SOLUTION MANUAL
Personal Finance, 14th Edition
By Garman, all Chapter 1-17
,TABLE OF CONTENTS e e e
Part I: FINANCIAL PLANNING.
e e e
1. Understanding Personal Finance.
e e e
2. Career Planning.
e e
3. Financial Statements, Goals, and Budgets.
e e e e e
Part II: MONEY MANAGEMENT.
e e e
4. Managing Income Taxes.
e e e
5. Managing Checking and Savings Accounts.
e e e e e
6. Building and Maintaining Good Credit.
e e e e e
7. Credit Cards and Consumer Loans.
e e e e e
8. Vehicles and Other Major Purchases.
e e e e e
9. Obtaining Affordable Housing.
e e e
Part III: INCOME AND ASSET PROTECTION.
e e e e e
10. Managing Property and Liability Risk.
e e e e e
11. Planning for Health Care Expenses.
e e e e e
12. Life Insurance Planning.
e e e
Part IV: INVESTMENTS.
e e
13. Investment Fundamentals.
e e
,14. Investing in Stocks and Bonds.
e e e e e
15. Mutual and Exchange-Traded Funds.
e e e e
16. Real Estate and High-Risk Investments.
e e e e e
17. Retirement and Estate Planning.
e e e e
Solution and Answer Guide e e e
GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
E E E E E E E E E E
TABLE OF CONTENTS E E
AnswersetoeChaptereConcepteChecks ......................................................................................... 2
WhateDoeYoueRecommendeNow? .............................................................................................. 4
Let’seTalkeAbouteIt ......................................................................................................................................................... 5
DoetheeMath ............................................................................................................................... 6
FinancialePlanningeCases ............................................................................................................ 8
ExtendedeLearning ...................................................................................................................10
, ANSWERS TO CHAPTER CONCEPT CHECKS
E E E E
LO1.1eRecognizeetheekeysetoeachievingefinancialesuccess.
1. Explainetheefiveestepseinetheefinancialeplanningeprocess.
Answer:eThereeareefiveefundamentalestepsetoetheepersonalefinancialeplanningeprocess:e(1)eevaluatee
yourefinancialehealthetoeyoureeducationeandecareerechoice;e(2)edefineeyourefinancialegoals;e(3)edevel
opeaeplaneofeactionetoeachieveeyouregoals;e(4)eimplementespendingeandesavingeplansetoemonitorean
decontroleprogressetowardeyouregoals;eande(5)erevieweyourefinancialeprogresseandemakeechangeseas
eappropriate.
2. Distinguisheamongefinancialesuccess,efinancialesecurity,eandefinancialehappiness.
Answer:eFinancialesuccesseisetheeachievementeofefinancialeaspirationsethateareedesired,eplanned,eo
reattempted.eSuccesseisedefinedebyetheeindividualeorefamilyethateseekseit.eFinancialesuccessemayebeed
efinedeasebeingeableetoeliveeaccordingetoeone’sestandardeofeliving.eFinancialesecurityeisethatecomfor
tableefeelingethateyourefinancialeresourcesewillebeeadequateetoefulfilleanyeneedseyouehaveeasewellease
yourewants.eFinancialehappinesseisetheeexperienceeyouehaveewheneyoueareesatisfiedewithemoneyem
atters.ePeopleewhoeareehappyeaboutetheirefinancesewilleseeeaespillovereintoepositiveefeelingseabouteli
feeinegeneral.
3. Summarizeewhateyouewilleaccomplishestudyingepersonalefinance.
Answer:eSeveralethingsecanebeeaccomplishedebyestudyingepersonalefinance.eRecognizeehowetoemana
geeunexpectedeandeexpectedefinancialeevents.ePayeaselittleeasepossibleeineincomeetaxes.eUnderstandeh
owetoeeffectivelyecomparisoneshopeforevehicleseandehomes.eProtectewhateweeown.eInvestewisely.eAccu
mulateeandeprotectetheewealthethateweemayechooseetoespendeduringeourenon-
workingeyearse(e.g.,eretirement)eoredonate.
4. Whateareetheebuildingeblocksetoeachievingefinancialesuccess?
Answer:eTheebuildingeblockseforeachievingefinancialesuccesseincludeeaefoundationeoferegulareincom
eethateprovidesetheemeansetoesupporteyourelifestyleeandesaveeforedesiredegoalseinetheefuture.eTheefo
undationesupportseaebaseeofevariousebankingeaccounts,einsuranceeprotection,eandeemployeeebenef
its.eTheneweecaneestablishegoals,eaerecordkeepingesystem,eaebudget,eandeaneemergencyesavingsefun
d.eWeewillealsoemanageevariouseexpensesesucheasehousing,etransportation,einsurance,eandetheepaym
enteofetaxes.eWeewillealsoeneedetoehandleecredit,esavings,eandeeducationalecosts.eFinally,eweeinvestein
evariouseinvestmentealternativesesucheasemutualefunds,estocks,eandebonds,eofteneforeretirement.eAse
aeresulteofealletheseebuildingeblocks,eweeareemoreeaptetoehaveeaefinanciallyesuccessfulelife.
LO1.2eUnderstandehowetheeeconomyeaffectseyourepersonalefinancialesuccess.
1. Summarizeetheephaseseofetheebusinessecycle.
Answer:eTheebusinessecycleeentailseaewavelikeepatterneoferisingeandefallingeeconomiceactivityeaseme
asuredebyeeconomiceindicatorselikeeunemploymenterateseoretheegrossedomesticeproduct.eTheephase
seofetheebusinessecycleeincludeeexpansione(preferredestage—
Personal Finance, 14th Edition
By Garman, all Chapter 1-17
,TABLE OF CONTENTS e e e
Part I: FINANCIAL PLANNING.
e e e
1. Understanding Personal Finance.
e e e
2. Career Planning.
e e
3. Financial Statements, Goals, and Budgets.
e e e e e
Part II: MONEY MANAGEMENT.
e e e
4. Managing Income Taxes.
e e e
5. Managing Checking and Savings Accounts.
e e e e e
6. Building and Maintaining Good Credit.
e e e e e
7. Credit Cards and Consumer Loans.
e e e e e
8. Vehicles and Other Major Purchases.
e e e e e
9. Obtaining Affordable Housing.
e e e
Part III: INCOME AND ASSET PROTECTION.
e e e e e
10. Managing Property and Liability Risk.
e e e e e
11. Planning for Health Care Expenses.
e e e e e
12. Life Insurance Planning.
e e e
Part IV: INVESTMENTS.
e e
13. Investment Fundamentals.
e e
,14. Investing in Stocks and Bonds.
e e e e e
15. Mutual and Exchange-Traded Funds.
e e e e
16. Real Estate and High-Risk Investments.
e e e e e
17. Retirement and Estate Planning.
e e e e
Solution and Answer Guide e e e
GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
E E E E E E E E E E
TABLE OF CONTENTS E E
AnswersetoeChaptereConcepteChecks ......................................................................................... 2
WhateDoeYoueRecommendeNow? .............................................................................................. 4
Let’seTalkeAbouteIt ......................................................................................................................................................... 5
DoetheeMath ............................................................................................................................... 6
FinancialePlanningeCases ............................................................................................................ 8
ExtendedeLearning ...................................................................................................................10
, ANSWERS TO CHAPTER CONCEPT CHECKS
E E E E
LO1.1eRecognizeetheekeysetoeachievingefinancialesuccess.
1. Explainetheefiveestepseinetheefinancialeplanningeprocess.
Answer:eThereeareefiveefundamentalestepsetoetheepersonalefinancialeplanningeprocess:e(1)eevaluatee
yourefinancialehealthetoeyoureeducationeandecareerechoice;e(2)edefineeyourefinancialegoals;e(3)edevel
opeaeplaneofeactionetoeachieveeyouregoals;e(4)eimplementespendingeandesavingeplansetoemonitorean
decontroleprogressetowardeyouregoals;eande(5)erevieweyourefinancialeprogresseandemakeechangeseas
eappropriate.
2. Distinguisheamongefinancialesuccess,efinancialesecurity,eandefinancialehappiness.
Answer:eFinancialesuccesseisetheeachievementeofefinancialeaspirationsethateareedesired,eplanned,eo
reattempted.eSuccesseisedefinedebyetheeindividualeorefamilyethateseekseit.eFinancialesuccessemayebeed
efinedeasebeingeableetoeliveeaccordingetoeone’sestandardeofeliving.eFinancialesecurityeisethatecomfor
tableefeelingethateyourefinancialeresourcesewillebeeadequateetoefulfilleanyeneedseyouehaveeasewellease
yourewants.eFinancialehappinesseisetheeexperienceeyouehaveewheneyoueareesatisfiedewithemoneyem
atters.ePeopleewhoeareehappyeaboutetheirefinancesewilleseeeaespillovereintoepositiveefeelingseabouteli
feeinegeneral.
3. Summarizeewhateyouewilleaccomplishestudyingepersonalefinance.
Answer:eSeveralethingsecanebeeaccomplishedebyestudyingepersonalefinance.eRecognizeehowetoemana
geeunexpectedeandeexpectedefinancialeevents.ePayeaselittleeasepossibleeineincomeetaxes.eUnderstandeh
owetoeeffectivelyecomparisoneshopeforevehicleseandehomes.eProtectewhateweeown.eInvestewisely.eAccu
mulateeandeprotectetheewealthethateweemayechooseetoespendeduringeourenon-
workingeyearse(e.g.,eretirement)eoredonate.
4. Whateareetheebuildingeblocksetoeachievingefinancialesuccess?
Answer:eTheebuildingeblockseforeachievingefinancialesuccesseincludeeaefoundationeoferegulareincom
eethateprovidesetheemeansetoesupporteyourelifestyleeandesaveeforedesiredegoalseinetheefuture.eTheefo
undationesupportseaebaseeofevariousebankingeaccounts,einsuranceeprotection,eandeemployeeebenef
its.eTheneweecaneestablishegoals,eaerecordkeepingesystem,eaebudget,eandeaneemergencyesavingsefun
d.eWeewillealsoemanageevariouseexpensesesucheasehousing,etransportation,einsurance,eandetheepaym
enteofetaxes.eWeewillealsoeneedetoehandleecredit,esavings,eandeeducationalecosts.eFinally,eweeinvestein
evariouseinvestmentealternativesesucheasemutualefunds,estocks,eandebonds,eofteneforeretirement.eAse
aeresulteofealletheseebuildingeblocks,eweeareemoreeaptetoehaveeaefinanciallyesuccessfulelife.
LO1.2eUnderstandehowetheeeconomyeaffectseyourepersonalefinancialesuccess.
1. Summarizeetheephaseseofetheebusinessecycle.
Answer:eTheebusinessecycleeentailseaewavelikeepatterneoferisingeandefallingeeconomiceactivityeaseme
asuredebyeeconomiceindicatorselikeeunemploymenterateseoretheegrossedomesticeproduct.eTheephase
seofetheebusinessecycleeincludeeexpansione(preferredestage—
