SOLUTION MANUAL Personal Financial Planning, 16th Edition by Randy Billingsley, Lawrence J. Gitman All Chapters 1 to 15 complete Verified editon

SOLUTION MANUAL
Personal Financial Planning, 16th Edition
by Billingsley, Gitman, Chapters 1 - 15, Complete




Table of Contents
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,Part I: FOUNDATIONS OF FINANCIAL PLANNING.
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1. Understanding the Financial Planning Process.
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2. Developing Your Financial Statements and Plans.
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3. Preparing Your Taxes.
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Part II: MANAGING BASIC ASSETS.
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4. Managing Your Cash and Savings.
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5. Making Automobile and Housing Decisions.
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Part III: MANAGING CREDIT.
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6. Using Credit.
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7. Using Consumer Loans.
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Part IV: MANAGING INSURANCE NEEDS.
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8. Insuring Your Life.
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9. Insuring Your Health.
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10. Protecting Your Property.
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Part V: MANAGING INVESTMENTS.
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11. Investment Planning.
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12. Investing in Stocks and Bonds.
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13. Investing in Mutual Funds and Real Estate.
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Part VI: RETIREMENT AND ESTATE PLANNING.
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14. Planning for Retirement.
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15. Preserving Your Estate.
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Chapter 1 o




Understanding the Financial Planning Process o o o o

,HowoWilloThisoAffectoMe?
Theoheartoofofinancialoplanningoisomakingosureoyourovaluesolineoupowithohowoyouospendoandosave.oTh
atomeansoknowingowhereoyouoareofinanciallyoandoplanningoonohowotoogetowhereoyouowantotoobeoinot
heofutureonoomatterowhatolifeothrowsoatoyou.oForoexample,ohowoshouldoyouroplanohandleotheoprojecti
onothatoSocialoSecurityocostsomayoexceedorevenuesobyo2035?oAndowhatoifotheogovernmentodecidesot
ooraiseotaxoratesotoohelpocoverotheofederalodeficit?oAnoinformedofinancialoplanoshouldoreflecto suchoun
certaintiesoandomore.

Thisochapterooverviewsotheofinancialoplanningoprocessoandoexplainsoitsocontext.oTopicsoincludeohowo
financialoplansochangeotooaccommodateoyourocurrentostageoinolifeoandotheoroleothatofinancialoplann
ersocanoplayoinohelpingoyouoachieveoyouroobjectives.oAfteroreadingothisochapteroyouowillohaveoaogo
odoperspectiveoonohowotooorganizeoyourooverallopersonalofinancialoplan.

LEARNING GOALS o



LG1oIdentifyotheobenefitsoofousingopersonalofinancialoplanningotechniquesotoomanageoyourofi
nances.

KeyoconceptoinothisosectionoisotheoplanningomodeloasodisplayedoinoExhibito1.1.oYourostandardoofolivin
goisogreatlyoimpactedobyoyourospendingohabitsoandoyourocommitmentotoosaving.oYourospendingoisome
asuredobyoyouropropensityotooconsume.oWealthoisotheototalovalueoofoallopropertyoyouoownolessotheo
amountothato youooweotooothers.

ACTIVITY:o Askotheostudentsotooassumeothatotheyohaveojustoinheritedo$100,000.oWhatowilloyouodoowi
thotheomoney?oWriteodownothreeowaysoyouowillospendoorouseotheomoney.

, Askotheostudentsotooshareooneoitemowithotheoclassoandorecordowhatotheyosayosoothatotheoentireoclassoca
noreflectoonotheoanswers.oHopefully,oatoleastoaofewowillomentionoinvestingoevenoifoonlyo$10,000oofoth
eoamount.o Useotheiroanswersotoodiscussotakingocareoofocurrentoneedsoversusofutureoneeds.
Focusoonotheiropropensityotooconsumeoandoitsoimpactoonoaccumulatingowealth.oPointooutotheoFinancialo
PlanningoTip,o―BeoSMARToinoPlanningo YouroFinancialoGoals.‖
UseoExhibito1.2otooshowohowotheoaverageopersonoearnsoandospendsotheiromoneyoandoExhibito1.6otooh
elpotheostudentoidentifyowhereotheyoareo now.

LG2oDescribeotheopersonalofinancialoplanningoprocessoandodefineoyourogoals.

DwightoEisenhower,oarmyogeneraloandopresident,o isoquotedoasosayingo ―Plansoareouseless;oPlanningoiso
priceless‖.oTheoprocessoofoplanningoallowsoyouotoofocusoonotheoissuesothatoareomostoimportantoandotoo
beoreadyowhenothingsochange.

Exhibito1.3olistsotheoSixoStepoFinancialoPlanningoProcess.oTheofirstoandomostoimportantoisodefiningoyo
urofinancialogoals.oExhibito1.6olistsogoalsobyoageotoodemonstrateohowogoalsochangeooverotime.oUseo
theoexamplesoinoExhibito1.5otooaskostudentsoifotheoassumptionsoareorealistic.oYes,otheoansweroisoinotheo
exhibit,obutomanyowillonotohaveoreadochapteroatothisopoint.oForoyourouse,otheoassumptionsoare:

Assumptiono1:oSavingoaofewothousandodollarsoaoyearoshouldoprovideoenoughotoofundomyochild‘soc
ollegeoEducation.
Assumptiono2:oAnoemergencyofundolastingo3o monthsoshouldobeoadequate.
Assumptiono3:oIowillobeoableotooretireoato65oandoshouldohaveoplentyotooliveoonoinoretirement.o
Assumptiono4:oI‘morelyingoonotheoruleoofothumbothatoIowilloneedoonlyo70opercentoofomyopre-
oretiremento incomeotoo manageo nicelyoinoretirement.



Thereoareoseveraloworksheetsoinotheobook.oWorksheeto1.1ogivesotheostudentoaoformatotoowriteodow
notheiroPersonaloFinancialoGoals.oThereoisopoweroinowritingodownogoalso[andomostoanyootheroplan].oR
ecordingotheogoaloandothenoreviewingothreeomonthsolaterowillohelpoyouotookeepofocusoonotheogoal.

LG3oExplainotheolifeocycleoofofinancialoplans,otheiroroleoinoachievingoyourofinancialogoals,oho
wotoodealowithospecialoplanningoconcerns,oandotheouseoofoprofessionalofinancialoplanners.

Exhibito1.7ocanohelpofocusotheoattentionoonohowogoalsodifferobetweenotheovariousostagesoofolife.oSect
iono1-3bolistsovariousodecisionsothatoyouowillohaveotoomakeooveroyourolife.oTheosectiono1-
3coaddressesoSpecialoPlanningoConcerns.oWorksheeto1.2ofocusesoonotheofinancialobenefitotootheofam
ilyoofotheosecondoincome.oIfotheosecondoincomeoisofromoaominimumowageojob,oitomayonotobeoaogoodofin
ancialodecision.oOfocourseohavingoaojob,oevenoaominimumowageojob,omayogiveotheopersonopsychicoinc
omeothatowillooverrideotheofinancialoimpact.

Whileoperhapsooffotopic,oIorecalloaohighoschooloscienceoteacherowhoowasoaosmoker.oHeowalkedothrou
ghotheoamountoofomoneyoheospentoonopurchasingotobaccooproducts.o Thatocomputationohadoa