SOLUTION MANUAL
Personal Finance, 14th Edition
By E. Thomas Garman, Chapter 1 - 17
,TABLE OF CONTENTS
Part I: FINANCIAL PLANNING.
1. Understanding Personal Finance.
2. Career Planning.
3. Financial Statements, Goals, and Budgets.
Part II: MONEY MANAGEMENT.
4. Managing Income Taxes.
5. Managing Checking and Savings Accounts.
6. Building and Maintaining Good Credit.
7. Credit Cards and Consumer Loans.
8. Vehicles and Other Major Purchases.
9. Obtaining Affordable Housing.
Part III: INCOME AND ASSET PROTECTION.
10. Managing Property and Liability Risk.
11. Planning for Health Care Expenses.
12. Life Insurance Planning.
Part IV: INVESTMENTS.
13. Investment Fundamentals.
,14. Investing in Stocks and Bonds.
15. Mutual and Exchange-Traded Funds.
16. Real Estate and High-Risk Investments.
17. Retirement and Estate Planning.
Solution and Answer Guide
GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
TABLE OF CONTENTS
Answers to Chapter Concept Checks ........................................................................................... 2
What Do You Recommend Now? ................................................................................................. 4
Let’s Talk About It......................................................................................................................................................... 5
Do the Math ................................................................................................................................... 6
Financial Planning Cases ............................................................................................................... 8
Extended Learning....................................................................................................................... 10
, ANSWERS TO CHAPTER CONCEPT CHECKS
LO1.1lRecognizelthelkeysltolachievinglfinanciallsuccess.
1. Explainlthelfivelstepslinlthelfinanciallplanninglprocess.
Answer:lTherelarelfivelfundamentallstepsltolthelpersonallfinanciallplanninglprocess:l(1)levaluatelyourl
financiallhealthltolyourleducationlandlcareerlchoice;l(2)ldefinelyourlfinanciallgoals;l(3)ldeveloplalplanlo
flactionltolachievelyourlgoals;l(4)limplementlspendinglandlsavinglplansltolmonitorlandlcontrollprogre
ssltowardlyourlgoals;landl(5)lreviewlyourlfinanciallprogresslandlmakelchangeslaslappropriate.
2. Distinguishlamonglfinanciallsuccess,lfinanciallsecurity,landlfinanciallhappiness.
Answer:lFinanciallsuccesslislthelachievementloflfinanciallaspirationslthatlareldesired,lplanned,lorlatt
empted.lSuccesslisldefinedlbylthelindividuallorlfamilylthatlseekslit.lFinanciallsuccesslmaylbeldefinedlasl
beinglableltollivelaccordingltolone’slstandardloflliving.lFinanciallsecuritylislthatlcomfortablelfeelinglt
hatlyourlfinanciallresourceslwilllbeladequateltolfulfilllanylneedslyoulhavelaslwelllaslyourlwants.lFinanci
allhappinesslislthelexperiencelyoulhavelwhenlyoularelsatisfiedlwithlmoneylmatters.lPeoplelwholarelh
appylaboutltheirlfinanceslwilllseelalspilloverlintolpositivelfeelingslaboutllifelinlgeneral.
3. Summarizelwhatlyoulwilllaccomplishlstudyinglpersonallfinance.
Answer:lSeverallthingslcanlbelaccomplishedlbylstudyinglpersonallfinance.lRecognizelhowltolmanagelu
nexpectedlandlexpectedlfinanciallevents.lPaylasllittlelaslpossiblelinlincomeltaxes.lUnderstandlhowltoleffe
ctivelylcomparisonlshoplforlvehicleslandlhomes.lProtectlwhatlwelown.lInvestlwisely.lAccumulatelandlprot
ectlthelwealthlthatlwelmaylchooseltolspendlduringlourlnon-workinglyearsl(e.g.,lretirement)lorldonate.
4. Whatlarelthelbuildinglblocksltolachievinglfinanciallsuccess?
Answer:lThelbuildinglblockslforlachievinglfinanciallsuccesslincludelalfoundationloflregularlincomelth
atlprovideslthelmeansltolsupportlyourllifestylelandlsavelforldesiredlgoalslinlthelfuture.lThelfoundationl
supportslalbaseloflvariouslbankinglaccounts,linsurancelprotection,landlemployeelbenefits.lThenlwelc
anlestablishlgoals,lalrecordkeepinglsystem,lalbudget,landlanlemergencylsavingslfund.lWelwilllalsolma
nagelvariouslexpenseslsuchlaslhousing,ltransportation,linsurance,landlthelpaymentlofltaxes.lWelwilllal
solneedltolhandlelcredit,lsavings,landleducationallcosts.lFinally,lwelinvestlinlvariouslinvestmentlaltern
ativeslsuchlaslmutuallfunds,lstocks,landlbonds,loftenlforlretirement.lAslalresultloflallltheselbuildinglblo
cks,lwelarelmorelaptltolhavelalfinanciallylsuccessfulllife.
LO1.2lUnderstandlhowltheleconomylaffectslyourlpersonallfinanciallsuccess.
1. Summarizelthelphasesloflthelbusinesslcycle.
Answer:lThelbusinesslcyclelentailslalwavelikelpatternloflrisinglandlfallingleconomiclactivitylaslmeasur
edlbyleconomiclindicatorsllikelunemploymentlrateslorlthelgrossldomesticlproduct.lThelphasesloflthelb
usinesslcyclelincludelexpansionl(preferredlstage—
productionlislhigh,lunemploymentllow,linterestlratesllowlorlfalling,lstocklmarketlandlconsumerldema
ndlhigh),lpeak,lcontraction,ldownturn,ltrough,landlrecovery.
Personal Finance, 14th Edition
By E. Thomas Garman, Chapter 1 - 17
,TABLE OF CONTENTS
Part I: FINANCIAL PLANNING.
1. Understanding Personal Finance.
2. Career Planning.
3. Financial Statements, Goals, and Budgets.
Part II: MONEY MANAGEMENT.
4. Managing Income Taxes.
5. Managing Checking and Savings Accounts.
6. Building and Maintaining Good Credit.
7. Credit Cards and Consumer Loans.
8. Vehicles and Other Major Purchases.
9. Obtaining Affordable Housing.
Part III: INCOME AND ASSET PROTECTION.
10. Managing Property and Liability Risk.
11. Planning for Health Care Expenses.
12. Life Insurance Planning.
Part IV: INVESTMENTS.
13. Investment Fundamentals.
,14. Investing in Stocks and Bonds.
15. Mutual and Exchange-Traded Funds.
16. Real Estate and High-Risk Investments.
17. Retirement and Estate Planning.
Solution and Answer Guide
GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
TABLE OF CONTENTS
Answers to Chapter Concept Checks ........................................................................................... 2
What Do You Recommend Now? ................................................................................................. 4
Let’s Talk About It......................................................................................................................................................... 5
Do the Math ................................................................................................................................... 6
Financial Planning Cases ............................................................................................................... 8
Extended Learning....................................................................................................................... 10
, ANSWERS TO CHAPTER CONCEPT CHECKS
LO1.1lRecognizelthelkeysltolachievinglfinanciallsuccess.
1. Explainlthelfivelstepslinlthelfinanciallplanninglprocess.
Answer:lTherelarelfivelfundamentallstepsltolthelpersonallfinanciallplanninglprocess:l(1)levaluatelyourl
financiallhealthltolyourleducationlandlcareerlchoice;l(2)ldefinelyourlfinanciallgoals;l(3)ldeveloplalplanlo
flactionltolachievelyourlgoals;l(4)limplementlspendinglandlsavinglplansltolmonitorlandlcontrollprogre
ssltowardlyourlgoals;landl(5)lreviewlyourlfinanciallprogresslandlmakelchangeslaslappropriate.
2. Distinguishlamonglfinanciallsuccess,lfinanciallsecurity,landlfinanciallhappiness.
Answer:lFinanciallsuccesslislthelachievementloflfinanciallaspirationslthatlareldesired,lplanned,lorlatt
empted.lSuccesslisldefinedlbylthelindividuallorlfamilylthatlseekslit.lFinanciallsuccesslmaylbeldefinedlasl
beinglableltollivelaccordingltolone’slstandardloflliving.lFinanciallsecuritylislthatlcomfortablelfeelinglt
hatlyourlfinanciallresourceslwilllbeladequateltolfulfilllanylneedslyoulhavelaslwelllaslyourlwants.lFinanci
allhappinesslislthelexperiencelyoulhavelwhenlyoularelsatisfiedlwithlmoneylmatters.lPeoplelwholarelh
appylaboutltheirlfinanceslwilllseelalspilloverlintolpositivelfeelingslaboutllifelinlgeneral.
3. Summarizelwhatlyoulwilllaccomplishlstudyinglpersonallfinance.
Answer:lSeverallthingslcanlbelaccomplishedlbylstudyinglpersonallfinance.lRecognizelhowltolmanagelu
nexpectedlandlexpectedlfinanciallevents.lPaylasllittlelaslpossiblelinlincomeltaxes.lUnderstandlhowltoleffe
ctivelylcomparisonlshoplforlvehicleslandlhomes.lProtectlwhatlwelown.lInvestlwisely.lAccumulatelandlprot
ectlthelwealthlthatlwelmaylchooseltolspendlduringlourlnon-workinglyearsl(e.g.,lretirement)lorldonate.
4. Whatlarelthelbuildinglblocksltolachievinglfinanciallsuccess?
Answer:lThelbuildinglblockslforlachievinglfinanciallsuccesslincludelalfoundationloflregularlincomelth
atlprovideslthelmeansltolsupportlyourllifestylelandlsavelforldesiredlgoalslinlthelfuture.lThelfoundationl
supportslalbaseloflvariouslbankinglaccounts,linsurancelprotection,landlemployeelbenefits.lThenlwelc
anlestablishlgoals,lalrecordkeepinglsystem,lalbudget,landlanlemergencylsavingslfund.lWelwilllalsolma
nagelvariouslexpenseslsuchlaslhousing,ltransportation,linsurance,landlthelpaymentlofltaxes.lWelwilllal
solneedltolhandlelcredit,lsavings,landleducationallcosts.lFinally,lwelinvestlinlvariouslinvestmentlaltern
ativeslsuchlaslmutuallfunds,lstocks,landlbonds,loftenlforlretirement.lAslalresultloflallltheselbuildinglblo
cks,lwelarelmorelaptltolhavelalfinanciallylsuccessfulllife.
LO1.2lUnderstandlhowltheleconomylaffectslyourlpersonallfinanciallsuccess.
1. Summarizelthelphasesloflthelbusinesslcycle.
Answer:lThelbusinesslcyclelentailslalwavelikelpatternloflrisinglandlfallingleconomiclactivitylaslmeasur
edlbyleconomiclindicatorsllikelunemploymentlrateslorlthelgrossldomesticlproduct.lThelphasesloflthelb
usinesslcyclelincludelexpansionl(preferredlstage—
productionlislhigh,lunemploymentllow,linterestlratesllowlorlfalling,lstocklmarketlandlconsumerldema
ndlhigh),lpeak,lcontraction,ldownturn,ltrough,landlrecovery.
