SOLUTION MANUAL Personal Finance, 14th Edition By E. Thomas Garman, Chapter 1 - 17

SOLUTION MANUAL

Personal Finance, 14th Edition

By E. Thomas Garman, Chapter 1 - 17

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Part I: FINANCIAL PLANNING.
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1. Understanding Personal Finance.
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2. Career Planning.
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3. Financial Statements, Goals, and Budgets.
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Part II: MONEY MANAGEMENT.
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4. Managing Income Taxes.
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5. Managing Checking and Savings Accounts.
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6. Building and Maintaining Good Credit.
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7. Credit Cards and Consumer Loans.
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8. Vehicles and Other Major Purchases.
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9. Obtaining Affordable Housing.
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Part III: INCOME AND ASSET PROTECTION.
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10. Managing Property and Liability Risk.
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11. Planning for Health Care Expenses.
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12. Life Insurance Planning.
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Part IV: INVESTMENTS.
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13. Investment Fundamentals.
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,14. Investing in Stocks and Bonds.
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15. Mutual and Exchange-Traded Funds.
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16. Real Estate and High-Risk Investments.
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17. Retirement and Estate Planning.
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SolutionandAnswerGuide FT FT FT




GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
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TABLE OF CONTENTS FT FT




Answers to Chapter Concept Checks .............................................................................................. 2
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What Do You Recommend Now?.................................................................................................... 4
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Let’s Talk About It ........................................................................................................................................................... 5
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Do the Math .................................................................................................................................... 6
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Financial Planning Cases................................................................................................................. 8
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Extended Learning ....................................................................................................................... 10
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, ANSWERS TO CHAPTER CONCEPT CHECKS FT FT FT FT




LO1.1 Recognize the keys to achieving financial success.
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1. Explain the five steps in the financial planning process. FT FT FT FT FT FT FT FT




Answer: There are five fundamental steps to the personal financial planning process: (1) evaluate your f
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inancial health to your education and career choice; (2) define your financial goals; (3) develop a plan of a
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ction to achieve your goals; (4) implement spending and saving plans to monitor and control progress t
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oward your goals; and (5) review your financial progress and make changes as appropriate.
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2. Distinguish among financial success, financial security, and financial happiness. FT FT FT FT FT FT FT FT




Answer: Financial success is the achievement of financial aspirations that are desired, planned, or atte
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mpted. Success is defined by the individual or family that seeks it. Financial success may be defined as bei
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ng able to live according to one’s standard of living. Financial security is that comfortable feeling that y
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our financial resources will be adequate to fulfill any needs you have as well as your wants. Financial ha
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ppiness is the experience you have when you are satisfied with money matters. People who are happy a
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bout their finances will see a spillover into positive feelings about life in general.
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3. Summarize what you will accomplish studying personal finance. FT FT FT FT FT FT FT




Answer: Several things can be accomplished by studying personal finance. Recognize how to manage un
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expected and expected financial events. Pay as little as possible in income taxes. Understand how to effect
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ivelycomparison shop for vehicles and homes. Protect what we own. Invest wisely. Accumulate and protect
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the wealth that we may choose to spend during our non-working years (e.g., retirement) or donate.
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4. What are the building blocks to achieving financial success?
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Answer: The building blocks for achieving financial success include a foundation of regular income tha
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t provides the means to support your lifestyle and save for desired goals in the future. The foundation su
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pports a base of various banking accounts, insurance protection, and employee benefits. Then we can e
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stablish goals, a recordkeeping system, a budget, and an emergency savings fund. We will also manage
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various expenses such as housing, transportation, insurance, and the payment of taxes. We will also nee
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d to handle credit, savings, and educational costs. Finally, we invest in various investment alternatives s
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uch as mutual funds, stocks, and bonds, often for retirement. As a result of all these building blocks, we a
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re more apt to have a financially successful life.
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LO1.2 Understand how the economy affects your personal financial success.
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1. Summarize the phases of the business cycle. FT FT FT FT FT FT




Answer: The business cycle entails a wavelike pattern of rising and falling economic activity as measure
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d by economic indicators like unemployment rates or the gross domestic product. The phases of the bus
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iness cycle include expansion (preferred stage—
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production is high, unemployment low, interest rates low or falling, stock market and consumer deman FT FT FT FT FT FT FT FT FT FT FT FT FT FT




d high), peak, contraction, downturn, trough, and recovery.
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