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Personal financial planning / Lawrence J. Gitman, Michael D. Joehnk, Randall S. Billingsley
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Lawrence J. Gitman, Ph.D., CFP® – San Diego State University
Michael D. Joehnk, Ph.D., CFA – Arizona State University
Randall S. Billingsley, Ph.D., FRM, CFA – Virginia Tech
PERSONAL
FINANCIAL
PLANNING
12th Edition
© 2011, 2008 South-Western, Cengage Learning
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Personal Financial Planning,
Twelfth Edition
Lawrence J. Gitman,
Michael D. Joehnk,
Randall S. Billingsley
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Printed in the United States of America
1 2 3 4 5 6 7 13 12 11 10 09
For our children:
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For Colwyn,
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because they’re so special
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For Bonnie, Lauren, and Evan
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iv Brief Contents
Preface, ix
About the Authors, xx
PART 1 FOUNDATIONS OF FINANCIAL PLANNING, 1
Chapter 1 Understanding the Financial Planning Process, 2
Chapter 2 Developing Your Financial Statements and Plans, 39
Chapter 3 Preparing Your Taxes, 75
PART 2 MANAGING BASIC ASSETS, 108
Chapter 4 Managing Your Cash and Savings, 109
Chapter 5 Making Automobile and Housing Decisions, 141
PART 3 MANAGING CREDIT, 186
Chapter 6 Using Credit, 187
Chapter 7 Using Consumer Loans, 224
PART 4 MANAGING INSURANCE NEEDS, 254
Chapter 8 Insuring Your Life, 255
Chapter 9 Insuring Your Health, 289
Chapter 10 Protecting Your Property, 320
PART 5 MANAGING INVESTMENTS, 349
Chapter 11 Investment Planning, 350
Chapter 12 Investing in Stocks and Bonds, 394
Chapter 13 Investing in Mutual Funds and Real Estate, 433
PART 6 RETIREMENT AND ESTATE PLANNING, 472
Chapter 14 Planning for Retirement, 472
Chapter 15 Preserving Your Estate, 509
Appendix A Table of Future Value Factors, 533
Appendix B Table of Future Value Annuity Factors, 533
Appendix C Table of Present Value Factors, 544
Appendix D Table of Present Value Annuity Factors, 544
Appendix E Using a Financial Calculator, 545
Index, 547
Brief Contents
Contents v
Preface, ix
About the Authors, xx
PART 1 FOUNDATIONS OF FINANCIAL PLANNING, 1
CHAPTER 1 Understanding the Financial Planning Process, 2
The Rewards of Sound Financial Planning, 2
The Personal Financial Planning Process, 7
WORKSHEET 1.1 Summary of Personal Financial Goals, 14
From Goals to Plans: A Lifetime of Planning, 14
WORKSHEET 1.2 Analyzing the Benefit of a Second Income, 20
The Planning Environment, 27
What Determines Your Personal Income?, 31
CHAPTER 2 Developing Your Financial Statements and Plans, 39
Mapping Out Your Financial Future, 39
The Balance Sheet: How Much Are You Worth Today?, 41
WORKSHEET 2.1 Balance Sheet for Bob and Cathy Case, 43
The Income and Expense Statement: What We Earn and Where It Goes, 46
WORKSHEET 2.2 Income and Expense Statement for Bob and Cathy Case, 48
Using Your Personal Financial Statements, 52
Cash In and Cash Out: Preparing and Using Budgets, 56
WORKSHEET 2.3 The Cases’ Annual Cash Budget by Month, 58
WORKSHEET 2.4 The Cases’ Budget Control Schedule for January, February,
and March 2011, 63
The Time Value of Money: Putting a Dollar Value on Financial Goals, 63
CHAPTER 3 Preparing Your Taxes, 75
Understanding Federal Income Tax Principles, 75
It’s Taxable Income That Matters, 79
Calculating and Filing Your Taxes, 85
WORKSHEET 3.1 2008 Tax Return (Form 1040EZ) for Akira Takyama, 90
WORKSHEET 3.2 2008 Tax Return (Form 1040) for the Trimbles, 92
Other Filing Considerations, 96
Effective Tax Planning, 101
PART 2 MANAGING BASIC ASSETS, 108
CHAPTER 4 Managing Your Cash and Savings, 109
The Role of Cash Management in Personal Financial Planning, 109
Today’s Financial Services Marketplace, 111
A Full Menu of Cash Management Products, 114
Maintaining a Checking Account, 122
WORKSHEET 4.1 An Account Reconciliation Form: William Torgeson’s May 2010 Statement, 128
Establishing a Savings Program, 129
Contents
vi Contents
CHAPTER 5 Making Automobile and Housing Decisions, 141
Buying an Automobile, 141
Leasing a Car, 150
WORKSHEET 5.1 Comparing Elaine Hodges’ Automobile Lease versus Purchase Costs, 153
Meeting Housing Needs: Buy or Rent?, 154
WORKSHEET 5.2 Rent-or-Buy Cost Comparison, 158
How Much Housing Can You Afford?, 159
WORKSHEET 5.3 Home Affordability Analysis for the Ursula and Ernest Schmidt Family, 166
The Home-Buying Process, 168
Financing the Transaction, 173
WORKSHEET 5.4 Mortgage Refinancing Analysis for the D’Angelo
Family, 180
PART 3 MANAGING CREDIT, 186
CHAPTER 6 Using Credit, 187
The Basic Concepts of Credit, 187
WORKSHEET 6.1 How’s My Credit?, 194
Credit Cards and Other Types of Open Account Credit, 195
Obtaining and Managing Open Forms of Credit, 205
Using Credit Wisely, 214
CHAPTER 7 Using Consumer Loans, 224
Basic Features of Consumer Loans, 224
Managing Your Credit, 232
WORKSHEET 7.1 Tracking Your Consumer Debt, 235
Single-Payment Loans, 236
Installment Loans, 241
WORKSHEET 7.2 To Borrow or Not to Borrow, 247
PART 4 MANAGING INSURANCE NEEDS, 254
CHAPTER 8 Insuring Your Life, 255
Basic Insurance Concepts, 255
Why Buy Life Insurance?, 257
How Much Life Insurance Is Right for You?, 259
WORKSHEET 8.1 Determining the Klauders' Need for Life Insurance, 263
What Kind of Policy Is Right for You?, 265
Buying Life Insurance, 275
Key Features of Life Insurance Policies, 279
CHAPTER 9 Insuring Your Health, 289
The Importance of Health Insurance Coverage, 289
Health Insurance Plans, 291
Health Insurance Decisions, 297
Medical Expense Coverage and Policy Provisions, 301
WORKSHEET 9.1 Health Insurance Checklist, 302
Long-Term Care Insurance, 308
Disability Income Insurance, 312
WORKSHEET 9.2 Estimating Disability Income Insurance Needs, 313
Contents vii
CHAPTER 10 Protecting Your Property, 320
Basic Principles of Property Insurance, 320
Homeowner’s Insurance, 324
Automobile Insurance, 333
Other Property and Liability Insurance, 342
Buying Insurance and Settling Claims, 343
PART 5 MANAGING INVESTMENTS, 349
CHAPTER 11 Investment Planning, 350
The Objectives and Rewards of Investing, 350
WORKSHEET 11.1 Determining the Amount of Investment Capital, 354
Securities Markets, 358
Making Transactions in the Securities Markets, 365
Becoming an Informed Investor, 371
Online Investing 376
Managing Your Investment Holdings, 381
WORKSHEET 11.2 Keeping Tabs on Your Investment Holdings, 387
CHAPTER 12 Investing in Stocks and Bonds, 394
The Risks and Rewards of Investing, 394
Investing in Common Stock, 401
Investing in Bonds, 415
CHAPTER 13 Investing in Mutual Funds and Real Estate, 433
Mutual Funds: Some Basics, 433
Types of Funds and Fund Services, 445
Making Mutual Fund Investments, 453
Investing in Real Estate, 461
PART 6 RETIREMENT AND ESTATE PLANNING, 472
CHAPTER 14 Planning for Retirement, 473
An Overview of Retirement Planning, 473
WORKSHEET 14.1 Estimating Future Retirement Needs, 477
Social Security, 481
Pension Plans and Retirement Programs, 485
Annuities, 498
CHAPTER 15 Preserving Your Estate, 509
Principles of Estate Planning, 509
Thy Will Be Done . . . , 516
WORKSHEET 15.1 A Checklist of Items to Keep in a Safe-Deposit Box, 523
Trusts, 527
Federal Unified Transfer Taxes, 531
Calculating Estate Taxes, 534
WORKSHEET 15.2 Computing Federal Estate Tax Due, 536
Estate Planning Techniques, 537
viii Contents
Appendix A Table of Future Value Factors, 543
Appendix B Table of Future Value Annuity Factors, 543
Appendix C Table of Present Value Factors, 544
Appendix D Table of Present Value Annuity Factors, 544
Appendix E Using a Financial Calculator, 545
Index, 547
Preface ix
“Economic Confidence Rebounds”
“Crisis on Wall Street as Lehman Totters, Merrill Is Sold, AIG Seeks to Raise Cash”
“Rally Spurs Stocks to ’09 Highs”
“US Agrees to Rescue Struggling Citigroup”
“Bonds Are Looking Better”
“Manufacturing Tumbles Globally”
“Rethinking Stocks’ Starring Role”
“There’s No Such Thing as a ‘Safe’ Investment”
“Small Stocks Hit 11-Month High”
“Household Wealth Advances by 3.9%”
We’ve all seen these kinds of headlines. They highlight the ever-changing nature of
the financial environment in which we live. And could there be a more dramatic
example of this dynamic environment than the recent global financial crisis? The
crisis offers a potent reminder that personal financial planning is as necessary as it
is challenging. Careful planning allows us to adapt to and even thrive in response to
changes in the financial environment and the associated changes in our own lives.
This book, Personal Financial Planning, Twelfth Edition, provides the framework
and tools for preparing personal financial plans that serve as road maps for goal
achievement. Personal Financial Planning emphasizes the dynamics of the financial
planning process by considering the impact of life changes—birth, marriage, divorce,
job and career, and death.
Personal Financial Planning addresses all of the major financial planning issues
and problems that individuals and families encounter. It is built around a model
that links together all of the major elements of effective money management. All of
the latest financial planning tools and techniques are discussed. This comprehensive
text is written in a personal style that uses state-of-the-art pedagogy to present the
key concepts and procedures used in sound personal financial planning and effective
money management. The roles of various financial decisions in the overall personal
financial planning process are clearly delineated.
The book serves individuals who are, or will be, actively developing their own
personal financial plans. It meets the needs of instructors and students in a first course
in personal financial planning (often called “personal finance”) offered at colleges
and universities, junior and community colleges, professional certification programs,
and continuing education courses. The experiences of individuals and families are
used to demonstrate successes and failures in various aspects of personal financial
planning. A conversational style and liberal use of examples and worksheets guide
students through the material and emphasize important points. The benefits of the
book’s readability accrue not only to students but also to their instructors.
MAJOR CHANGES IN THE TWELFTH EDITION
The twelfth edition has been thoroughly updated to consider the lessons of the recent
global financial crisis in terms of the most up-to-date techniques of contemporary
personal financial planning. We emphasize that the key principles of personal financial planning remain valid: save, diversify your investments, watch your expenditures,
and borrow carefully. The twelfth edition reflects feedback from past users as well as
Preface
x Preface
nonusers, practicing financial planners, students, and our own research. It provides
helpful new approaches, expanded coverage in certain areas, streamlined coverage
in others, and enhanced pedagogy anchored by a state-of-the-art integrated learning
system. The basic organizational structure, topical coverage, superior readability, and
useful instructional aids that marked the success of the first 11 editions have been
retained and extended. Important changes in this edition are described below, first as
general changes and then as specific chapter-by-chapter changes.
Readers will note an obvious key change to the twelfth edition, which is the
addition of Professor Randy Billingsley as an author. Randy is a finance professor
at Virginia Tech. His research, consulting, and teaching deal with many personal
finance topics. We welcome Randy to the author team and appreciate the fresh
perspective he brings to it. Continuing users will recognize the positive impact that
Randy had on this twelfth edition.
General Changes
• The highly regarded Worksheets continue in this edition and, as with the previous edition, are also available online as part of the Gitman/Joehnk/Billingsley
FinanceCentral product. Students have the option of using the Worksheets multiple times and having some of the calculations within the Worksheets completed
electronically. All end-of-chapter problems that can be solved using a given worksheet have an identifying icon and provide the worksheet reference, which directs
the student to its application.
• In addition to the Worksheets, Personal Financial Planning Software is available
with each new text as part of FinanceCentral. Students will find that the chapter
concepts, Worksheets, problems, and cases can be solved with the use of the software. The Personal Financial Planning Software should help students begin and
continue their own financial planning.
• Web-based part-ending cases are included in the package, one for each of the six major
parts of the textbook. These cases are provided online as part of FinanceCentral.
They have been developed to challenge readers to integrate and develop plans with
regard to the major topics covered in the corresponding part of the book.
• The book has been completely updated and redesigned to allow improved presentation of each of the text’s pedagogical features.
• The twelfth edition continues to place emphasis on using the Internet. Included are
a number of features that either link students to relevant Internet sites or describe
how the Internet can be incorporated into the personal financial planning process.
The Money Online Internet feature can now be found on the text Web site at www.
cengage.com/finance/gitman. Money Online exercises include eight to ten Web
addresses followed by a brief paragraph that challenges the reader to go to the site
and either research specific information or review the resources available there. All
of the Web topics presented within the chapter are intended to reinforce—as well
as expand—the reader’s practical grasp of the key concepts, tools, and techniques
presented in the chapter. Some Money Online exercises incorporate “Just for Fun!”
features, which include one to three Web addresses followed by brief paragraphs
that direct the reader to interesting and often entertaining sites to obtain information, perform an activity, or answer specific questions.
Each chapter also includes a number of Smart Sites, marginal notes that direct
students to the companion Web site (www.cengage.com/finance/gitman) for linking to the Internet listings that correspond to related topics discussed in the text.
Preface xi
This element helps keep readers in touch with the Web as they read and study the
chapter. In addition, many Web addresses are embedded in the text and exhibits.
These Web links are included when referencing a specific company, information
provider, or organization, and they provide the reader with a convenient way to
learn more about the topic, obtain information, or make inquiries or transactions.
Another source of additional Internet insights is the Money in Action boxes
(described in detail below); some of these features focus on technology and
include descriptions and links to useful sites on the Internet. This edition’s emphasis on the Internet is significant and widely present both in the chapter and in the
end-of-chapter materials.
• Step-by-step use of a handheld financial calculator to make time value calculations continues to be integrated into relevant discussions in this edition. To
improve understanding, relevant keystrokes are highlighted in these demonstrations. Basics of the time value of money are introduced in Chapter 2, Developing
Your Financial Statements and Plans, and Appendix E now explains how financial calculators can be used to make time value calculations. The use of a financial calculator is reinforced in later chapters, where the time value techniques
are applied. For example, using a calculator to find the future value of a deposit
given various compounding periods is shown in Chapter 4, Managing Your Cash
and Savings, and calculating estimates of future retirement needs is demonstrated
in Chapter 14, Planning for Retirement. The inclusion of calculator keystrokes
should help the reader learn how to develop financial plans more effectively by
using this important tool of the trade.
• The twelfth edition also includes one Money in Action feature for each chapter.
Most of these features are new to this edition, some have been revised and updated
from the previous edition, and all are drawn from recent articles in the popular
press—providing both relevant and timely information. The Money in Action
features address a variety of informative topics to help link the text discussions to
actual financial planning ideas, experiences, practices, and events—all intended
to fully engage readers in the personal financial planning process. The Money in
Action features include Money and Happiness (Chapter 1), Small Ways to Save
Big (Chapter 2), Finding the Right Tax Preparer for You (Chapter 3), Pros and
Cons of Online Banking (Chapter 4), Online Ways to Save Money Buying Cars
(Chapter 5), Choosing between a Credit and a Debit Card (Chapter 6), Watch
Out for Predatory Lenders (Chapter 7), Filing a Life Insurance Claim (Chapter 8),
Health Care Reform and You (Chapter 9), Keeping Your Homeowner’s Insurance
Affordable (Chapter 10), How to Build a Portfolio When You’re Just Starting Out
(Chapter 11), Investing Lessons from the Financial Crisis (Chapter 12), Choosing
Mutual Funds for Your 401(k) Plan: Stars or Dogs? (Chapter 13), Is Your Pension
Plan at Risk? (Chapter 14), and Having “The Talk” with Parents—About Estate
Planning, That Is (Chapter 15). Each feature contains Critical Thinking Questions
that can be used to improve reader understanding.
• The integrated learning system has been refined even more in this edition to
help students better anchor their study to a set of chapter learning goals. Each
chapter begins with a list of six numbered learning goals, LG1 through LG6.
The learning goal numbers are tied to major chapter headings and restated and
reviewed point by point in the end-of-chapter summary, financial planning
exercises, and Critical Thinking Cases. Another element of this system is the
Concept Check questions that appear at the end of each section of the chapter.
As students read through the chapters, they can test their understanding of
the material in each section. The most effective advanced pedagogical features
xii Preface
from the previous edition— marginal glossary, Exhibits and Worksheets, and
end-of-chapter Financial Planning Exercises and Critical Thinking Cases—have
been retained and improved as part of the integrated learning system. Also
included at the end of each chapter is Applying Personal Finance—a feature
that presents a challenging out-of-class exercise dealing with at least one of the
main topics presented in the chapter.
Specific Chapter-by-Chapter Changes
Because users often like to know where new material appears, the significant changes
that have been made in the twelfth edition are summarized next.
Chapter 1 on understanding the financial planning process has been carefully
revised to focus on the most important themes in the book. A new section on managing your finances in tough economic times has been added in light of the recent financial crisis. Special planning concerns have been moved from Chapter 2 to Chapter 1
to allow for a more integrated treatment of the topic. Thus, new emphasis is placed
on special planning concerns such as job changes or loss, getting married, having
children, the loss of a parent, and taking responsibility for dependent parents. All
discussions—including Exhibits and the Go to Smart Sites and Financial Road Sign
sidebars—have been refreshed and updated. Sidebar material focuses on assessing
current wealth and monitoring it in the future, how to start saving now, getting your
financial act together, planning to repay student debt, planning for critical life events,
and calculating the cost of a move.
Chapter 2 on developing your financial statements has been restructured, streamlined, and updated. Calculator keystrokes and time lines continue to appear in discussions of the time value of money. Sidebar discussions include tips for eliminating
documents that you don’t need and developing a budget.
Chapter 3 on preparing your taxes has been completely updated to reflect the
changes in tax laws, rates, procedures, and forms in effect at the time we revised the
chapter. The material emphasizes current tax practices and explains the nature of
progressive tax rates, average tax rates, itemized deductions, IRAs, and other types
of taxes. The chapter continues to provide readers with sidebar advice on finding
commonly missed tax deductions, avoiding common tax-form errors, tax tips, and
audit triggers.
Chapter 4 on managing your cash and savings has been revised and updated to
consider additional financial instruments as well as issues related to the recent
global financial crisis. For example, the change in FDIC deposit insurance during
the financial crisis is discussed, and the potential of using I savings bonds to manage
inflation risk is considered. The chapter includes the latest return and institutional
data, accurately reflecting current market rates and structure. Calculator keystrokes
continue to be shown in the discussion of earning interest on your money. Practical
sidebar discussions of protecting your personal financial information, tips for safe
online banking, making the best use of a safe-deposit box, choosing a new bank, and
determining interest on deposits are included in the chapter.
Chapter 5 on making automobile and housing decisions considers new market
developments and sources of information. The automobile affordability section
includes a discussion of hybrid cars. The information on using the Internet to shop
for and buy a car has been updated. The discussion of how to meet housing needs
Preface xiii
considers the recent crisis in real estate markets. An explanation of the nature of real
estate short sales has been added in light of their increased use during the financial
crisis. Sidebar discussions focus on tips for saving money on a new car purchase, a
checklist for negotiating an auto lease, how to decide whether you should buy or lease
your next car, questions to answer before buying a home, and top home remodeling
project paybacks.
Chapter 6 on consumer credit and credit cards focuses on the positive aspects of
using credit and what it takes to build and maintain a strong credit history. New
material explores the implications of the Credit Card Act of 2009 for consumers.
Emphasis is placed on how FICO scores are used, what goes into them, and steps
you can take to build up your own FICO score. Sidebar discussions consider the
key determinants of a borrower’s ability to repay a loan, questions to answer before
choosing a credit card, effective uses of debit cards, how to keep up your FICO score,
how to decide if you should switch credit cards, and key sources of identity theft.
Chapter 7 on using consumer loans analyzes the benefits and uses of consumer
credit for both single-payment and installment loans. The discussion concentrates on
the key issues surrounding loan provisions, finance charges, and other credit considerations. The discussion of student loans has been updated to provide more detail
about the terms and provisions of federally sponsored student loans. Sidebars examine how to shop for an auto loan, pitfalls of lending to family or friends, potentially
misleading “no interest, no payments” deals, and what lenders look for in reviewing
loan applications.
Chapter 8 on insuring your life has been updated. Practical sidebar material appearing in this chapter includes questions to ask before buying insurance, the effect of
insurance company ownership on premiums, expectations for a life insurance medical exam, unethical insurance sales practices, and how to understand an insurance
illustration. Descriptions of Internet resources and advice on buying life insurance
online have been updated.
Chapter 9 on insuring your health has been updated to include a discussion of how
health care reform could affect the growing cost of health insurance and your insurance options. Practical sidebar material includes sources of student health insurance,
data on workers taking health care benefits offered by employers, how to save on
health insurance, how to choose a health insurance plan, tips for buying long-term
care insurance, and tips for reducing the cost of disability income insurance.
Chapter 10 on protecting your property has added a discussion of the challenge
of keeping up your insurance in a recession. Practical sidebar discussions offer data
on commonly stolen cars, and strategies for avoiding liability as well as advice on
what to do when a claim is denied. We continue to emphasize practical advice for
reducing homeowner’s insurance premiums, filing auto insurance claims, preventing
auto theft, strategies to avoid liability, and obtaining discounts for auto safety and
good driving.
Chapter 11 on investment planning is thoroughly revised and updated to consider
the impact of the recent financial crisis and key ongoing developments in this area.
The material on securities markets reflects recent mergers between the New York
Stock Exchange, Euronext, and the American Stock Exchange as well as the merger of
NASDAQ and OMX AB. The chapter also now includes exchange traded funds (ETFs)
in the list of popular investment vehicles and examines the performance of real estate
xiv Preface
during the recent financial crisis. Updated information is also provided on the performance of major U.S. stock and bond indices. Sidebars consider the relationship between
equity risk premiums and the business cycle, trade execution using electronic communications networks (ECNs), high-frequency (flash) trading, types of limit orders, characteristics of successful online investing, and common portfolio management mistakes.
Chapter 12 on investing in stocks and bonds continues to emphasize the risk–return
characteristics of these securities. As part of the revision process, all the return behavior and security performance material for both stocks and bonds has been updated
to reflect the financial crisis. Indeed, a new Money in Action box examines the lessons of the crisis for investing. The material on agency and mortgage bonds has been
expanded in light of their prominent role in the financial crisis. Similarly, the potential
role of the bond rating agencies in the financial crisis is noted. Sidebars provide guidelines for effective investing, data on the largest market value companies, investing
myths, how to use equity analyst forecasts, and the use of bonds in a portfolio.
Chapter 13 on investing in mutual funds has expanded the coverage of exchange
traded funds and provides updated data on the performance of real estate investment
trusts (REITs). All market statistics and performance data have been updated. Sidebars
discuss how to choose between exchange traded funds and mutual funds, key rules
for mutual fund investors, the use of life-cycle funds, and what to look for in a REIT.
Chapter 14 on planning for retirement is thoroughly updated, and discussion of
each of the various retirement/pension programs (including Social Security, companysponsored plans, and self-directed programs) reflects the latest guidelines, limitations,
and requirements, including those contained in the Pension Protection Act of 2006.
Also, new material has been added on Section 529 education savings plans. Sidebars
discuss tips for making the most of retirement planning, retirement plan reviews,
determining whether you are in an integrated pension plan, the nature of the Pension
Benefit Guaranty Corporation, the proper care and feeding of your 401(k) plan, and
how to determine if an annuity fits your needs.
Chapter 15 on preserving your estate has been updated to reflect the most recent
estate tax laws and tax rates. The impact of the uncertainy introduced by the possible elimination of the estate tax exclusion in 2010 is considered. The Worksheet for
computing federal estate tax due has been changed to reflect current rules. Valuable
links include a comprehensive guide on what to do when a loved one dies and additional information on ethical wills and trusts. Useful sidebar material covers common
(incorrect) excuses for not writing a will, tips for choosing a guardian for children,
will-writing pointers, and how to use trusts effectively.
ORGANIZATION OF THE BOOK
Personal Financial Planning is divided into six parts. Part 1 presents the foundations
of personal financial planning, beginning with the financial planning process and
then covering financial statements and plans and also taxes. Part 2 concerns the
management of basic assets, including cash and savings instruments, automobiles,
and housing. Part 3 covers credit management, including the various types of open
account borrowing and consumer loans. Part 4 deals with managing insurance needs
and considers life insurance, health care insurance, and property insurance. Part 5
covers investments—including stocks, bonds, mutual funds, exchange traded funds,
and real estate—and how to make transactions in securities markets. Part 6 is devoted