SOLUTION MANUAL Personal Finance, 14th Edition By E. Thomas Garman, Chapter 1 - 17

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TABLE OF CONTENTS bh bh b h




Part I: FINANCIAL PLANNING.
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1. Understanding Personal Finance. bh bh




2. Career Planning. bh




3. Financial Statements, Goals, and Budgets.
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bh Part II: MONEY MANAGEMENT.
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4. Managing Income Taxes. bh bh




5. Managing Checking and Savings Accounts.
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6. Building and Maintaining Good Credit.
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7. Credit Cards and Consumer Loans.
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8. Vehicles and Other Majory Purchases.
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9. Obtaining Affordable Housing. bh bh




Part III: INCOME AND ASSET PROTECTION.
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10. Managing Property and Liability Risk. bh bh bh bh




11. Planning for Health Care Expenses.
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12. Life Insurance Planning.
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bh Part IV: INVESTMENTS.
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13. Investment Fundamentals. bh




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14. Investing in Stocks and Bonds. bh bh bh bh




15. Mutual and Exchange-Traded Funds.
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16. Real Estate and High-Risk Investments.
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17. Retirement and Estate Planning. bh bh bh




SolutionandAnswerGuide h
b h
b h
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GARMAN/FOX, b h PERSONAL b h b h FINANCE b h b h 14E, b h CHAPTER b h b h 1: b h THINKING b h b h LIKE b h b h AY
FINANCIAL
b h b h b h PLANNER


TABLE OF CONTENTS
B
H B H B H




Answers b h to b h Chapter b h Concept b h Checks .............................................................................2
What b h Do b h You b h Recommend b h Now?..................................................................................4
Let’s b h Talk b h About b h It...............................................................................................................5
Do b h the b h Math ...........................................................................................................................6
Financial b h Planning b h Cases .........................................................................................................8
Extended b h Learning ................................................................................................................... 10




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ANSWERS TO CHAPTER CONCEPT CHECKS
BH B H B H B H




LO1.1 b h Recognize b h the b h keys b h to b h achieving b h financial b h success.
1. Explain b h the b h five b h steps b h in b h the b h financial b h planning b h process.

Answer: There are five fundamental steps
b h to the
b h personal financial planning
b h b h b h b h b h b h b h b h


b hprocess:
(1) evaluate
b h your financial health tob h your education and career choice;
b h b h b h b h b h b h b h b h


(2) define your financial goals; (3) develop a plan of
b h b h b h bhaction to b h b h b h b h b h b h b h b h


b hachieve your goals; (4)
b h implement spending and saving
b h plans to b h b h bh b h b h b h b h


b hmonitor and control progress toward
b h your goals;
b h and (5) review your b h b h b h b h b h b h bh b h


financial progress and make changes as appropriate.
b h b h b h b h b h b h b h




2. Distinguish b h among b h financial b h success, b h financial b h security, b h and b h financial b h happiness.

Answer: Financial success
b h is the achievement of financial aspirations that
b h b h b h b h b h b h b h b h


are desired, planned,
b h b h or attempted.
bh Success is defined b hby the individual
b h b h b h b h b h b h b h


b hor family that
b h seeks it. b h b h b h


Financial success may be
b h defined as being able
b h to live b h according to b h b h b h b h b h b h b h b h


b hone’s standard ofy living. Financial
b h security is that comfortable feeling
b h bh b h b h b h b h b h b h


that your
b h b h financial resources will be adequate
b h to fulfill
b h any needs b h b h bh b h b h b h b h


b hyou have as
b h well as your b h wants. Financial
b h happiness is the
b h b h b h b h b h b h bh


b hexperience you have when b h you are satisfied
b h with money b h b h b h b h b h b h


b hmatters. People who are happy
b h about their finances
b h will see
b h a bh b h b h b h b h b h b h


b hspillover into positive b hfeelings about life
b h in general. b h b h b h b h bh




3. Summarize b h what b h you b h will b h accomplish b h studying b h personal b h finance.

Answer: Several things
b h can be accomplished by studying
b h personal finance.b h b h b h b h b h b h b h


Recognize how to
b h manage unexpected
b h and expected
bh financial
b h events. b h b h b h b h b h


Pay
b h as little
b h as possible b hin income taxes. Understand
b h how to
b h b h b h bh b h b h b h


effectively
b h comparison shop for
b h vehicles and homes. Protect what we b h b h b h b h b h b h bh b h


own. Invest wisely. Accumulate and
b h b h protect the wealth that we may
b h b h b h b h b h b h b h b h b h


choose to spend during our non-working years (e.g., retirement) or donate.
b h b h b h b h b h b h b h b h b h b h b h




4. What b h are b h the b h building b h blocks b h to b h achieving b h financial b h success?

Answer: The building
b h blocks for achieving
b h financial success include a
b h b h b h b h b h b h b h


foundation ofy regular
b h income
b h that provides
bh the means tob h support b h b h b h b h b h b h


b hyour lifestyle
b h and save for desired goals in the future. The
b h b h b h b h bh b h b h b h b h


b hfoundation supports a base of various banking
b h accounts, insurance
b h b h b h b h b h b h bh


protection,
b h and employee benefits. Then
b h we can b h establish goals, a b h b h b h b h b h b h b h


recordkeeping
bh system, a budget, and an
b h emergency savings fund. We
b h b h b h b h b h b h b h b h


will also
b h b h manage various expenses such as housing,
b h bhtransportation, b h b h b h b h b h


insurance,
b h and the payment of taxes. We will also need
b h b h to
b h handle b h b h bh b h b h b h b h b h


b hcredit, savings, and
b h educational costs. Finally,
b h we invest in various
b h b h b h b h b h b h bh


investment alternatives such as mutual funds, stocks, and bonds, often
b h b h b h b h b h b h b h b h b h b h


for
b h retirement.
b h As a result of all these
b h building blocks,
b h we b h b h b h b h b h b h b h


b hare more b h apt to have a financially successful life.
b h b h b h b h bh b h b h




LO1.2 b h Understand b h how b h the b h economy b h affects b h your b h personal b h financial b h success.
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