SOLUTION MANUAL x
Personal Financial Planning
x x
15th Edition by Billingsley
x x x
All chapters 1 to 15
x x x x
,TABLE OF CONTENT x x
1. Understanding the Financial Planning Process.
x x x x x
2. Developing Your Financial Statements and Plans.
x x x x x x
3. Preparing Your Taxes.
x x x
Part II: MANAGING BASIC ASSETS.
x x x x
4. Managing Your Cash and Savings.
x x x x x
5. Making Automobile and Housing Decisions.
x x x x x
Part III: MANAGING CREDIT.
x x x
6. Using Credit.
x x
7. Using Consumer Loans.
x x x
Part IV: MANAGING INSURANCE NEEDS.
x x x x
8. Insuring Your Life.
x x x
9. Insuring Your Health.
x x x
10. Protecting Your Property.
x x x
Part V: MANAGING INVESTMENTS.
x x x
11. Investment Planning.
x x
12. Investing in Stocks and Bonds.
x x x x x
13. Investing in Mutual Funds and Real Estate.
x x x x x x x
Part VI: RETIREMENT AND ESTATE PLANNING.
x x x x x
14. Planning for Retirement.
x x x
15. Preserving Your Estate.
x x x
Understanding the Financial Planning x x x x
Process Chapter 1
x x x
How xWill xThis xAffect xMe?
The xheart xof xfinancial xplanning xis xmaking xsure xyour xvalues xline xup xwith xhow xyou xspend xand
xsave. xThat xmeans xknowing xwhere xyou xare xfinancially xand xplanning xon xhow xto xget xwhere xyou
xwant xto xbe xin xthe xfuture xno xmatter xwhat xlife xthrows xat xyou. xFor xexample, xhow xshould xyour
xplan xhandle xthe xprojection xthat xSocial xSecurity xcosts xmay xexceed xrevenues xby x2035? xAnd
xwhat xif xthe xgovernment xdecides xto xraise xtax xrates xto xhelp xcover xthe xfederal xdeficit? xAn
xinformed xfinancial xplan xshould xreflect xsuch xuncertainties xand xmore.
This xchapter xoverviews xthe xfinancial xplanning xprocess xand xexplains xits xcontext. xTopics
xinclude xhow xfinancial xplans xchange xto xaccommodate xyour xcurrent xstage xin xlife xand xthe xrole
xthat xfinancial xplanners xcan xplay xin xhelping xyou xachieve xyour xobjectives. xAfter xreading xthis
xchapter xyou xwill xhave xa xgood xperspective xon xhow xto xorganize xyour xoverall xpersonal
xfinancial xplan.
LEARNING GOALS x
,LG1 xIdentify xthe xbenefits xof xusing xpersonal xfinancial xplanning xtechniques xto xmanage
xyour xfinances.
Key xconcept xin xthis xsection xis xthe xplanning xmodel xas xdisplayed xin xExhibit x1.1. xYour
xstandard xof xliving xis xgreatly ximpacted xby xyour xspending xhabits xand xyour xcommitment xto
xsaving. xYour xspending xis xmeasured xby xyour xpropensity xto xconsume. xWealth xis xthe xtotal
xvalue xof xall xproperty xyou xown xless xthe xamount xthat xyou xowe xto xothers.
ACTIVITY: x Ask xthe xstudents xto xassume xthat xthey xhave xjust xinherited x$100,000. xWhat xwill
xyou xdo xwith xthe xmoney? xWrite xdown xthree xways xyou xwill xspend xor xuse xthe xmoney.
, Ask xthe xstudents xto xshare xone xitem xwith xthe xclass xand xrecord xwhat xthey xsay xso xthat xthe xentire
xclass xcan xreflect xon xthe xanswers. xHopefully, xat xleast xa xfew xwill xmention xinvesting xeven xif
xonly x$10,000 xof xthe xamount. x Use xtheir xanswers xto xdiscuss xtaking xcare xof xcurrent xneeds
xversus xfuture xneeds.
Focus xon xtheir xpropensity xto xconsume xand xits ximpact xon xaccumulating xwealth. xPoint xout xthe
xFinancial xPlanning xTip, x―Be xSMART xin xPlanning xYour xFinancial xGoals.‖
Use xExhibit x1.2 xto xshow xhow xthe xaverage xperson xearns xand xspends xtheir xmoney xand xExhibit
x1.6 xto xhelp xthe xstudent xidentify xwhere xthey xare xnow.
LG2 xDescribe xthe xpersonal xfinancial xplanning xprocess xand xdefine xyour xgoals.
Dwight xEisenhower, xarmy xgeneral xand xpresident, xis xquoted xas xsaying x―Plans xare xuseless;
xPlanning xis xpriceless‖. xThe xprocess xof xplanning xallows xyou xto xfocus xon xthe xissues xthat xare
xmost ximportant xand xto xbe xready xwhen xthings xchange.
Exhibit x1.3 xlists xthe xSix xStep xFinancial xPlanning xProcess. xThe xfirst xand xmost ximportant xis
xdefining xyour xfinancial xgoals. xExhibit x1.6 xlists xgoals xby xage xto xdemonstrate xhow xgoals
xchange xover xtime. xUse xthe xexamples xin xExhibit x1.5 xto xask xstudents xif xthe xassumptions xare
xrealistic. xYes, xthe xanswer xis xin xthe xexhibit, xbut xmany xwill xnot xhave xread xchapter xat xthis
xpoint. xFor xyour xuse, xthe xassumptions xare:
Assumption x1: xSaving xa xfew xthousand xdollars xa xyear xshould xprovide xenough xto xfund xmy
xchild‘s xcollege xEducation.
Assumption x2: xAn xemergency xfund xlasting x3 x months xshould xbe xadequate.
Assumption x3: xI xwill xbe xable xto xretire xat x65 xand xshould xhave xplenty xto xlive xon xin
xretirement. xAssumption x4: xI‘m xrelying xon xthe xrule xof xthumb xthat xI xwill xneed xonly x70
xpercent xof xmy xpre- xretirement xincome xto xmanage xnicely xin xretirement.
There xare xseveral xworksheets xin xthe xbook. xWorksheet x1.1 xgives xthe xstudent xa xformat xto
xwrite xdown xtheir xPersonal xFinancial xGoals. xThere xis xpower xin xwriting xdown xgoals x[and xmost
xany xother xplan]. xRecording xthe xgoal xand xthen xreviewing xthree xmonths xlater xwill xhelp xyou xto
xkeep xfocus xon xthe xgoal.
LG3 xExplain xthe xlife xcycle xof xfinancial xplans, xtheir xrole xin xachieving xyour xfinancial
xgoals, xhow xto xdeal xwith xspecial xplanning xconcerns, xand xthe xuse xof xprofessional
xfinancial xplanners.
Exhibit x1.7 xcan xhelp xfocus xthe xattention xon xhow xgoals xdiffer xbetween xthe xvarious xstages xof
xlife. xSection x1-3b xlists xvarious xdecisions xthat xyou xwill xhave xto xmake xover xyour xlife. xThe
xsection x1-3c xaddresses xSpecial xPlanning xConcerns. xWorksheet x1.2 xfocuses xon xthe xfinancial
xbenefit xto xthe xfamily xof xthe xsecond xincome. xIf xthe xsecond xincome xis xfrom xa xminimum xwage
xjob, xit xmay xnot xbe xa xgood xfinancial xdecision. xOf xcourse xhaving xa xjob, xeven xa xminimum
xwage xjob, xmay xgive xthe xperson xpsychic xincome xthat xwill xoverride xthe xfinancial ximpact.
While xperhaps xoff xtopic, xI xrecall xa xhigh xschool xscience xteacher xwho xwas xa xsmoker. xHe
xwalked xthrough xthe xamount xof xmoney xhe xspent xon xpurchasing xtobacco x products. x That
xcomputation xhad xa
Personal Financial Planning
x x
15th Edition by Billingsley
x x x
All chapters 1 to 15
x x x x
,TABLE OF CONTENT x x
1. Understanding the Financial Planning Process.
x x x x x
2. Developing Your Financial Statements and Plans.
x x x x x x
3. Preparing Your Taxes.
x x x
Part II: MANAGING BASIC ASSETS.
x x x x
4. Managing Your Cash and Savings.
x x x x x
5. Making Automobile and Housing Decisions.
x x x x x
Part III: MANAGING CREDIT.
x x x
6. Using Credit.
x x
7. Using Consumer Loans.
x x x
Part IV: MANAGING INSURANCE NEEDS.
x x x x
8. Insuring Your Life.
x x x
9. Insuring Your Health.
x x x
10. Protecting Your Property.
x x x
Part V: MANAGING INVESTMENTS.
x x x
11. Investment Planning.
x x
12. Investing in Stocks and Bonds.
x x x x x
13. Investing in Mutual Funds and Real Estate.
x x x x x x x
Part VI: RETIREMENT AND ESTATE PLANNING.
x x x x x
14. Planning for Retirement.
x x x
15. Preserving Your Estate.
x x x
Understanding the Financial Planning x x x x
Process Chapter 1
x x x
How xWill xThis xAffect xMe?
The xheart xof xfinancial xplanning xis xmaking xsure xyour xvalues xline xup xwith xhow xyou xspend xand
xsave. xThat xmeans xknowing xwhere xyou xare xfinancially xand xplanning xon xhow xto xget xwhere xyou
xwant xto xbe xin xthe xfuture xno xmatter xwhat xlife xthrows xat xyou. xFor xexample, xhow xshould xyour
xplan xhandle xthe xprojection xthat xSocial xSecurity xcosts xmay xexceed xrevenues xby x2035? xAnd
xwhat xif xthe xgovernment xdecides xto xraise xtax xrates xto xhelp xcover xthe xfederal xdeficit? xAn
xinformed xfinancial xplan xshould xreflect xsuch xuncertainties xand xmore.
This xchapter xoverviews xthe xfinancial xplanning xprocess xand xexplains xits xcontext. xTopics
xinclude xhow xfinancial xplans xchange xto xaccommodate xyour xcurrent xstage xin xlife xand xthe xrole
xthat xfinancial xplanners xcan xplay xin xhelping xyou xachieve xyour xobjectives. xAfter xreading xthis
xchapter xyou xwill xhave xa xgood xperspective xon xhow xto xorganize xyour xoverall xpersonal
xfinancial xplan.
LEARNING GOALS x
,LG1 xIdentify xthe xbenefits xof xusing xpersonal xfinancial xplanning xtechniques xto xmanage
xyour xfinances.
Key xconcept xin xthis xsection xis xthe xplanning xmodel xas xdisplayed xin xExhibit x1.1. xYour
xstandard xof xliving xis xgreatly ximpacted xby xyour xspending xhabits xand xyour xcommitment xto
xsaving. xYour xspending xis xmeasured xby xyour xpropensity xto xconsume. xWealth xis xthe xtotal
xvalue xof xall xproperty xyou xown xless xthe xamount xthat xyou xowe xto xothers.
ACTIVITY: x Ask xthe xstudents xto xassume xthat xthey xhave xjust xinherited x$100,000. xWhat xwill
xyou xdo xwith xthe xmoney? xWrite xdown xthree xways xyou xwill xspend xor xuse xthe xmoney.
, Ask xthe xstudents xto xshare xone xitem xwith xthe xclass xand xrecord xwhat xthey xsay xso xthat xthe xentire
xclass xcan xreflect xon xthe xanswers. xHopefully, xat xleast xa xfew xwill xmention xinvesting xeven xif
xonly x$10,000 xof xthe xamount. x Use xtheir xanswers xto xdiscuss xtaking xcare xof xcurrent xneeds
xversus xfuture xneeds.
Focus xon xtheir xpropensity xto xconsume xand xits ximpact xon xaccumulating xwealth. xPoint xout xthe
xFinancial xPlanning xTip, x―Be xSMART xin xPlanning xYour xFinancial xGoals.‖
Use xExhibit x1.2 xto xshow xhow xthe xaverage xperson xearns xand xspends xtheir xmoney xand xExhibit
x1.6 xto xhelp xthe xstudent xidentify xwhere xthey xare xnow.
LG2 xDescribe xthe xpersonal xfinancial xplanning xprocess xand xdefine xyour xgoals.
Dwight xEisenhower, xarmy xgeneral xand xpresident, xis xquoted xas xsaying x―Plans xare xuseless;
xPlanning xis xpriceless‖. xThe xprocess xof xplanning xallows xyou xto xfocus xon xthe xissues xthat xare
xmost ximportant xand xto xbe xready xwhen xthings xchange.
Exhibit x1.3 xlists xthe xSix xStep xFinancial xPlanning xProcess. xThe xfirst xand xmost ximportant xis
xdefining xyour xfinancial xgoals. xExhibit x1.6 xlists xgoals xby xage xto xdemonstrate xhow xgoals
xchange xover xtime. xUse xthe xexamples xin xExhibit x1.5 xto xask xstudents xif xthe xassumptions xare
xrealistic. xYes, xthe xanswer xis xin xthe xexhibit, xbut xmany xwill xnot xhave xread xchapter xat xthis
xpoint. xFor xyour xuse, xthe xassumptions xare:
Assumption x1: xSaving xa xfew xthousand xdollars xa xyear xshould xprovide xenough xto xfund xmy
xchild‘s xcollege xEducation.
Assumption x2: xAn xemergency xfund xlasting x3 x months xshould xbe xadequate.
Assumption x3: xI xwill xbe xable xto xretire xat x65 xand xshould xhave xplenty xto xlive xon xin
xretirement. xAssumption x4: xI‘m xrelying xon xthe xrule xof xthumb xthat xI xwill xneed xonly x70
xpercent xof xmy xpre- xretirement xincome xto xmanage xnicely xin xretirement.
There xare xseveral xworksheets xin xthe xbook. xWorksheet x1.1 xgives xthe xstudent xa xformat xto
xwrite xdown xtheir xPersonal xFinancial xGoals. xThere xis xpower xin xwriting xdown xgoals x[and xmost
xany xother xplan]. xRecording xthe xgoal xand xthen xreviewing xthree xmonths xlater xwill xhelp xyou xto
xkeep xfocus xon xthe xgoal.
LG3 xExplain xthe xlife xcycle xof xfinancial xplans, xtheir xrole xin xachieving xyour xfinancial
xgoals, xhow xto xdeal xwith xspecial xplanning xconcerns, xand xthe xuse xof xprofessional
xfinancial xplanners.
Exhibit x1.7 xcan xhelp xfocus xthe xattention xon xhow xgoals xdiffer xbetween xthe xvarious xstages xof
xlife. xSection x1-3b xlists xvarious xdecisions xthat xyou xwill xhave xto xmake xover xyour xlife. xThe
xsection x1-3c xaddresses xSpecial xPlanning xConcerns. xWorksheet x1.2 xfocuses xon xthe xfinancial
xbenefit xto xthe xfamily xof xthe xsecond xincome. xIf xthe xsecond xincome xis xfrom xa xminimum xwage
xjob, xit xmay xnot xbe xa xgood xfinancial xdecision. xOf xcourse xhaving xa xjob, xeven xa xminimum
xwage xjob, xmay xgive xthe xperson xpsychic xincome xthat xwill xoverride xthe xfinancial ximpact.
While xperhaps xoff xtopic, xI xrecall xa xhigh xschool xscience xteacher xwho xwas xa xsmoker. xHe
xwalked xthrough xthe xamount xof xmoney xhe xspent xon xpurchasing xtobacco x products. x That
xcomputation xhad xa
