ss
Do the Math .............................................................................................................................................. 6
ss ss
Financial Planning Cases .......................................................................................................................... 8
ss ss
Extended Learning ................................................................................................................................... 10
ss
© 2024 Cengage. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
1
s s accessible
pp
, Solution ssand s s Answer s s Guide: s s Garman/Fox, s s Personal s s Finance ss14e, ss Chapter s s 1: ssThinking s s Like ss a
Financial
ANSWERS TO CHAPTER CONCEPT CHECKS SS SS SS SS
LO1.1 Recognize the keys to achieving financial success.
ss ss ss ss ss ss ss
1. Explain the five steps in the financial planning process.
ss ss ss ss ss ss ss ss
Answer: There are five fundamental steps to the personal financial planning process: (1)
ss ss ss ss ss ss ss ss ss ss ss ss
evaluate
ss
your financial health to your education and career choice; (2) define your financial goals; (3)
ss ss ss ss ss ss ss ss ss ss ss ss ss ss
develop a plan of action to achieve your goals; (4) implement spending and saving plans to
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
monitor and control progress toward your goals; and (5) review your financial progress
ss ss ss ss ss ss ss ss ss ss ss ss ss
and make changes as appropriate.
ss ss ss ss ss
2. Distinguish among financial success, financial security, and financial happiness.
ss ss ss ss ss ss ss ss
Answer: Financial success is the achievement of financial aspirations that are
s s s s s s ss s s s s ss s s ss ss
desired, planned, or attempted. Success is defined by the individual or family that seeks
ss ss s s ss ss ss ss ss ss ss ss ss ss ss
it. Financial success may be defined as being able to live according to one’s standard of
ss ss s s ss ss ss ss s s ss ss ss ss ss ss s s ss
living. Financial security is that comfortable feeling that your financial resources will
ss s s s s s s ss ss ss ss s s s s s s s s
be adequate to fulfill any needs you have as well as your wants. Financial
s s s s s s ss s s ss s s ss s s ss s s s s s s s s
happiness is the experience you have when you are satisfied with money matters.
s s s s ss s s s s ss s s s s ss s s s s ss ss
People who are happy about their finances will see a spillover into positive feelings
ss ss ss ss ss ss ss ss ss ss ss ss ss ss
about life in general.
ss ss s s ss
3. Summarize what you will accomplish studying personal finance.
ss ss ss ss ss ss ss
Answer: Several things can be accomplished by studying personal finance. Recognize how to
s s s s s s ss s s s s ss s s s s s s s s ss
manage unexpected and expected financial events. Pay as little as possible in income
s s ss ss ss s s ss ss ss ss ss ss ss ss
taxes. Understand how to effectively comparison shop for vehicles and homes. Protect what we own.
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
Invest wisely. Accumulate and protect the wealth that we may choose to spend during our non-
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
working years (e.g., retirement) or donate.
ss ss ss ss ss
4. What are the building blocks to achieving financial success?
ss ss ss ss ss ss ss ss
Answer: The building blocks for achieving financial success include a foundation of
s s ss s s s s s s s s s s s s s s s s s s
regular income that provides the means to support your lifestyle and save for desired
ss s s ss s s s s s s s s s s ss s s s s s s s s ss
goals in the future. The foundation supports a base of various banking accounts, insurance
s s ss ss ss ss ss ss ss ss ss ss ss ss ss
protection, and employee benefits. Then we can establish goals, a recordkeeping system,
ss ss ss ss ss ss ss ss ss ss ss ss
a budget, and an emergency savings fund. We will also manage various expenses such
ss ss ss ss ss ss ss ss ss s s s s s s ss ss
as housing, transportation, insurance, and the payment of taxes. We will also need to
ss ss ss ss s s ss ss ss ss ss ss ss ss ss
handle credit, savings, and educational costs. Finally, we invest in various investment
ss ss ss ss ss ss ss ss ss ss ss ss
alternatives such as mutual funds, stocks, and bonds, often for retirement. As a
s s s s ss s s s s s s s s s s s s s s s s s s s s
result of all these building blocks, we are more apt to have a financially successful
s s s s ss s s s s s s s s s s s s s s s s s s s s s s s s
life.
s s
LO1.2 Understand how the economy affects your personal financial success.
ss ss ss ss ss ss ss ss ss
1. Summarize the phases of the business cycle. ss ss ss ss ss ss
Answer: The business cycle entails a wavelike pattern of rising and falling economic
s s ss ss s s ss s s s s ss ss ss s s s s
activity as measured by economic indicators like unemployment rates or the gross domestic
s s ss ss ss ss ss ss ss ss ss ss ss ss
product. The phases of the business cycle include expansion (preferred stage—production is
ss ss ss ss ss ss ss s s s s ss s s ss
high, unemployment low, interest rates low or falling, stock market and consumer demand
ss s s s s ss ss ss ss ss ss ss ss ss ss
high), peak, contraction, downturn, trough, and recovery.
ss ss ss ss ss s s s s
2. Describe two statistics that help predict the future direction of the economy.
ss ss ss ss ss ss ss ss ss ss ss
© 2024 Cengage. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
2
s s accessible
pp
, Solution ssand s s Answer s s Guide: s s Garman/Fox, s s Personal s s Finance ss14e, ss Chapter s s 1: ssThinking s s Like ss a
Financial
Answer: Forecasting the state of the economy involves predicting, estimating, or calculating
ss ss ss ss ss ss ss ss ss ss ss
sswhat will happen in advance. We need to be able to forecast the state of the
ss ss ss ss s s ss ss ss ss ss ss ss ss s s ss
sseconomy, inflation, and interest rates so that we have advance warning of the directions
ss ss ss ss ss ss s s ss ss s s ss ss ss
and strength of changes in economic trends since they will affect our personal finances.
ss ss ss ss ss ss ss ss ss ss s s s s s s s s
Two statistics we could watch are the consumer confidence index (how consumers feel
s s s s s s s s s s ss s s s s ss ss ss ss ss
ssabout the economy and their personal finances) and the index
ss ss ss ss ss ss ss ss ss
© 2024 Cengage. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
3
s s accessible
pp
, Solution ssand s s Answer s s Guide: s s Garman/Fox, s s Personal s s Finance ss14e, ss Chapter s s 1: ssThinking s s Like ss a
Financial
of leading economic indicators (composite index, averages ten components of economic growth).
ss ss ss ss ss ss ss ss ss ss ss
© 2024 Cengage. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
4
s s accessible
pp
Financial
SolutionandAnswerGuide
GARMAN/FOX, PERSONAL S S S S S S FINANCE S S S S 14E, S S CHAPTER S S S S 1: S S THINKING S S S S LIKE S S S S A S S
FINANCIAL
S S PLANNER S S S S
TABLE OF CONTENTS SS SS
Answers to Chapter Concept Checks ................................................................................................... 2
ss ss ss ss
What Do You Recommend Now? ......................................................................................................... 4
ss ss ss ss
Let’s Talk About It .................................................................................................................................. 5
ss ss ss
Do the Math .............................................................................................................................................. 6
ss ss
Financial Planning Cases .......................................................................................................................... 8
ss ss
Extended Learning ................................................................................................................................... 10
ss
© 2024 Cengage. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
1
s s accessible
pp
, Solution ssand s s Answer s s Guide: s s Garman/Fox, s s Personal s s Finance ss14e, ss Chapter s s 1: ssThinking s s Like ss a
Financial
ANSWERS TO CHAPTER CONCEPT CHECKS SS SS SS SS
LO1.1 Recognize the keys to achieving financial success.
ss ss ss ss ss ss ss
1. Explain the five steps in the financial planning process.
ss ss ss ss ss ss ss ss
Answer: There are five fundamental steps to the personal financial planning process: (1)
ss ss ss ss ss ss ss ss ss ss ss ss
evaluate
ss
your financial health to your education and career choice; (2) define your financial goals; (3)
ss ss ss ss ss ss ss ss ss ss ss ss ss ss
develop a plan of action to achieve your goals; (4) implement spending and saving plans to
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
monitor and control progress toward your goals; and (5) review your financial progress
ss ss ss ss ss ss ss ss ss ss ss ss ss
and make changes as appropriate.
ss ss ss ss ss
2. Distinguish among financial success, financial security, and financial happiness.
ss ss ss ss ss ss ss ss
Answer: Financial success is the achievement of financial aspirations that are
s s s s s s ss s s s s ss s s ss ss
desired, planned, or attempted. Success is defined by the individual or family that seeks
ss ss s s ss ss ss ss ss ss ss ss ss ss ss
it. Financial success may be defined as being able to live according to one’s standard of
ss ss s s ss ss ss ss s s ss ss ss ss ss ss s s ss
living. Financial security is that comfortable feeling that your financial resources will
ss s s s s s s ss ss ss ss s s s s s s s s
be adequate to fulfill any needs you have as well as your wants. Financial
s s s s s s ss s s ss s s ss s s ss s s s s s s s s
happiness is the experience you have when you are satisfied with money matters.
s s s s ss s s s s ss s s s s ss s s s s ss ss
People who are happy about their finances will see a spillover into positive feelings
ss ss ss ss ss ss ss ss ss ss ss ss ss ss
about life in general.
ss ss s s ss
3. Summarize what you will accomplish studying personal finance.
ss ss ss ss ss ss ss
Answer: Several things can be accomplished by studying personal finance. Recognize how to
s s s s s s ss s s s s ss s s s s s s s s ss
manage unexpected and expected financial events. Pay as little as possible in income
s s ss ss ss s s ss ss ss ss ss ss ss ss
taxes. Understand how to effectively comparison shop for vehicles and homes. Protect what we own.
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
Invest wisely. Accumulate and protect the wealth that we may choose to spend during our non-
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
working years (e.g., retirement) or donate.
ss ss ss ss ss
4. What are the building blocks to achieving financial success?
ss ss ss ss ss ss ss ss
Answer: The building blocks for achieving financial success include a foundation of
s s ss s s s s s s s s s s s s s s s s s s
regular income that provides the means to support your lifestyle and save for desired
ss s s ss s s s s s s s s s s ss s s s s s s s s ss
goals in the future. The foundation supports a base of various banking accounts, insurance
s s ss ss ss ss ss ss ss ss ss ss ss ss ss
protection, and employee benefits. Then we can establish goals, a recordkeeping system,
ss ss ss ss ss ss ss ss ss ss ss ss
a budget, and an emergency savings fund. We will also manage various expenses such
ss ss ss ss ss ss ss ss ss s s s s s s ss ss
as housing, transportation, insurance, and the payment of taxes. We will also need to
ss ss ss ss s s ss ss ss ss ss ss ss ss ss
handle credit, savings, and educational costs. Finally, we invest in various investment
ss ss ss ss ss ss ss ss ss ss ss ss
alternatives such as mutual funds, stocks, and bonds, often for retirement. As a
s s s s ss s s s s s s s s s s s s s s s s s s s s
result of all these building blocks, we are more apt to have a financially successful
s s s s ss s s s s s s s s s s s s s s s s s s s s s s s s
life.
s s
LO1.2 Understand how the economy affects your personal financial success.
ss ss ss ss ss ss ss ss ss
1. Summarize the phases of the business cycle. ss ss ss ss ss ss
Answer: The business cycle entails a wavelike pattern of rising and falling economic
s s ss ss s s ss s s s s ss ss ss s s s s
activity as measured by economic indicators like unemployment rates or the gross domestic
s s ss ss ss ss ss ss ss ss ss ss ss ss
product. The phases of the business cycle include expansion (preferred stage—production is
ss ss ss ss ss ss ss s s s s ss s s ss
high, unemployment low, interest rates low or falling, stock market and consumer demand
ss s s s s ss ss ss ss ss ss ss ss ss ss
high), peak, contraction, downturn, trough, and recovery.
ss ss ss ss ss s s s s
2. Describe two statistics that help predict the future direction of the economy.
ss ss ss ss ss ss ss ss ss ss ss
© 2024 Cengage. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
2
s s accessible
pp
, Solution ssand s s Answer s s Guide: s s Garman/Fox, s s Personal s s Finance ss14e, ss Chapter s s 1: ssThinking s s Like ss a
Financial
Answer: Forecasting the state of the economy involves predicting, estimating, or calculating
ss ss ss ss ss ss ss ss ss ss ss
sswhat will happen in advance. We need to be able to forecast the state of the
ss ss ss ss s s ss ss ss ss ss ss ss ss s s ss
sseconomy, inflation, and interest rates so that we have advance warning of the directions
ss ss ss ss ss ss s s ss ss s s ss ss ss
and strength of changes in economic trends since they will affect our personal finances.
ss ss ss ss ss ss ss ss ss ss s s s s s s s s
Two statistics we could watch are the consumer confidence index (how consumers feel
s s s s s s s s s s ss s s s s ss ss ss ss ss
ssabout the economy and their personal finances) and the index
ss ss ss ss ss ss ss ss ss
© 2024 Cengage. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
3
s s accessible
pp
, Solution ssand s s Answer s s Guide: s s Garman/Fox, s s Personal s s Finance ss14e, ss Chapter s s 1: ssThinking s s Like ss a
Financial
of leading economic indicators (composite index, averages ten components of economic growth).
ss ss ss ss ss ss ss ss ss ss ss
© 2024 Cengage. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
4
s s accessible
pp
