Solution Manual for Personal Financial Planning 15th Edition by Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk

,TABLE SOLUTION MANUAL
Personal Financial Planning
15th Edition by Billingsley
All chapters 1 to 15
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1. Understanding the Financial Planning Process.
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2. Developing Your Financial Statements and Plans.
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3. Preparing Your Taxes.
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Part II: MANAGING BASIC ASSETS.
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4. Managing Your Cash and Savings.
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5. Making Automobile and Housing Decisions.
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Part III: MANAGING CREDIT. AS AS AS




6. Using Credit.
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7. Using Consumer Loans.
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Part IV: MANAGING INSURANCE NEEDS.
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8. Insuring Your Life.
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9. Insuring Your Health.
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10. Protecting Your Property.
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Part V: MANAGING INVESTMENTS.
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11. Investment Planning.
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12. Investing in Stocks and Bonds.
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13. Investing in Mutual Funds and Real Estate.
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Part VI: RETIREMENT AND ESTATE PLANNING.
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14. Planning for Retirement.
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15. Preserving Your Estate.
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Understanding the FinancialPlanningProc AS ASAS A
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ess Chapter 1 AS AS




How Will This Affect Me?
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The heart of financial planning is making sure your values line up with how you spend and save. That m
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eans knowing where you are financially and planning on how to get where you want to be in the future no
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matter what life throws at you. For example, how should your plan handle the projection that Social Sec
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urity costs may exceed revenues by 2035? And what if the government decides to raise tax rates to help
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cover the federal deficit? An informed financial plan should reflect such uncertainties and more.
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,This chapter overviews the financial planning process and explains its context. Topics include how fi
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nancialplans change to accommodate your current stage in life and the role that financial planners can
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play in helping you achieve your objectives. After reading this chapter you will have a good perspecti
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ve on how to organize your overall personal financial plan.
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LEARNINGGOALS AS




LG1 Identify the benefits of using personal financial planning techniques to manage your finance
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s.

Key concept in this section is the planning model as displayed in Exhibit 1.1. Your standard of living i
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s greatly impacted by your spending habits and your commitment to saving. Your spending is measur
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ed by your propensity to consume. Wealth is the total value ofall property you own less the amount t
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hat you owe to others.
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ACTIVITY: Ask the studentsto assumethat theyhave just inherited $100,000. What will you do wit
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h the money? Write down three ways you will spend or use the money.
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, Ask the students to share one itemwith the class and record what theysayso that the entire class can refl
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ect on the answers. Hopefully, at least a few will mention investing even if only $10,000 ofthe amount.
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AUse their answers to discuss taking care of current needs versus future needs.
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Focus ontheir propensityto consume and its impact on accumulating wealth. Point out the FinancialPla
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nning Tip, ―Be SMART inPlanning Your FinancialGoals.‖ AS AS AS AS A
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Use Exhibit 1.2 to show how the average person earns and spends their money and Exhibit 1.6 to help the
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student identify where they are now. AS AS AS AS AS




LG2 Describe the personalfinancialplanning process and define yourgoals.
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DwightEisenhower,army generaland president, isquoted assaying ―Plansareuseless;Planning is pric
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eless‖. The process of planning allows you to focus on the issues that are most important and to be rea
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dy when things change. AS AS AS




Exhibit 1.3 lists the Six Step Financial Planning Process. The first and most important is defining you
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r financial goals. Exhibit 1.6 lists goals by age to demonstrate how goals change over time. Use the ex
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amples inExhibit 1.5 to ask students ifthe assumptions are realistic. Yes, the answer is in the exhibit, b
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ut manywill not have read chapter at this point. For your use, the assumptions are:
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Assumption 1: Saving a few thousand dollars a year should provide enoughto fund mychild‘s colleg AS AS AS AS AS AS AS AS AS AS AS A
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e Education. AS




Assumption 2: Anemergency fund lasting 3 monthsshould be adequate. AS AS A
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Assumption 3: I will be able to retire at 65 and should have plentyto live on in retirement. Assu AS AS AS AS AS AS AS AS AS AS AS AS AS AS AS AS AS AS AS




mption 4: I‘mrelying on the rule of thumb that I will need only 70 percent of my pre-
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retirement income to manage nicely in retirement.
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There are several worksheets in the book. Worksheet 1.1 gives the student a format to write downthei
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r PersonalFinancialGoals. There is power inwriting downgoals [and most anyother plan]. Recording
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the goal and then reviewing three months later will help you to keep focus on the goal.
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LG3 Explain the life cycle of financial plans, their role in achieving your financial goals, how t
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odealwith special planning concerns, and theuse of professional financial planners.
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Exhibit 1.7 can help focus the attention on how goals differ between the various stages of life. Section
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1-3b lists various decisions that you will have to make over your life. The section 1-
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3c addresses Special Planning Concerns. Worksheet 1.2 focuses on the financial benefit to the famil
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y ofthe second income. Ifthe second income is froma minimum wage job, it may not be a goodfinanci
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aldecision. Ofcourse having a job, evena minimumwage job, maygive the person psychic income tha
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t will override the financial impact.
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While perhaps off topic, I recall a high school science teacher who was a smoker. He walked throught
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he amount ofmoney he spent onpurchasing tobacco products. That computation had a
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