1
,TABLE OF CONTENTSNN NN
Answers nnto nnChapter nnConcept nnChecks ............................................................................................... 2
What nnDo nnYou nnRecommend nnNow?..................................................................................................... 4
Let’s nnTalk nnAbout nnIt............................................................................................................................. 5
Do nnthe nnMath ........................................................................................................................................ 6
Financial nnPlanning nnCases ..................................................................................................................... 8
Extended nnLearning ............................................................................................................................. 10
2
,ANSWERS TO CHAPTER CONCEPT CHECKS
NN NN NN NN
LO1.1 nnRecognize nnthe nnkeys nnto nnachieving nnfinancial nnsuccess.
1. Explain nnthe nnfive nnsteps nnin nnthe nnfinancial nnplanning nnprocess.
Answer: nnThere nnare nnfive nnfundamental nnsteps nnto nnthe nnpersonal nnfinancial nnplanning nnprocess: nn(1)
nnevaluate nnyour nnfinancial nnhealth nnto nnyour nneducation nnand nncareer nnchoice; nn(2) nndefine nnyour nnfinancial
nngoals; nn(3) nndevelop nna nnplan nnof nnaction nnto nnachieve nnyour nngoals; nn(4) nnimplement nnspending nnand
nnsaving nnplans nnto nnmonitor nnand nncontrol nnprogress nntoward nnyour nngoals; nnand nn(5) nnreview nnyour
nnfinancial nnprogress nnand nnmake nnchanges nnas nnappropriate.
2. Distinguish nnamong nn financial nnsuccess, nn financial nnsecurity, nn and nnfinancial nnhappiness.
Answer: nnFinancial nnsuccess nnis nnthe nnachievement nnof nnfinancial nnaspirations nnthat nnare nndesired,
nnplanned, nnor nnattempted. nnSuccess nnis nndefined nnby nnthe nnindividual nnor nnfamily nnthat nnseeks nnit. nnFinancial
nnsuccess nnmay nnbe nndefined nnas nnbeing nnable nnto nnlive nnaccording nnto nnone’s nnstandard nnof nnliving.
nnFinancial nnsecurity nnis nnthat nncomfortable nnfeeling nnthat nnyour nnfinancial nnresources nnwill nnbe
nnadequate nnto nnfulfill nnany nnneeds nnyou nnhave nnas nnwell nnas nnyour nnwants. nnFinancial nnhappiness nnis
nnthe nnexperience nnyou nnhave nnwhen nnyou nnare nnsatisfied nnwith nnmoney nnmatters. nnPeople nnwho nnare
nnhappy nnabout nntheir nnfinances nnwill nnsee nna nnspillover nninto nnpositive nnfeelings nnabout nnlife nnin
nngeneral.
3. Summarize nnwhat nnyou nnwill nnaccomplish nnstudying nn personal nnfinance.
Answer: nnSeveral nnthings nncan nnbe nnaccomplished nnby nnstudying nnpersonal nnfinance. nnRecognize nnhow
nnto nnmanage nnunexpected nnand nnexpected nnfinancial nnevents. nnPay nnas nnlittle nnas nnpossible nnin nnincome
nntaxes. nnUnderstand nnhow nnto nneffectively nncomparison nnshop nnfor nnvehicles nnand nnhomes. nnProtect nnwhat
nnwe nnown. nnInvest nnwisely. nnAccumulate nnand nnprotect nnthe nnwealth nnthat nnwe nnmay nnchoose nnto nnspend
nnduring nnour nnnon-working nnyears nn(e.g., nnretirement) nnor nndonate.
4. What nnare nnthe nnbuilding nnblocks nnto nnachieving nnfinancial nnsuccess?
Answer: nnThe nnbuilding nnblocks nnfor nnachieving nnfinancial nnsuccess nninclude nna nnfoundation nnof
nnregular nnincome nnthat nnprovides nnthe nnmeans nnto nnsupport nnyour nnlifestyle nnand nnsave nnfor nndesired
nngoals nnin nnthe nnfuture. nnThe nnfoundation nnsupports nna nnbase nnof nnvarious nnbanking nnaccounts,
nninsurance nnprotection, nnand nnemployee nnbenefits. nnThen nnwe nncan nnestablish nngoals, nna nnrecordkeeping
nnsystem, nna nnbudget, nnand nnan nnemergency nnsavings nnfund. nnWe nnwill nnalso nnmanage nnvarious nnexpenses
nnsuch nnas nnhousing, nntransportation, nninsurance, nnand nnthe nnpayment nnof nntaxes. nnWe nnwill nnalso nnneed nnto
nnhandle nncredit, nnsavings, nnand nneducational nncosts. nnFinally, nnwe nninvest nnin nnvarious nninvestment
nnalternatives nnsuch nnas nnmutual nnfunds, nnstocks, nnand nnbonds, nnoften nnfor nnretirement. nnAs nna nnresult nnof
nnall nnthese nnbuilding nnblocks, nnwe nnare nnmore nnapt nnto nnhave nna nnfinancially nnsuccessful nnlife.
LO1.2 nnUnderstand nnhow nnthe nneconomy nnaffects nnyour nnpersonal nnfinancial nnsuccess.
1. Summarize nnthe nnphases nnof nnthe nnbusiness nncycle.
Answer: nnThe nnbusiness nncycle nnentails nna nnwavelike nnpattern nnof nnrising nnand nnfalling nneconomic
nnactivity nnas nnmeasured nnby nneconomic nnindicators nnlike nnunemployment nnrates nnor nnthe nngross nndomestic
nnproduct. nnThe nnphases nnof nnthe nnbusiness nncycle nninclude nnexpansion nn(preferred nnstage—production nnis
nnhigh, nnunemployment nnlow, nninterest nnrates nnlow nnor nnfalling, nnstock nnmarket nnand nnconsumer nndemand
nnhigh), nnpeak, nncontraction, nndownturn, nntrough, nnand nnrecovery.
2. Describe nntwo nnstatistics nnthat nnhelp nnpredict nnthe nnfuture nndirection nnof nnthe nneconomy.
Answer: nnForecasting nnthe nnstate nnof nnthe nneconomy nninvolves nnpredicting, nnestimating, nnor nncalculating
nnwhat nnwill nnhappen nnin nnadvance. nnWe nnneed nnto nnbe nnable nnto nnforecast nnthe nnstate nnof nnthe nneconomy,
3
, nninflation, nnand nninterest nnrates nnso nnthat nnwe nnhave nnadvance nnwarning nnof nnthe nndirections nnand nnstrength
nnof nnchanges nnin nneconomic nntrends nnsince nnthey nnwill nnaffect nnour nnpersonal nnfinances. nnTwo nnstatistics
nnwe nncould nnwatch nnare nnthe nnconsumer nnconfidence nnindex nn(how nnconsumers nnfeel nnabout nnthe
nneconomy nnand nntheir nnpersonal nnfinances) nnand nnthe nnindex nnof nnleading nneconomic nnindicators
nn(composite nnindex, nnaverages nnten nncomponents nnof nneconomic nngrowth).
4
,TABLE OF CONTENTSNN NN
Answers nnto nnChapter nnConcept nnChecks ............................................................................................... 2
What nnDo nnYou nnRecommend nnNow?..................................................................................................... 4
Let’s nnTalk nnAbout nnIt............................................................................................................................. 5
Do nnthe nnMath ........................................................................................................................................ 6
Financial nnPlanning nnCases ..................................................................................................................... 8
Extended nnLearning ............................................................................................................................. 10
2
,ANSWERS TO CHAPTER CONCEPT CHECKS
NN NN NN NN
LO1.1 nnRecognize nnthe nnkeys nnto nnachieving nnfinancial nnsuccess.
1. Explain nnthe nnfive nnsteps nnin nnthe nnfinancial nnplanning nnprocess.
Answer: nnThere nnare nnfive nnfundamental nnsteps nnto nnthe nnpersonal nnfinancial nnplanning nnprocess: nn(1)
nnevaluate nnyour nnfinancial nnhealth nnto nnyour nneducation nnand nncareer nnchoice; nn(2) nndefine nnyour nnfinancial
nngoals; nn(3) nndevelop nna nnplan nnof nnaction nnto nnachieve nnyour nngoals; nn(4) nnimplement nnspending nnand
nnsaving nnplans nnto nnmonitor nnand nncontrol nnprogress nntoward nnyour nngoals; nnand nn(5) nnreview nnyour
nnfinancial nnprogress nnand nnmake nnchanges nnas nnappropriate.
2. Distinguish nnamong nn financial nnsuccess, nn financial nnsecurity, nn and nnfinancial nnhappiness.
Answer: nnFinancial nnsuccess nnis nnthe nnachievement nnof nnfinancial nnaspirations nnthat nnare nndesired,
nnplanned, nnor nnattempted. nnSuccess nnis nndefined nnby nnthe nnindividual nnor nnfamily nnthat nnseeks nnit. nnFinancial
nnsuccess nnmay nnbe nndefined nnas nnbeing nnable nnto nnlive nnaccording nnto nnone’s nnstandard nnof nnliving.
nnFinancial nnsecurity nnis nnthat nncomfortable nnfeeling nnthat nnyour nnfinancial nnresources nnwill nnbe
nnadequate nnto nnfulfill nnany nnneeds nnyou nnhave nnas nnwell nnas nnyour nnwants. nnFinancial nnhappiness nnis
nnthe nnexperience nnyou nnhave nnwhen nnyou nnare nnsatisfied nnwith nnmoney nnmatters. nnPeople nnwho nnare
nnhappy nnabout nntheir nnfinances nnwill nnsee nna nnspillover nninto nnpositive nnfeelings nnabout nnlife nnin
nngeneral.
3. Summarize nnwhat nnyou nnwill nnaccomplish nnstudying nn personal nnfinance.
Answer: nnSeveral nnthings nncan nnbe nnaccomplished nnby nnstudying nnpersonal nnfinance. nnRecognize nnhow
nnto nnmanage nnunexpected nnand nnexpected nnfinancial nnevents. nnPay nnas nnlittle nnas nnpossible nnin nnincome
nntaxes. nnUnderstand nnhow nnto nneffectively nncomparison nnshop nnfor nnvehicles nnand nnhomes. nnProtect nnwhat
nnwe nnown. nnInvest nnwisely. nnAccumulate nnand nnprotect nnthe nnwealth nnthat nnwe nnmay nnchoose nnto nnspend
nnduring nnour nnnon-working nnyears nn(e.g., nnretirement) nnor nndonate.
4. What nnare nnthe nnbuilding nnblocks nnto nnachieving nnfinancial nnsuccess?
Answer: nnThe nnbuilding nnblocks nnfor nnachieving nnfinancial nnsuccess nninclude nna nnfoundation nnof
nnregular nnincome nnthat nnprovides nnthe nnmeans nnto nnsupport nnyour nnlifestyle nnand nnsave nnfor nndesired
nngoals nnin nnthe nnfuture. nnThe nnfoundation nnsupports nna nnbase nnof nnvarious nnbanking nnaccounts,
nninsurance nnprotection, nnand nnemployee nnbenefits. nnThen nnwe nncan nnestablish nngoals, nna nnrecordkeeping
nnsystem, nna nnbudget, nnand nnan nnemergency nnsavings nnfund. nnWe nnwill nnalso nnmanage nnvarious nnexpenses
nnsuch nnas nnhousing, nntransportation, nninsurance, nnand nnthe nnpayment nnof nntaxes. nnWe nnwill nnalso nnneed nnto
nnhandle nncredit, nnsavings, nnand nneducational nncosts. nnFinally, nnwe nninvest nnin nnvarious nninvestment
nnalternatives nnsuch nnas nnmutual nnfunds, nnstocks, nnand nnbonds, nnoften nnfor nnretirement. nnAs nna nnresult nnof
nnall nnthese nnbuilding nnblocks, nnwe nnare nnmore nnapt nnto nnhave nna nnfinancially nnsuccessful nnlife.
LO1.2 nnUnderstand nnhow nnthe nneconomy nnaffects nnyour nnpersonal nnfinancial nnsuccess.
1. Summarize nnthe nnphases nnof nnthe nnbusiness nncycle.
Answer: nnThe nnbusiness nncycle nnentails nna nnwavelike nnpattern nnof nnrising nnand nnfalling nneconomic
nnactivity nnas nnmeasured nnby nneconomic nnindicators nnlike nnunemployment nnrates nnor nnthe nngross nndomestic
nnproduct. nnThe nnphases nnof nnthe nnbusiness nncycle nninclude nnexpansion nn(preferred nnstage—production nnis
nnhigh, nnunemployment nnlow, nninterest nnrates nnlow nnor nnfalling, nnstock nnmarket nnand nnconsumer nndemand
nnhigh), nnpeak, nncontraction, nndownturn, nntrough, nnand nnrecovery.
2. Describe nntwo nnstatistics nnthat nnhelp nnpredict nnthe nnfuture nndirection nnof nnthe nneconomy.
Answer: nnForecasting nnthe nnstate nnof nnthe nneconomy nninvolves nnpredicting, nnestimating, nnor nncalculating
nnwhat nnwill nnhappen nnin nnadvance. nnWe nnneed nnto nnbe nnable nnto nnforecast nnthe nnstate nnof nnthe nneconomy,
3
, nninflation, nnand nninterest nnrates nnso nnthat nnwe nnhave nnadvance nnwarning nnof nnthe nndirections nnand nnstrength
nnof nnchanges nnin nneconomic nntrends nnsince nnthey nnwill nnaffect nnour nnpersonal nnfinances. nnTwo nnstatistics
nnwe nncould nnwatch nnare nnthe nnconsumer nnconfidence nnindex nn(how nnconsumers nnfeel nnabout nnthe
nneconomy nnand nntheir nnpersonal nnfinances) nnand nnthe nnindex nnof nnleading nneconomic nnindicators
nn(composite nnindex, nnaverages nnten nncomponents nnof nneconomic nngrowth).
4
