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

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

LG1 Identify the benefits of using personal financial planning techniques to
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manage your finances.
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Key concept in this section is the planning model as displayed in Exhibit 1.1. Your
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ss standard of living is greatly impacted by your spending habits and your
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ss commitment to saving. Your spending is measured by your propensity to ss ss ss ss s s s s ss ss ss ss

,s s consume. Wealth is the total value of all property you own less the amount
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ss that you owe to others.
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ACTIVITY: s s Ask the studentsto assume that theyhave just inherited $100,000.
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ss What will you do with the money? Write down three ways you will spend
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ss or use the money.
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, Ask the students to share one item with the class and record what they
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ss say so that the entire class can reflect on the answers. Hopefully, at least
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s s a few will mention investing even if only
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$10,000 of the amount. s s ss s s Use their answers to discuss taking care
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s s of current needs versus future needs.
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Focus on their propensityto consume and its impact on accumulating wealth.
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ss Point out the Financial Planning Tip, ―Be SMART in Planning Your Financial
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Goals.‖
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Use Exhibit 1.2 to show how the average person earns and spends their money
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and Exhibit 1.6 to help the student identify where they are now.
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LG2 Describe the personal financial planning process and define your goals.
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DwightooEisenhower,army generaland president, isquoted assaying ―Plans are s ss s ss ss s ss s ss s




useless;Planning is priceless‖. The process of planning allows you to focus on
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ss the issues that are most important and to be ready when things change.
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Exhibit 1.3 lists the Six Step Financial Planning Process. The first and most
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ss important is defining your financial goals. Exhibit 1.6 lists goals by age to
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ss demonstrate how goals change over time. Use the examples inExhibit 1.5 to ask ss ss ss ss ss ss ss ss ss s ss ss ss




ss students ifthe assumptions are realistic. Yes, the answer is in the exhibit, but
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ss manywill not have read chapter at this point. For your use, the assumptions
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ss are:


Assumption 1: Saving a few thousand dollars a year should provide s s s s ss s s ss ss ss s s s s s s




ss enough to fund my child‘s college Education.ss s s s s ss ss ss




Assumption 2: Anooemergency fund lasting 3 months should be adequate. ss ss ss ss ss s s ss ss ss




Assumption 3: I will be able to retire at 65 and should have plenty to s s s s ss s s ss ss ss ss s s ss s s ss ss ss




s s live on in retirement. Assumption 4: I‘m relying on the rule of thumb that I
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