Solut on Manual for Personal F nanc al Plann ng
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15th Ed t on by Randy B ll ngsley, Lawrence J. G
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fg tman, M chael D. Joehnk
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,SOLUT ON MANUAL FOR FG
Personal F nanc al Plann ng 15th Ed t on by Randy B ll ngsley, fg fg fg fg fg fg fg
Lawrence J. G tman, M chael D. Joehnk fg fg
Understand ng the F nanc al fg fg fg
Plann ng ProcessChapter 1 fg
How W ll Th s Affect Me? fg fg
The heart of f nanc al plann ng s mak ng sure your values l ne up w th how you spend and
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save.That means know ng where you are f nanc ally and plann ng on how to get where you fg fg fg fg
want to be n the future no matter what l fe throws at you. For example, how should your plan
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handle the project on that Soc al Secur ty costs may exceed revenues by 2035? And what f the
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governmentdec des to ra se tax rates to help cover the federal def c t? An nformed f nanc al
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plan should reflect such uncerta nt es and more. fg fg
Th s chapter overv ews the f nanc al plann ng process and expla ns ts context. Top cs
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nclude how f nanc al plans change to accommodate your current stage n l fe and the role
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that f nanc alplanners can play n help ng you ach eve your object ves. After read ng th s
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chapter you w ll have a good perspect ve on how to organ ze your overall personal f nanc al
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plan.
LEARN NG GOALS FG
LG1 dent fy the benef ts of us ng personal f nanc al plann ng techn ques to manage yourf
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nances.
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Key concept n th s sect on s the plann ng model as d splayed n Exh b t 1.1. Your standard
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of l v ng s greatly mpacted by your spend ng hab ts and your comm tment to sav ng. Your
fg fg fg fg fg fg fg fg
spend ng s measured by your propens ty to consume. Wealth s the total value of all
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propertyyou own less the amount that you owe to others.
ACT V TY: Ask the students to assume that they have just nher ted $100,000. What w ll you
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do w th the money? Wr te down three ways you w ll spend or use the money.
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,Ask the students to share one tem w th the class and record what they say so that the ent re fg fg fg
class can reflect on the answers. Hopefully, at least a few w ll ment on nvest ng even f only fg fg fg fg fg
$10,000 of the amount. Use the r answers to d scuss tak ng care of current needs versus future fg fg fg
needs.
Focus on the r propens ty to consume and ts mpact on accumulat ng wealth. Po nt out
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theF nanc al Plann ng T p, ―Be SMART n Plann ng Your F nanc al Goals.‖
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Use Exh b t 1.2 to show how the average person earns and spends the r money and Exh b t 1.6
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tohelp the student dent fy where they are now. fg fg
LG2 Descr be the personal f nanc al plann ng process and def ne your goals.
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Dw ght E senhower, army general and pres dent, s quoted as say ng ―Plans are useless; Plann
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ng s pr celess‖. The process of plann ng allows you to focus on the ssues that are most
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mportant and to be ready when th ngs change.
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Exh b t 1.3 l sts the S x Step F nanc al Plann ng Process. The f rst and most mportant s def
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n ng your f nanc al goals. Exh b t 1.6 l sts goals by age to demonstrate how goals change
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over t me. Use the examples n Exh b t 1.5 to ask students f the assumpt ons are real st c.
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Yes,the answer s n the exh b t, but many w ll not have read chapter at th s po nt. For your
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use, theassumpt ons are: fg
Assumpt on 1: Sav ng a few thousand dollars a year should prov de enough to fund my ch
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ld‘scollege Educat on.
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Assumpt on 2: An emergency fund last ng 3 months should be adequate.
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Assumpt on 3: w ll be able to ret re at 65 and should have plenty to l ve on n ret
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rement. Assumpt on 4: ‘m rely ng on the rule of thumb that w ll need only 70 percent
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of my pre-ret rement ncome to manage n cely n ret rement. fg fg fg fg fg
There are several worksheets n the book. Worksheet 1.1 g ves the student a format to wr te fg fg fg
down the r Personal F nanc al Goals. There s power n wr t ng down goals [and most any
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otherplan]. Record ng the goal and then rev ew ng three months later w ll help you to keep
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focus onthe goal.
LG3 Expla n the l fe cycle of f nanc al plans, the r role n ach ev ng your f nanc al goals,
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how to deal w th spec al plann ng concerns, and the use of profess onal f nanc al planners.
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Exh b t 1.7 can help focus the attent on on how goals d ffer between the var ous stages of l
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fe. Sect on 1-3b l sts var ous dec s ons that you w ll have to make over your l fe. The sect on
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1-3c addresses Spec al Plann ng Concerns. Worksheet 1.2 focuses on the f nanc al benef t to fg fg fg fg fg
the fam ly of the second ncome. f the second ncome s from a m n mum wage job, t may
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not be agood f nanc al dec s on. Of course hav ng a job, even a m n mum wage job, may g ve
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the personpsych c ncome that w ll overr de the f nanc al mpact. fg fg fg fg fg fg fg
Wh le perhaps off top c, recall a h gh school sc ence teacher who was a smoker. He walked
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through the amount of money he spent on purchas ng tobacco products. That computat on fg fg
had a
, lot to do w th my dec s on to not smoke. How th s relates to the course s that th s s an
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llustrat on of how the f nanc al mpact of a dec s on can dr ve the dec s on.
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LG4 Exam ne the econom c env ronment’s nfluence on personal f nanc al plann ng.
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For older folks, the f nanc al cr s s of 2008-2009 s fresh n our memory. To the student of
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2021,that cr s s s more of h story than l fe. f you can share a war story on how you were
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personally mpacted, t w ll help br ng the mpact of the world economy on f nanc al plans to l
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fe. The bookspeaks how to manage th s type of cr s s, but you had to go through t to really
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understand the mpact t had. fg fg
The value of profess onal adv ce s greatly understated. f by talk ng to a profess onal you can
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prevent mak ng a m stake -- that can be of a great value. Sect on 1-3e speaks to the use of
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profess onal f nanc al planners. Exh b t 1.9 l sts out the var ous cert f cat ons that planners
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have.
Econom c or bus ness cycles are real. Perhaps the most useful th ng about the cycles s the
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knowledge that f th ngs are bad, you know they w ll get better. Of course, when l fe s good,
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you know that the bad cycle w ll come around aga n. Thus, f nanc al plann ng requ res sav ng fg fg fg fg fg fg fg
nthe good t mes for the bad t mes. See the ―Test Yourself‖ quest on 1-17 for a short d scuss
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on of bus ness cycles.
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The power of compound ng s rarely understood. Exh b t 1.8 shows how the amount fg fg fg fg
$10,000w ll grow over t me. The longer the nvestment stays nvested, the greater the
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amount – the power of compound nterest. fg
LG5 Evaluate the mpact of age, educat on, and geograph c locat on on personal ncome.
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Exh b t 1.12 says t all.
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LG6 Understand the mportance of career cho ces and the r relat onsh p to personalf nanc al
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plann ng. fg
Exh b t 1.13 shows that the cho ce of a college major has a f nanc al mpact. Of course money
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cannot buy happ ness, but hav ng a b t helps. f you really want to be an elementary school
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teacher, you must recogn ze that you w ll not have as much wealth as a lawyer or f nanc al fg fg fg fg
analyst.
The summary of the learn ng goals at the end of the chapter should a d the student n rev ew fg fg fg fg
ngthe chapter when exam t me comes. t w ll be useful to po nt out to the student how to
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use th s mater al.
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L nk to Solut ons to F nanc al Plann ng Exerc ses
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Pre-tests
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15th Ed t on by Randy B ll ngsley, Lawrence J. G
fg fg fg fg
fg tman, M chael D. Joehnk
fg
,SOLUT ON MANUAL FOR FG
Personal F nanc al Plann ng 15th Ed t on by Randy B ll ngsley, fg fg fg fg fg fg fg
Lawrence J. G tman, M chael D. Joehnk fg fg
Understand ng the F nanc al fg fg fg
Plann ng ProcessChapter 1 fg
How W ll Th s Affect Me? fg fg
The heart of f nanc al plann ng s mak ng sure your values l ne up w th how you spend and
fg fg fg fg fg fg fg
save.That means know ng where you are f nanc ally and plann ng on how to get where you fg fg fg fg
want to be n the future no matter what l fe throws at you. For example, how should your plan
fg fg
handle the project on that Soc al Secur ty costs may exceed revenues by 2035? And what f the
fg fg fg fg
governmentdec des to ra se tax rates to help cover the federal def c t? An nformed f nanc al
fg fg fg fg fg fg fg
plan should reflect such uncerta nt es and more. fg fg
Th s chapter overv ews the f nanc al plann ng process and expla ns ts context. Top cs
fg fg fg fg fg fg fg fg
nclude how f nanc al plans change to accommodate your current stage n l fe and the role
fg fg fg fg fg
that f nanc alplanners can play n help ng you ach eve your object ves. After read ng th s
fg fg fg fg fg fg fg fg
chapter you w ll have a good perspect ve on how to organ ze your overall personal f nanc al
fg fg fg fg fg
plan.
LEARN NG GOALS FG
LG1 dent fy the benef ts of us ng personal f nanc al plann ng techn ques to manage yourf
FG fg fg fg fg fg fg fg
nances.
fg
Key concept n th s sect on s the plann ng model as d splayed n Exh b t 1.1. Your standard
fg fg fg fg fg fg fg fg fg
of l v ng s greatly mpacted by your spend ng hab ts and your comm tment to sav ng. Your
fg fg fg fg fg fg fg fg
spend ng s measured by your propens ty to consume. Wealth s the total value of all
fg fg fg fg
propertyyou own less the amount that you owe to others.
ACT V TY: Ask the students to assume that they have just nher ted $100,000. What w ll you
FG FG fg fg fg
do w th the money? Wr te down three ways you w ll spend or use the money.
fg fg fg
,Ask the students to share one tem w th the class and record what they say so that the ent re fg fg fg
class can reflect on the answers. Hopefully, at least a few w ll ment on nvest ng even f only fg fg fg fg fg
$10,000 of the amount. Use the r answers to d scuss tak ng care of current needs versus future fg fg fg
needs.
Focus on the r propens ty to consume and ts mpact on accumulat ng wealth. Po nt out
fg fg fg fg fg fg
theF nanc al Plann ng T p, ―Be SMART n Plann ng Your F nanc al Goals.‖
fg fg fg gf fg fg fg fg
Use Exh b t 1.2 to show how the average person earns and spends the r money and Exh b t 1.6
fg fg fg fg fg
tohelp the student dent fy where they are now. fg fg
LG2 Descr be the personal f nanc al plann ng process and def ne your goals.
fg fg fg fg fg
Dw ght E senhower, army general and pres dent, s quoted as say ng ―Plans are useless; Plann
fg fg fg fg fg
ng s pr celess‖. The process of plann ng allows you to focus on the ssues that are most
fg fg fg fg fg
mportant and to be ready when th ngs change.
fg fg
Exh b t 1.3 l sts the S x Step F nanc al Plann ng Process. The f rst and most mportant s def
fg fg fg fg fg fg fg fg fg fg
n ng your f nanc al goals. Exh b t 1.6 l sts goals by age to demonstrate how goals change
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over t me. Use the examples n Exh b t 1.5 to ask students f the assumpt ons are real st c.
fg fg fg fg fg fg fg fg
Yes,the answer s n the exh b t, but many w ll not have read chapter at th s po nt. For your
fg fg fg fg fg fg fg
use, theassumpt ons are: fg
Assumpt on 1: Sav ng a few thousand dollars a year should prov de enough to fund my ch
fg fg fg
ld‘scollege Educat on.
fg fg
Assumpt on 2: An emergency fund last ng 3 months should be adequate.
fg fg
Assumpt on 3: w ll be able to ret re at 65 and should have plenty to l ve on n ret
fg FG fg fg fg fg
rement. Assumpt on 4: ‘m rely ng on the rule of thumb that w ll need only 70 percent
fg fg FG fg FG fg
of my pre-ret rement ncome to manage n cely n ret rement. fg fg fg fg fg
There are several worksheets n the book. Worksheet 1.1 g ves the student a format to wr te fg fg fg
down the r Personal F nanc al Goals. There s power n wr t ng down goals [and most any
fg fg fg fg fg fg fg
otherplan]. Record ng the goal and then rev ew ng three months later w ll help you to keep
fg fg fg fg
focus onthe goal.
LG3 Expla n the l fe cycle of f nanc al plans, the r role n ach ev ng your f nanc al goals,
fg fg fg fg fg fg fg fg fg fg
how to deal w th spec al plann ng concerns, and the use of profess onal f nanc al planners.
fg fg fg fg fg fg
Exh b t 1.7 can help focus the attent on on how goals d ffer between the var ous stages of l
fg fg fg fg fg
fe. Sect on 1-3b l sts var ous dec s ons that you w ll have to make over your l fe. The sect on
fg fg fg fg fg fg fg fg fg
1-3c addresses Spec al Plann ng Concerns. Worksheet 1.2 focuses on the f nanc al benef t to fg fg fg fg fg
the fam ly of the second ncome. f the second ncome s from a m n mum wage job, t may
fg fg FG fg fg fg fg fg
not be agood f nanc al dec s on. Of course hav ng a job, even a m n mum wage job, may g ve
fg fg fg fg fg fg fg fg
the personpsych c ncome that w ll overr de the f nanc al mpact. fg fg fg fg fg fg fg
Wh le perhaps off top c, recall a h gh school sc ence teacher who was a smoker. He walked
fg fg FG fg fg
through the amount of money he spent on purchas ng tobacco products. That computat on fg fg
had a
, lot to do w th my dec s on to not smoke. How th s relates to the course s that th s s an
fg fg fg fg fg fg fg
llustrat on of how the f nanc al mpact of a dec s on can dr ve the dec s on.
fg fg fg fg fg fg fg fg fg fg
LG4 Exam ne the econom c env ronment’s nfluence on personal f nanc al plann ng.
fg fg fg fg fg fg fg
For older folks, the f nanc al cr s s of 2008-2009 s fresh n our memory. To the student of
fg fg fg fg fg fg
2021,that cr s s s more of h story than l fe. f you can share a war story on how you were
fg fg fg fg fg FG
personally mpacted, t w ll help br ng the mpact of the world economy on f nanc al plans to l
fg fg fg fg fg fg fg
fe. The bookspeaks how to manage th s type of cr s s, but you had to go through t to really
fg fg fg fg fg
understand the mpact t had. fg fg
The value of profess onal adv ce s greatly understated. f by talk ng to a profess onal you can
fg fg fg FG fg fg
prevent mak ng a m stake -- that can be of a great value. Sect on 1-3e speaks to the use of
fg fg fg
profess onal f nanc al planners. Exh b t 1.9 l sts out the var ous cert f cat ons that planners
fg fg fg fg fg fg fg fg fg fg
have.
Econom c or bus ness cycles are real. Perhaps the most useful th ng about the cycles s the
fg fg fg fg
knowledge that f th ngs are bad, you know they w ll get better. Of course, when l fe s good,
fg fg fg fg fg
you know that the bad cycle w ll come around aga n. Thus, f nanc al plann ng requ res sav ng fg fg fg fg fg fg fg
nthe good t mes for the bad t mes. See the ―Test Yourself‖ quest on 1-17 for a short d scuss
fg fg fg fg fg
on of bus ness cycles.
gf fg
The power of compound ng s rarely understood. Exh b t 1.8 shows how the amount fg fg fg fg
$10,000w ll grow over t me. The longer the nvestment stays nvested, the greater the
fg fg fg fg
amount – the power of compound nterest. fg
LG5 Evaluate the mpact of age, educat on, and geograph c locat on on personal ncome.
fg fg fg fg fg
Exh b t 1.12 says t all.
fg fg fg
LG6 Understand the mportance of career cho ces and the r relat onsh p to personalf nanc al
fg fg fg fg fg fg fg
plann ng. fg
Exh b t 1.13 shows that the cho ce of a college major has a f nanc al mpact. Of course money
fg fg fg fg fg fg
cannot buy happ ness, but hav ng a b t helps. f you really want to be an elementary school
fg fg fg FG
teacher, you must recogn ze that you w ll not have as much wealth as a lawyer or f nanc al fg fg fg fg
analyst.
The summary of the learn ng goals at the end of the chapter should a d the student n rev ew fg fg fg fg
ngthe chapter when exam t me comes. t w ll be useful to po nt out to the student how to
fg fg FG fg fg
use th s mater al.
fg fg
L nk to Solut ons to F nanc al Plann ng Exerc ses
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Pre-tests
