(eBook PDF) PFIN6 6th Edition By

Randall Billingsley
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5-4 How Much Housing Can You Afford? 124
5-5 The Home-Buying Process 131 Part 4
5-6 Financing the Transaction 135
MANAGING
Part 3
INSURANCE NEEDS
MANAGING CREDIT

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Mark Viker/Getty Images

8 Insuring Your Life 196

8-1 Basic Insurance Concepts 197
8-2 Why Buy Life Insurance? 198

6 Using Credit 144

8-3 How Much Life Insurance Is Right for You?
8-4 What Kind of Policy Is Right for You? 204
199

6-1 The Basic Concepts of Credit 144 8-5 Buying Life Insurance 213
6-2 Credit Cards and Other Types of Open Account 8-6 Key Features of Life Insurance Policies 216
Credit 150
6-3 Obtaining and Managing Open Forms of Credit 157
6-4 Using Credit Wisely 164
9 Insuring Your Health 224
9-1 The Importance of Health Insurance

7 Using Consumer Coverage 225

9-2 Health Insurance Plans 226
Loans 170 9-3 Health Insurance Decisions 232
7-1 Basic Features of Consumer Loans 170 9-4 Medical Expense Coverage and Policy
7-2 Managing Your Credit 177 Provisions 236
7-3 Single-Payment Loans 181 9-5 Long-Term-Care Insurance 241
7-4 Installment Loans 186 9-6 Disability Income Insurance 244

Contents v

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 10 Protecting Your Property 252
13-2 Types of Funds and Fund Services 350
13-3 Making Mutual Fund and ETF Investments 356
10-1 Basic Principles of Property Insurance 253 13-4 Investing in Real Estate 362
10-2 Homeowner’s Insurance 257
10-3 Automobile Insurance 263
10-4 Other Property and Liability Insurance 269
Part 6
10-5 Buying Insurance and Settling Claims 270
RETIREMENT AND
Part 5
ESTATE PLANNING
MANAGING
INVESTMENTS

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Jan Stromme/Getty Images

14 Planning for Retirement 370

14-1 An Overview of Retirement Planning 371
14-2 Social Security 377

11 Investment Planning
14-3 Pension Plans and Retirement Programs 380
276 14-4 Annuities 389

15 Preserving Your Estate

11-1 The Objectives and Rewards of Investing 277
11-2 Securities Markets 283 398
11-3 Making Transactions in the Securities 15-1 Principles of Estate Planning 398
Markets 288
15-2 Thy Will Be Done . . . 403
11-4 Becoming an Informed Investor 294
15-3 Trusts 411
11-5 Online Investing 296
15-4 Federal Unified Transfer Taxes 414
11-6 Managing Your Investment Holdings 300
15-5 Calculating Estate Taxes 418

12 Investing in Stocks and 15-6 Estate Planning Techniques 420

Bonds 308 Appendix A 424

12-1 The Risks and Rewards of Investing 309 Appendix B 425
12-2 Investing in Common Stock 315 Appendix C 426
12-3 Investing in Bonds 326 Appendix D 427
Appendix E 428

13 Investing in Mutual Funds, Index 430

ETFs, and Real Estate 340

13-1 Mutual Funds and Exchange Traded Funds: Some
Basics 341

vi Contents

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 ABOUT THE AUTHORS
RANDALL S. BILLINGSLEY is a finance professor
at Virginia Tech. He received his bachelor’s degree in
economics from Texas Tech University and received
both an M.S. in economics and a Ph.D. in finance from
Texas A&M University. Professor Billingsley holds the
Chartered Financial Analyst (CFA), Financial Risk
Manager (FRM), and Certified Rate of Return Analyst
(CRRA) professional designations. An award-winning
teacher at the undergraduate and graduate levels, his
research, consulting, and teaching focus on investment
analysis and issues relevant to practicing financial ad-
visors. Formerly a vice-president at the Association
for Investment Management and Research (now the
CFA Institute), Professor Billingsley’s published equity
valuation case study of Merck & Company was assigned
reading in the CFA curriculum for several years. In 2006,
the Wharton School published his book, Understanding
Arbitrage: An Intuitive Approach to Financial Analysis.
In addition, his research has been published in refereed
journals that include the Journal of Portfolio Manage-
ment, the Journal of Banking and Finance, Financial
Management, the Journal of Financial Research, and
the Journal of Futures Markets. Professor Billingsley
advises the Student-Managed Endowment for Educa-
tional Development (SEED) at Virginia Tech, which
manages an equity portfolio of about $5 million on be-
half of the Virginia Tech Foundation.
Professor Billingsley’s consulting to date has focused
on two areas of expertise. First, he has acted extensively
as an expert witness on financial issues. Second, he has
taught seminars and published materials that prepare in-
vestment professionals for the CFA examinations. This
has afforded him the opportunity to explore and discuss
the relationships among diverse areas of investment anal-
ysis. His consulting endeavors have taken him across the
United States and to Canada, Europe, and Asia. A primary
goal of Professor Billingsley’s consulting is to apply the
findings of academic financial research to practical invest-
ment decision making and personal financial planning.
LAWRENCE J. GITMAN is an emeritus professor of fi-
nance at San Diego State University. He received his
bachelor’s degree from Purdue University, his M.B.A.
from the University of Dayton, and his Ph.D. from the
University of Cincinnati. Professor Gitman is a prolific
textbook author and has more than 50 articles appearing
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
in Financial Management, The Financial Review, the
Journal of Financial Planning, the Journal of Risk and
Insurance, the Financial Services Review, the Journal of
Financial Research, Financial Practice and Education,
the Journal of Financial Education, and other scholarly
publications.
His major textbooks include The Future of Business,
Sixth Edition, and The Future of Business: The Essen-
tials, Fourth Edition, both of which are co-authored with
Carl McDaniel; and Fundamentals of Investing, Twelfth
Edition, which is co-authored with Michael D. Joehnk
and Scott B. Smart. Gitman and Joehnk also wrote Invest-
ment Fundamentals: A Guide to Becoming a Knowledge-
able Investor, which was selected as one of 1988’s 10 best
personal finance books by Money magazine; Principles of
Managerial Finance, Sixth Brief Edition, and Principles
of Managerial Finance, Thirteenth Edition, both co-
authored with Chad J. Zutter; Foundations of Manageri-
al Finance, Fourth Edition; and Introduction to Finance,
co-authored with Jeff Madura.
An active member of numerous professional organi-
zations, Professor Gitman is past president of the Acad-
emy of Financial Services, the San Diego Chapter of the
Financial Executives Institute, the Midwest Finance
Association, and the FMA National Honor Society. In
addition, he is a Certified Financial Planner® (CFP®).
Gitman formerly served as a director on the CFP®
Board of Governors, as vice-president–financial edu-
cation for the Financial Management Association, and
as director of the San Diego MIT Enterprise Forum.
Gitman has two grown children and lives with his wife
in La Jolla, California, where he is an avid bicyclist.
MICHAEL D. JOEHNK is an emeritus professor of
finance at Arizona State University. In addition to his ac-
ademic appointments at ASU, Professor Joehnk spent a
year (1999) as a visiting professor of finance at the Univer
Univer-
sity of Otago in New Zealand. He received his bachelor’s
and Ph.D. degrees from the University of Arizona and
his M.B.A. from Arizona State University. A Chartered
Financial Analyst (CFA), he has served as a member
of the Candidate Curriculum Committee and of the
Council of Examiners of the Institute of Chartered
Financial Analysts. He has also served as a director of the
Phoenix Society of Financial Analysts and as secretary/
treasurer of the Western Finance Association, and he was
About the Authors vii
 elected to two terms as a vice-president of the Financial
Management Association. Professor Joehnk is the author
or co-author of some 50 articles, five books, and numer
numer-
ous monographs. His articles have appeared in Finan-
cial Management, the Journal of Finance, the Journal of
Bank Research, the Journal of Portfolio Management,
the Journal of Consumer Affairs, the Journal of Financial
and Quantitative Analysis, the AAII Journal, the Journal
of Financial Research, the Bell Journal of Economics,
the Daily Bond Buyer, Financial Planner, and other
publications.
In addition to co-authoring several books with Lawrence
J. Gitman, Professor Joehnk was the author of a highly
viii About the Authors
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
successful paperback trade book, Investing for Safety’s
Sake. Dr. Joehnk was also the editor of Institutional
Asset Allocation, which was sponsored by the Institute
of Chartered Financial Analysts and published by Dow
Jones-Irwin. He was a contributor to the Handbook
for Fixed Income Securities and to Investing and Risk
Management, Volume 1 of the Library of Investment
Banking. In addition, he served a six-year term as ex-
ecutive co-editor of the Journal of Financial Research.
He and his wife live in Flagstaff, Arizona, where they
enjoy hiking and other activities in the nearby moun-
tains and canyons.
 ACKNOWLEDGEMENTS
In addition to the many individuals who made significant The editorial staff at Cengage Learning has been
contributions to the book by their expertise, classroom most helpful in our endeavors. We particularly wish
experience, guidance, general advice, and reassurance, to thank Steven E. Joos, the former Product Director,
we also appreciate the students and faculty who used the 4LTR Press; Laura Redden, Product Manager; Tricia
book and provided valuable feedback, confirming our Hempel, Content/Media Developer; Lauren Dame,
conviction that a truly teachable personal financial plan- Product Assistant, and Nadia Saloom, Content Project
ning text could be developed. Manager.
We are indebted to the academicians and practitio- Finally, our wives – Bonnie, Robin, and Charlene –
ners who have created the body of knowledge contained have provided needed support during the writing of this
in this text. We particularly wish to thank several people book. We are forever grateful to them.
who gave the most significant help in developing and revis-
ing it. They include Eric Johnson, ChFC, CLU, LTCP, of Randall S. Billingsley, FRM, CFA
StateFarm for his helpful insights on insurance products Virginia Tech
and planning; Professor Sam Hicks, CPA, of Virginia Tech, Lawrence J. Gitman, CFP®
for his thorough review of the entire book; Professor Hon- San Diego State University
gbok Lee, of Western Illinois University, for helpful obser
obser-
vations, and Thomas C. Via Jr., CLU, of Leonard L. Brown Michael D. Joehnk, CFA
Agency for his help on life and property insurance issues. Arizona State University

Acknowledgements ix

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 1 Understanding the
Financial Planning
Process
LEARNING OBJECTIVES
After studying this chapter, you will be able to…

LO1 Identify the benefits of using personal financial planning techniques to manage your finances.

LO2 Describe the personal financial planning process and define your goals. After finishing
this chapter go
LO3 Explain the life cycle of financial plans, their role in achieving your financial goals, how to deal
with special planning concerns, and the use of professional financial planners. to PAGE26 for

JGI/Jamie Grill/Getty Images

LO4 Examine the economic environment’s influence on personal financial planning. STUDY TOOLS
LO5 Evaluate the impact of age, education, and geographic location on personal income.

LO6 Understand the importance of career choices and their relationship to personal financial
planning.

How Will This Affect Me? The heart of financial planning is making sure your
values line up with how you spend and save. That means knowing where you are
financially and planning on how to get where you want to be in the future no
matter what life throws at you. For example, how should your plan handle the
projection that Social Security costs may exceed revenues by 2037? And what if the
government decides to raise marginal tax rates to help cover the federal deficit? An
informed financial plan should reflect such uncertainties and more.
This chapter describes the financial planning process and explains its context.
Topics include how financial plans change to accommodate your current stage
in life and the role that financial planners can play in helping you achieve your
objectives. After reading this chapter you will have a good perspective on how to
organize your overall personal financial plan.

2 PART ONE: Foundations of Financial Planning

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1-1 THE REWARDS OF SOUND
FINANCIAL PLANNING
LO1 What does living “the good life” mean to you? Does
it mean having the flexibility to pursue your dreams and
goals in life? Is it owning a home in a certain part of
town, starting a company, being debt free, driving a par
par-
ticular type of car, taking luxury vacations, or having a
large investment portfolio? Today’s complex, fast-paced
world offers a bewildering array of choices. Rapidly
changing economic, political, technological, and social
environments make it increasingly difficult to develop
solid financial strategies that will improve your lifestyle
consistently. Moreover, the financial crisis of 2008–2009
dramatizes the need to plan for financial contingen-
cies. No matter how you define it, the good life requires
sound planning to turn financial goals into reality.
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The best way to achieve financial objectives is
through personal financial planning, which helps de-
fine your financial goals and develop appropriate strat-
egies to reach them. And being financially self-aware
provides more insight into the range of available fi-
nancial choices and their trade-offs. Your comfortable
retirement should not depend solely on employee or
government benefits—such as steady salary increases
or adequate funding from employer-paid pensions or
Social Security. Creating flexible plans and regularly
revising them is the key to building a sound financial
future.
Successful financial planning also brings rewards
that include greater flexibility, an improved standard
of living, wiser spending habits, and increased wealth.
Of course, planning alone does not guarantee success;
but having an effective, consistent plan can help you
use your resources wisely. Careful financial planning
CHAPTER 1: Understanding the Financial Planning Process 3
 Exhibit 1.1
Organizational Planning Model
This text emphasizes making financial decisions regarding assets, credit, insurance, investments, and retirement and estates.

Financial Actions

Financial Basic asset decisions Financial

Plans Credit decisions Results
Insurance decisions
Investment decisions
Retirement and estate decisions

increases the chance that your financial goals will be
achieved and that you will have sufficient flexibility to
handle such contingencies as illness, job loss, and even
financial crises.
The goal of this book is to remove the mystery from
the personal financial planning process and replace it
with the tools you need to take charge of your personal
finances. To organize this process, the text is divided into
six parts, as follows:
▶ Part 1: Foundations of Financial Planning
▶ Part 2: Managing Basic Assets
▶ Part 3: Managing Credit
▶ Part 4: Managing Insurance Needs
▶ Part 5: Managing Investments
▶ Part 6: Retirement and Estate Planning
Each part explains a different aspect of personal fi-
nancial planning, as shown in Exhibit 1.1. This orga-
nizational scheme revolves around financial decision
making that’s firmly based on an operational set of fi-
nancial plans. We believe that sound financial planning
enables individuals to make decisions that will yield
their desired results.
income and thus to improve our standard of living—the
necessities, comforts, and luxuries we have or desire.
Our quality of life is closely tied to our standard
of living. Although other factors—geographic location,
public facilities, local cost of living, pollution, traffic,
and population density—also affect quality of life,
wealth is commonly viewed as a key determinant. Ma-
terial items such as a house, car, and clothing as well as
money available for health care, education, art, music,
travel, and entertainment all contribute to our quality
of life. Of course, many so-called wealthy people live
“plain” lives, choosing to save, invest, or support phil-
anthropic organizations with their money rather than
indulge in luxuries.
One trend profoundly affecting our standard of liv-
ing is the two-income family. What was relatively rare
in the early 1970s has become commonplace today, and
the incomes of millions of families have risen sharply as
a result. About 75 percent of married adults say that they
and their mate share all their money. Two incomes not
only buy more, but they also require greater responsibil-
ity to manage the money wisely.

1-1b Spending Money Wisely

1-1a Improving Your Standard
of Living
With personal financial planning we learn to acquire, use,
standard of living the necessities,
comforts, and luxuries enjoyed or
desired by an individual or family
Using money wisely is a major benefit of financial plan-
ning. Whatever your income, you can either spend it now
or save some of it for the future. Determining your cur
cur-
and control our finan- rent and future spending patterns is an important part of
cial resources more effi- personal money management. The goal, of course, is to
ciently. It allows us to gain spend your money so that you get the most satisfaction
more enjoyment from our from each dollar.

4 PART ONE: Foundations of Financial Planning

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Current Needs Your current spending level is based
on the necessities of life and your average propensity to
consume, which is the percentage of each dollar of in-
come, on average, that is spent for current needs rather
than savings. A minimum level of spending would allow
you to obtain only the necessities of life: food, clothing, and
shelter. Although the quantity and type of food, clothing,
and shelter purchased may differ among individuals de-
pending on their wealth, we all need these items to survive.
Some people with high average propensi-
propensi
ties to consume earn low incomes
and spend a large portion of it
on basic necessities. On the
Future Needs A carefully developed financial plan
should set aside a portion of current income for future
spending. Placing these funds in various savings and in-
vestment vehicles allows you to earn a return on your funds
until you need them. For example, you may want to build
up a retirement fund to maintain a desirable standard of
living in your later years. Instead of spending the money
now, you defer actual spending until the future when you
retire. Nearly 35 percent of Americans say retirement
planning is their most press-
ing financial concern. Other
examples of deferred spending
include saving for a child’s ed-

canbedone/Shutterstock.com
other hand, individuals earn- ucation, a primary residence
ing large amounts quite often or vacation home, a major
have low average propensi- acquisition (such as a car or
ties to consume, in part home entertainment cen-
because the cost of ne- ter), or even a vacation.
cessities represents only The portion of current
a small portion of their in- income we commit to future needs
come. depends on how much we earn and also on our av av-
Still, two people with signifi- erage propensity to consume. Many affluent Americans say
cantly different incomes could have the same average they need at least $5 million to feel rich. And more gener
gener-
propensity to consume because of differences in their ally, most people say that it would take about twice their
standard of living. The person making more money current net worth to feel wealthy. The more we earn and
may believe it is essential to buy better-quality items or the less we devote to current spending, the more we
more items and will thus, on average, spend the same can commit to meeting future needs. Regardless of in-
percentage of each dollar of income as the person mak- come or wealth, some portion of current income should
ing far less. be set aside regularly for future use. Doing so creates
good saving habits and provides for your future needs.

Financial Planning Tips 1-1c Accumulating Wealth

BE SMART IN PLANNING YOUR FINANCIAL GOALS
In addition to using current income to pay for everyday liv-
ing expenses, we often spend it to acquire assets such as cars,
Success is most likely if your goals are: a home, or stocks and bonds. Our assets largely determine
Specific: What do I want to achieve? What is how wealthy we are. Personal financial planning plays a
required of me, and what are my constraints? critical role in the accumulation of wealth by directing our
Measurable: How much money is needed? How financial resources to the most productive areas.
will I know if I am succeeding? One’s wealth is the
Attainable: How can I do this? Is this consistent net total value of all the
items that the individual average propensity to consume
with my other financial goals? the percentage of each dollar of income, on
owns. Wealth consists of
Realistic: Am I willing and able to do this? average, that a person spends for current
financial and tangible as- needs rather than savings
Timely: What is my target date? What short-term sets. Financial assets are
goals must be achieved along the way to achieve wealth the total value of all items owned
intangible, paper assets
by an individual, such as savings accounts,
my longer-term goals? such as savings accounts stocks, bonds, home, and automobiles
Inspired by Paul J. Meyers, Attitude Is Everything, The Meyer and securities (stocks,
Resource Group, 2003. financial assets intangible assets, such
bonds, mutual funds, as savings accounts and securities, that are
and so forth). They are acquired for some promised future return
earning assets that are

CHAPTER 1: Understanding the Financial Planning Process 5

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 Exhibit 1.2
The Average
A American, Financially Speaking
This financial snapshot of the “average American” gives you an idea of where you stand in terms of income, net worth, and
other measures. It should help you set some goals for the future.
Income and Assets
What Do We Earn? (median)
All families $46,700
What Are We Worth? (median)
All families $81,200
Home Ownership (median)
Value of primary residence $170,000
Mortgage on primary residence 115,000
How Much Savings Do We Have? (median)
Pooled investment funds (excluding money market) $80,000
Stocks 27,000
Bonds 94,500
Bank accounts/CDs 20,100
Retirement accounts 59,000
Source: Adapted from Jesse Bricker, Lisa J. Dettling, Alice Henriques, Joanne W. Hsu, Kevin B. Moore, John Sabelhaus, Jeffrey Thompson, and Richard A.Windle, “Changes in U.S. Family Finances from 2010 to 2013:
Evidence from the Survey of Consumer Finances,” Board of Governors of the Federal Reserve System, Washington, D.C., October 24, 2014. Data is for 2013. http://www.federalreserve.gov/pubs/bulletin/2014/pdf
/scf14.pdf, Tables 1–4, accessed September 2016.

held for their expected future returns. enough, you need personal financial
Tangible assets, in contrast, are physical Everyone—including planning. If you have enough money,
assets such as real estate and automobiles. recent college graduates, planning can help you spend and in-
These assets can be held for either con- young married couples, vest it wisely. If your income seems
sumption (e.g., your home, car, artwork, and others—needs inadequate, taking steps to plan your
or jewelry) or investment purposes (e.g., a to develop a personal financial activities will lead to an im-
duplex purchased for rental income). The proved lifestyle. Personal financial
financial plan.
goal of most people is to accumulate as planning is a systematic process that
much wealth as possible while maintaining considers the important elements of
current consumption at a level that provides the desired stan- an individual’s financial affairs and is aimed at fulfilling
dard of living. To see how you compare with the typical Ameri- his or her financial goals.
can in financial terms, check out the statistics in Exhibit 1.2. Everyone—including recent college graduates,
young married couples, and others—needs to develop

1-2 THE PERSONAL FINANCIAL

PLANNING PROCESS
tangible assets physical assets,
such as real estate and automobiles, that
can be held for either consumption or
investment purposes
personal financial planning a
systematic process that considers important
elements of an individual’s financial affairs
in order to fulfill financial goals
LO2 Many people mis-
takenly assume that per
per-
sonal financial planning
is only for the wealthy.
However, nothing could
be further from the
truth. Whether you have
a lot of money or not
a personal financial plan. Knowing what you need to ac-
complish financially, and how you intend to do it, gives
you an edge over someone who merely reacts to financial
events as they unfold. Just think of the example provided
by the financial crisis of 2008–2009. Do you think that
a financial plan would have helped in weathering the
financial storm?
1-2a Steps in the Financial
Planning Process
The financial planning process translates personal fi-
nancial goals into specific financial plans, which then

6 PART ONE: Foundations of Financial Planning

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 Exhibit 1.3
The Six-Step Financial Planning Process
The financial planning process translates personal financial goals into specific financial plans and strategies, implements them,
and then uses budgets and financial statements to monitor, evaluate, and revise plans and strategies as needed. This process
typically involves the six steps shown in sequence here.
1. Define financial goals.

2. Develop financial plans and strategies to achieve goals.

3. Implement financial plans and strategies.

4. Periodically develop and implement budgets to monitor and control progress toward goals.

5. Use financial statements to evaluate results of plans and budgets, taking corrective action as required.

6. Redefine goals and revise plans and strategies as personal circumstances change.

help you implement those goals through financial

strategies. The financial planning process involves the
six steps shown in Exhibit 1.3.
You start with financial goals, formulate and im-
plement financial plans and strategies to reach them,
monitor and control progress toward goals through
budgets, and use financial statements to evaluate the
plan and budget results. This leads you back to rede-
fining your goals so that they better meet your current
needs, and to revising your financial plans and strate-
Patpitchaya/Shutterstock.com

gies accordingly.
Let’s now look at how goal setting fits into the plan-
ning process. In Chapters 2 and 3, we’ll consider other
information essential to creating your financial plans:
personal financial statements, budgets, and taxes.

1-2b Defining Your Financial Goals

Financial goals are the results that an individual wants effectively meet the major financial events in our lives.
to attain. Examples include buying a home, build- Your financial goals or preferences must be stated in mon-
ing a college fund, and achieving financial indepen- etary terms because
dence. What are your financial goals? Have you spelled money and the sat- financial goals results that an
them out? It’s impossible to effectively manage your individual wants to attain, such as
isfaction it can bring
buying a home, building a college fund,
financial resources without financial goals. We need are an integral part of or achieving financial independence
to know where we are going, in a financial sense, to financial planning.

CHAPTER 1: Understanding the Financial Planning Process 7

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 BEHAVIOR MATTERS

Practicing Financial Self-Awareness

Are you aware of your financial behavior, its causes,
and its consequences? For example, are you routinely
relying too heavily on your credit card? Are you saving
enough to buy a new car or to fund your retirement?
And the bottom line: Are you continuing the same
financial behavior you have in the past and yet expect-
ing different results?
The first decisive step in taking control of your life is
to be aware of what you’re thinking, feeling, and doing.
Be financially self-aware: observe your own thoughts,
feelings, and behavior concerning your finances. Take
notes on things that affect how you feel, and what you
do about financial decisions. Watch yourself, and be
honest about your feelings concerning money and your
future.
Then ask yourself two critically important questions:
● Is the way I spend money consistent with what I
believe? Financial planning that works taking the
time to develop a plan that purposely lines up your
values and your use of money.
● Have I clearly stated the financial goals that are
important to me and, if so, what am I doing today
to make sure I achieve them? The heart of financial
planning is determining where you are today and
where you want to be in the future. This implies the
need for a financial plan: limited resources sometimes
bring painful trade-offs.
Source: Adapted from Carl Richards, “Practicing Radical Self-Awareness,”
Behaviorgap.com, http://us2.campaign-archive1.com/?u=23ce2ac179e81
58f7583c4e3f&id=86f42577bc&e=b50e826a9e, accessed September 2016.

The Role of Money About 75 percent of Americans cost when evaluating alternative qualities of life, spend-
believe that money is freedom. Money is the medium ing patterns, and forms of wealth accumulation.
of exchange used to measure value in financial trans-
actions. It would be difficult to set specific personal
financial goals and to measure progress toward achiev- Go to Smart Sites
ing them without the standard unit of exchange pro-
vided by the dollar. Money, as we know it today, is the Is getting the lowest price important to you? Where can
key consideration in establishing financial goals. Yet you search for the best prices? A highlight box in each
it’s not money, as such, that most people want. Rather, chapter of PFIN Online includes “Smart Sites,” a list of
we want the utility, which is the amount of satisfaction resources and sites that offer additional information on
received from buying quantities of goods and services topics in the PFIN text. Log in at www.cengagebrain.com.
of a given quality, that money makes possible.
People may choose one item over another because
of a special feature that provides additional utility. For
example, some people will pay more for a car with satel-
lite radio than one with only an audio player. The added
utility may result from the actual usefulness of the spe-
cial feature, from the “status” it’s expected to provide, or
from both. Regardless,
people receive varying
money the medium of exchange levels of satisfaction from
used as a measure of value in
similar items, and their The Psychology of Money Money and its utility
financial transactions
satisfaction isn’t neces- are not only economic concepts; they’re also closely
utility the amount of satisfaction sarily directly related to linked to the psychological concepts of values, emo-
received from purchasing certain
the cost of the items. We, tion, and personality. Your personal value system—the
types or quantities of goods and
services therefore, need to con- important ideals and beliefs that guide your life—will
sider utility along with also shape your attitude toward money and wealth

8 PART ONE: Foundations of Financial Planning

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accumulation. If you place a high value
on family life, you may choose a career
that offers regular hours and less stress
or choose an employer who offers flex-
time rather than a higher-paying po-
sition that requires travel and lots of
overtime.
You may have plenty of money but
choose to live frugally and do things your
your-
self rather than hire someone to do them
for you. Or you may spend a high propor
propor-
tion of your current income on acquiring

zimmytws/Shutterstock.com
luxuries. Financial goals and decisions
should be consistent with your personal
values. You can formulate financial plans
that provide the greatest personal satis-
faction and quality of life by identifying
your values.
Money is an important motivator of personal be- in any relationship, including that with a partner,
havior because it has a strong effect on self-image. parents, or children. Most people are uncomfortable
Each person’s unique personality and emotional talking about money matters and avoid such discus-
makeup determine the importance and role of money sions, even with their partners. However, differing
in his or her life. You should become aware of your opinions on how to spend money may threaten the
own attitudes toward money because they are the ba- stability of a marriage or cause arguments between
sis of your “money personality” and money manage- parents and children. Learning to communicate with
ment style. your partner about money is a critical step in develop-
Some questions to ask yourself include: How im- ing effective financial plans.
portant is money to me? Why? What types of spend- The best way to resolve money disputes is to be
ing give me satisfaction? Am I a risk taker? Do I need aware of your partner’s financial style, consistently com-
large financial reserves to feel secure? Knowing the municate openly, and be willing to compromise. It’s
answers to these questions is a prerequisite for devel- highly unlikely that you can change your partner’s style,
oping realistic and effective financial goals and plans. but you can work out your differences. Financial plan-
Trade-offs between current and future benefits are ning is an especially important part of the conflict resolu-
strongly affected by values, emotions, and personality. tion process. You need to work together to develop your
Effective financial plans are both economically and financial goals.
psychologically sound. They must not only consider
your wants, needs, and financial resources but must
also realistically reflect your personality and emo- 1-2d Types of Financial Goals
tional reactions to money.
Financial goals cover a wide range of financial as-
pirations: controlling living expenses, meeting re-
tirement needs, setting up a savings and investment
1-2c Money and Relationships
program, and minimizing your taxes. Other impor-
The average couple spends between 250 and 700 tant financial goals include having enough money to
hours planning their wedding. While most couples live as well as possible, being financially indepen-
spend less than $10,000 on the big day, the average dent, sending children to college, and providing for
cost has risen to more than $32,000, depending on retirement.
where they live. But with all the hoopla surrounding Financial goals should be defined as specifically
the wedding day, many couples overlook one of the as possible. Saying that you want to save money next
most important aspects of marriage: financial compat- year is not a specific goal. How much do you want
ibility. Money can be one of the most emotional issues to save, and for what purpose? A goal such as “save

CHAPTER 1: Understanding the Financial Planning Process 9

Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
 Financial Planning Tips
COMMON MISCONCEPTIONS ABOUT FINANCIAL PLANNING
● A professional financial planner is an unneces-
sary expense. The answer depends on you. A lot of
good financial planning can be done on your own.
But honestly ask yourself: Do I have the discipline,
time, and financial experience to manage these
complicated tasks effectively and confidently? If the
answer is no, see a financial planner to get a realistic
idea of the planning process.
● A little credit card debt is just fine. Define “a little.”
A modest amount of credit card debt is OK. The prob-
lem is that for all too many people, “a little” leads to
a lot. As discussed in Part 3 of this book, “Managing
Credit,” credit card debt is often one of the biggest
problems in managing your personal finances. Just
consider the high interest rates of credit cards and
how easy it is to build up a big balance.
● I don’t need a budget because I have a general
idea of what I earn and spend. There is a natural
10 percent of my take-home pay each month to start
an investment program” states clearly what you want
to do and why.
Because they are the basis of your financial plans,
your goals should be realistic and attainable. If you set
a savings goal too high—for example, 25 percent of
your take-home pay when your basic living expenses
already account for 85 percent of it—then your goal
is unattainable and there’s no way to meet it. But if
savings goals are set too low, you may not accumulate
enough for a meaningful investment program. If your
goals are unrealistic, they’ll put the integrity of your
financial plan at risk and be a source of ongoing finan-
cial frustration.
It’s important to involve your immediate family in
the goal-setting process. When family members “buy
into” the goals, it reduces the likelihood of future
conflicts and improves
the family’s chances for
goal dates target dates in financial success. After
the future when certain financial
objectives are expected to be
defining and approving
completed your goals, you can pre-
pare appropriate cash
10 PART ONE: Foundations of Financial Planning
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
tendency to overspend because expenses are easy
to underestimate without a formal budget. And if
you spend first and only save what’s left over, the
probability of achieving your financial goals is much
lower. Sticking to a budget is the key.
● Retirement is a lifetime away. While that may be
true, that doesn’t justify focusing only on short-
term goals like coming up with the down pay-
ment on a house. When retirement is a “lifetime
away,” that’s the time to exploit the compounding
of returns over a long period of time by taking full
advantage of retirement investments in your em-
ployer’s 401(k) plan and in IRAs. An early start can
put you well ahead.
Source: Adapted from Kimberly J. Howard, CFP®, CRPC, “Financial
Fiascos Every Young Couple with Debts Should Avoid,” NAPFA
Planning Perspectives, volume 6, issue 5, Sept/Oct 2011, www
.NAPFA.org, accessed September 2016.
budgets. Finally, you should assign priorities and a
time frame to financial goals. Are they short-term
goals for the next year, or are they intermediate or
long-term goals that will not be achieved for many
more years? For example, saving for a vacation might
be a medium-priority, short-term goal, whereas buy-
ing a larger home may be a high-priority, intermediate
goal and purchasing a vacation home a low-priority,
long-term goal. Normally, long-term financial goals
are set first, followed by a series of corresponding
short-term and intermediate goals.
1-2e Putting Target Dates
on Financial Goals
Financial goals are most effective when they are set with
goal dates. Goal dates are target points in the future
when you expect to have achieved or completed certain
financial objectives. They may serve as progress check-
points toward some longer-term financial goals and/or as
deadlines for others.
 EXAMPLE: Target Dates for Financial Goals
Austin and Clara Martin are both 28 and have been
married for one year. They have set financial goals of
buying a boat for $3,000 in 2019, accumulate a net
worth of $10,000 by 2023, and accumulate a net worth
of $50,000 by 2031.

Long-Term Goals Long-term financial goals should

indicate wants and desires for a period covering about

RomanR/Shutterstock.com
6 years out to the next 30 or 40 years. Although it’s dif
dif-
ficult to pinpoint exactly what you will want 30 years
from now, it’s useful to establish some tentative long-
term financial goals. However, you should recognize
that long-term goals will change over time and that
you’ll need to revise them accordingly. If the goals
long-term goals. Short-term planning should also include
seem too ambitious, you’ll want to make them more
establishing an emergency fund with at least six months’
realistic. If they’re too conservative, you’ll want to
worth of income. This special savings account serves as a
adjust them to a level that encourages you to make
safety reserve in case of financial emergencies such as a
financially responsible decisions rather than squander
temporary loss of income.
surplus funds.
Unless you attain your short-term goals, you proba-
Short-Term and Intermediate Goals Short-term fi- bly won’t achieve your intermediate or long-term goals.
nancial goals are set each year and cover a 12-month It’s tempting to let the desire to spend now take prior
prior-
period. They include making substantial, regular con- ity over the need to save for the future. But by making
tributions to savings or investments in order to accumu- some short-term sacrifices now, you’re more likely to
late your desired net worth. Intermediate goals bridge have a comfortable future. Worksheet 1.1 is a conve-
the gap between short- and long-term goals. And of nient way to summarize your personal financial goals. It
course, both intermediate and short-term goals should groups them by time frame (short term, intermediate,
be consistent with your long-term goals. or long term) and lists a priority for each goal (high,
Short-term goals become the key input for the cash medium, or low), a target date to reach the goal, and an
budget, a tool used to plan for short-term income and estimated cost.
expenses. To define your short-term goals, consider We have filled out the form showing the goals that
your immediate goals, expected income for the year, and Silas and Emily Nelson set in December 2017. The
Nelsons were married in 2013, own a condominium in
a Midwestern suburb, and have no children. Because
Silas and Emily are 28 and 26 years old, respectively,
DO IT NOW: Start a List of Your Financial Goals they have set their longest-term financial goal 33 years
Yogi Berra summed it up: “If you don’t know where from now, when they want to retire. Silas has just com-
you’re going, you might not get there.” And so it is pleted his fifth year as a marketing representative for
with your financial goals. Pick up some paper now and a large pharmaceutical company. Emily, a former el-
start a list of your financial goals. Maybe it’s as simple ementary school teacher, finished her MBA in May
as saving $25 by the end of the month or as lofty as 2016 and began working at a local advertising agency.
saving $200,000 for retirement by the time you’re 50. Silas and Emily love to travel and ski. They plan to
You’ll never achieve your goals if you don’t know what start a family in a few years, but for now they want
they are, much less know whether they’re realistic. Go to develop some degree of financial stability and in-
ahead and dream. List your goals (short-term, interme- dependence. Their short-term goals include purchas-
diate, and long-term) and start laying out how you’ll ing assets (clothes, furniture, and car), reducing debt,
get there. You can do it now. reviewing insurance, increasing savings, and planning
for retirement.

CHAPTER 1: Understanding the Financial Planning Process 11

Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
 WORKSHEET 1.1 SUMMARY OF PERSONAL FINANCIAL GOALS
Set financial goals carefully and realistically, because they form the basis for your personal
financial plans. Each goal should be clearly defined and have a priority, time frame, and
cost estimate.

Personal Financial Goals

Name(s)
Silas and Emily Nelson Date
December 27, 2017
Short-Term Goals (1 year or less)

Goal Priority Target Date Cost Estimate

Buy new tires and brakes for Honda High Feb. 2018 $ 500
Take Colorado ski trip Medium Mar. 2018 1,800
Buy career clothes for Emily High May 2018 1,200
Buy new work clothes for Silas Medium June 2018 750
Replace stereo components Low Sept. 2018 1,100

Intermediate Goals (2 to 5 years)

Goal Priority Target Date Cost Estimate

Start family High 2019 -
Take 2-week European Vacation Medium 2019–20 5,000
Repay all loans except mortgage High 2020 $ 7,500
Trade Focus and buy larger car High 2020 10,500
Review insurance needs High 2020 -
Buy new bedroom furniture Low 2022 4,000
Accumulate $100,000 net worth High 2022 -
Long-Term Goals (6 1 years)

Goal Priority Target Date Cost Estimate

Begin college fund for children High 2023 ? /year

Diversify/increase investment portfolio High 2024 Varies
Take Hawaiian vacation Low 2025 $ 10,000
Increase college fund contributions High 2025 -
Buy larger home High 2027 $ 250,000
Retire from jobs High 2050 ?

12 PART ONE: Foundations of Financial Planning

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1-3 FROM GOALS TO PLANS:
A LIFETIME OF PLANNING
LO3 How will you achieve the financial goals you set
for yourself? The answer, of course, lies in the financial
plans you establish. Financial plans provide the road
map for achieving your financial goals. The six-step fi-
nancial planning process (introduced in Exhibit 1.3) re-
sults in separate yet interrelated components covering
all the important financial elements in your life.
Some elements deal with the more imme-
diate aspects of money management,
such as preparing a budget to
help manage spending. Oth-
ers focus on acquiring major
assets, controlling borrowing, re- re
ducing financial risk, providing for
emergency funds and future wealth
accumulation, taking advantage of
and managing employer-sponsored
benefits, deferring and minimizing
taxes, providing for financial security
when you stop working, and ensuring
an orderly and cost-effective transfer
of assets to your heirs.
In addition to discussing your
financial goals and attitudes toward
money with your partner, you must al- al
locate responsibility for money man-man
agement tasks and decisions. Many
couples make major decisions jointly
and divide routine financial decision
making on the basis of expertise and interest.
Others believe it is important for their entire family to
work together as a team to manage the family finances.
They hold family financial meetings once every few
months to help their children understand how the house-
hold money is spent.
1-3a The Life Cycle
of Financial Plans
Financial planning is a dynamic process. As you move
through different stages of your life,
your needs and goals will change. Yet
certain financial goals are important You need to plan ahead
regardless of age. Having extra re- and take steps to
sources to fall back on in an economic weather life’s financial
downturn or period of unemployment storms successfully.
should be a priority whether you are 25,
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
45, or 65. Some changes—a new job, marriage, children,
moving to a new area—may be part of your original plan.
More often than not, you’ll face unexpected “financial
shocks” during your life: loss of a job, a car accident, di-
vorce or death of a spouse, a long illness, or the need to
support adult children or aging parents. With careful plan-
ning, you can get through tough times and prosper in good
times. You need to plan ahead and take steps to weather
life’s financial storms successfully. For example, setting up
an emergency fund or reducing monthly expenses will help
protect you and your family financially if a setback occurs.
As we move from childhood to retirement age, we
go through different life stages. Ex Ex-
hibit 1.4 illustrates the various
components of a typical per- per
sonal financial planning life
cycle as they relate to these different
life stages. While the exhibit shows
more detail, the life cycle involves
three general stages: 1) wealth accu
accu-
mulation, 2) wealth preservation, and
3) wealth transfer. This exhibit pres-
pres
ents the organizing framework of
the entire financial planning pro pro-
cess. We will refer to it throughout
the book—and we suggest you do
so for the rest of your life.
As we pass from one stage of Mega Pixel/Shutterstock.com
maturation to the next, our patterns
of income, home ownership, and
debt also change. From early child child-
hood, when we rely on our parents
for support, to early adulthood,
when we hold our first jobs and start
our families, we can see a noticeable change in income
patterns. For example, those in the pre-retirement 45–64
age group tend to have higher income than those younger
than age 45. Thus, as our emphasis in life changes, so do
the kinds of financial plans we need to pursue.
New career strategies—planned and unplanned job
changes—may require that financial plans be revised.
Many young people focus on their careers and building a
financial base before marrying and having children. The
families of women who interrupt their careers to stay
home with their children, whether for six months or six
years, will experience periods of reduced
income. A divorce, a spouse’s death, or
remarriage can also drastically change
your financial circumstances. Many peo-
ple in their 30s, 40s, and 50s find them-
selves in the “sandwich generation”:
supporting their elderly parents while
CHAPTER 1: Understanding the Financial Planning Process 13
 Exhibit 1.4
The Personal Financial Planning Life Cycle
As you move through life and your income and living cost patterns change, you’ll typically have to pursue a variety of financial
plans. For instance, after graduating from college, your focus likely will be on buying a car and a house, and you’ll be concerned
about health and automobile insurance to protect against loss.
Wealth Wealth
Wealth accumulation
preservation transfer
Early High Pre- Family Pre- Retirement
childhood school family formation/ retirement
and inde- career
college pendence development Income

Retirement and estate planning

Tax planning
$

Employee benefit planning

Savings and investment planning

Liability and insurance planning

Asset acquisition planning

0
10 20 30 40 50 60 70 80 90
Age

still raising their own children and paying for college. And as a house). Chapters 4 and 5 focus on important con-
some people must cope with reduced income due to jobs siderations for managing liquid assets and other major
lost because of corporate downsizing or early retirement. assets such as automobiles and housing.

Liability and Insurance Planning Another category

1-3b Plans to Achieve Your
Financial Goals
Financial goals can range from short-term goals, such
as saving for a car, to long-term goals, such as saving
enough to start your own business. Reaching your partic-
ular goals requires different types of financial planning.
Asset Acquisition Planning One of the first catego-
ries of financial planning we typically encounter is asset
acquisition. We accumulate assets—things we own—
throughout our lives. These include liquid assets (cash,
savings accounts, and money market funds) used to pay
everyday expenses, investments (stocks, bonds, and mu-
tual funds) acquired to earn a return on our money, per-
per
sonal property (movable property such as automobiles,
household furnishings, appliances, clothing, jewelry,
home electronics, and similar items), and real property
(immovable property; land and anything fixed to it, such
of financial planning is liability planning. A liability is
something we owe, which is measured by the amount
of debt we incur. We create liabilities by borrowing
money. By the time most of us graduate from college,
we have debts of some sort or another—examples in-
clude education loans, car loans, credit card balances,
and so on. Our borrowing needs typically increase as
we acquire assets like a home, furnishings, and appli-
ances. Whatever the source of credit, such transactions
have one thing in common: the debt must be repaid at
some future time. How we manage our debt burden is
just as important as how we manage our assets. Manag-
ing credit effectively requires careful planning, which
is covered in Chapters 6 and 7.
Obtaining adequate insurance coverage is also essen-
tial. Like borrowing money, obtaining insurance is often
introduced relatively early in our life cycle (usually early in
the family formation stage). Insurance is a way to reduce

14 PART ONE: Foundations of Financial Planning

Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Another random document with
no related content on Scribd:
Great Queen Street Chapel, 86–92
Great Russell Street, Thanet House, 147–149
Great St. Andrew Street, 113
Great Turnstile, 3
Great Wardrobe, Nos. 57–58, Great Queen Street, 66
Great White Lion Street, 114
Great Wild Street (Wild Street), 34, 93–97
Green, Chas., 83
Green, Thomas, 176
Green Dragon Yard, High Holborn, 18
Greene Dragon, The, 18
Greene, Thomas, 13, 14
Gregg, Henry, 178
Gregory, Edmond, 5n
Greville, Fulk, 51
Greville, Robert, 2nd Baron Brooke, 51n
Grey, Humfrey (Humphrey), 35
Grey, Thomas, 2nd Earl of Stamford, 65
Grey, Thomas, Lord Grey of Groby, 65
Grey, William, Lord, 6th Baron North, 70
Grey of Wark, William, Lord, 70
Greyhound Inn, Broad Street, 101, 108, 109, 125
Greyhound Close, 108
Greyhound Court, 109
Gridiron, High Holborn, 3n
Grigge (alias Barbor), John, 145
Grove, Thos., 67n
Grover, Thomas, 18, 30n
Guerin, Peter, 39n
Guildford, Lord North, 2nd Earl of, 173
Guilford, Francis North, 1st Baron, 79, 80
Gwilliam, Thomas, 29n
Gyles’ Court, 108
Gyles, William, 108

Hahn, Daniel, 105n

Haley, William, 139
Hall, Charles, 29, 108n
Hallam, Adam, 90
Hallifax, Rev. Jas., 73n, 75n
Halton, Lord, 56
Hamilton, Rev. Frederick, 166
Hamilton, James, 2nd Earl of Abercorn, 102
Hamilton, James, Lord Paisley, 102
Hamilton, William, 11
Hamlyn, Mistress Margaret, 110
Hammond, George, 138
Hammond, George Aust., 138
Hammond, John, 138
Hammond, Mrs. P., 138
Hankey, Thos., 166
Hanney, Sir Samuel, 172
Hannott, Anthony, 28n
Hanson, John, 54n
Hanson, Thomas, 108
Harboard, Sir Charles, 54n
Harborne, Symond, 101n
Harding, Margaret, 138
Harding, William, 138
Harley, Sir Edward, 79
Harman, John, 120n
Harris, Richard, 30
Harris, Robert, 3n
Harris, Thos., 126
Harrison, George, 20, 24n, 107
Harrison, George, 145
Harrow, The, High Holborn, 18
Harrow Alley, 18
Hartopp, Lady, 91
Hartopp, Sir Thomas, 91
Hartopp, Sir William, 91
Hartoppe, William, 32n
Harvey, Sir Nicolas, 6n
Harwell, Henry, 6n
Hatton Garden, No. 13, 78
Hawford, Elizabeth, 134
Hawford, John (father and son), 134
Hawford, William, 134
Hawker, Thomas, 95n, 96
Hawkins, Abraham, 109n
Hawkins, Anthony Hope, 177
Hawkins, Jane, 110n
Hawkins, John, 109n
Hawley, Nicholas, 14
Hawte, Sir William, 188n
Hayward, Sir Roland, 186
Hell Gate, 36n
Hellier, Samuel, 29
Henderson, John, 66, 67n
Henrietta Maria, Queen, Statue of, 44, 59, 60, 61, 71–77
Herbert, Lord, of Cherbury, 37
Herbert, Sir William, Earl of Pembroke, 119
Heron, Henry, 5, 7
Heron, Richard, 149
Herriot, William, 97n
Heston, manor and messuages in, 123
Hewitt, Matthew, 39
Heywood, Wm., 139
Hibbart, Thos., 164
Hibbert, Thos., 178
Higgons, Thomas, 88
Higgs, John, 22n
High Holborn, 3–9, 13–17, 23–26
High Street, St. Giles, 118, 144
Hill, Eliz., 70
Hill, Joseph, 84
Hippisley, Sir John, 29n
Hoare, Chas., 56
Hoare, Widow, 56
Hobbes, Thomas, 54
Hog Lane, 112, 118n, 119
Hogarth Room, Freemasons’ Tavern, 63
Holborn Place, 8
Holborn Public Library, 18, 20n, 114
Holborn Restaurant, 16
Holborn Station, 15
Holden, Nicholas, 122n
Holdmay, Robert, 56
Holford, Henry, 34, 35, 36n, 40n, 42, 93, 100
Holford, Jane, 35n, 37n, 40n
Holford, Richard, 34n, 35n, 37n, 40, 42, 94n, 100n, 137
Holland, Henry Rich, 1st Earl of, 88
Holles, John, Duke of Newcastle, 188
Holles, John, 1st Earl of Clare, 100, 188
Holles, Sir William, 188n
Holles, Thomas Pelham. (See Pelham-Holles).
Hollinghurst, Elizabeth (formerly Tompson), 8
Hollys, Sir William, 34
Holme, Daniel, 105
Holme’s Bagnio, 105
Holt, Rowland, 75n
Holt, William, 120
Hone, Matthew, 70
Hooker, John, 120n
Hoole, John, 57, 67n
Hooper, Benjamin, 28
Hooper, Sarah, 28
Hooper, William, 28, 29
Horn, Wm., 23n, 144n
Horne, Thomas, 112
Horseman, Richd., 29n, 31n
Hospital of Burton Lazars. (See Burton Lazars.)
Hospital of St. Giles. (See St. Giles, Hospital of.)
Hosyer, William, 24, 125
Howard, Catherine, 72
Howard, Charles, 3rd Earl of Carlisle, 92
Howard, Edward, Viscount Morpeth, 92
Howard, Henry, 7th Duke of Norfolk, 55
Howard, Col. Thos., 68
Howard, Thomas, 3rd Duke of Norfolk, 124n
Huckle, Godfrey Kneller, 56
Huddleston, Henry, 14
Hudson, George, 76, 77n
Hudson, Thomas, 67n, 74, 76–77
Hugh, the Smith, 107
Hughes, 71
Hughes, John, 71
Huguenots’ Chapel, 115
Hunt, John, 186
Hunt, Stephen, 90
Hunter, John, 183
Hurlestone, Henry, 3n
Hutchins, Wm., 84
Hye, Henrye, 119

Iley, Thos., 76
Inchiquin, Murrough O’Brien, 1st Earl of, 69
Inchiquin, William O’Brien, 2nd Earl of, 69
Inns of Court Hotel, High Holborn, 8
Ittery, John, 42, 93, 94n, 100
Ives, Anthony, 24
Ivey, Lady, 102n

Jackson, 71
Jackson, Mrs., 175
Jackson, Jas., 175
Jackson, John, 66
Jackson, T. S., 178
James, Madd., 96
James, Mary, 96
Jeffreys, George, 1st Baron Jeffreys, 81
Jennens, William, 113n
John de Cruce, 23, 107
John de Fonte the Elder, 23n
John of Good Memory, 23n
Johnson, Mrs. Barbra, 83
Johnson, Francis, 9
Johnson, Frederick, 9n
Johnson, John, 3n, 9n
Johnson, John, 83
Johnson, Robert, 110
Johnson, Samuel, 57, 71, 85, 149
Johnson (alias Colleton), Mrs. Elizabeth, 69, 70
Johnson (alias Trueman), William, 80n
Jones, Ed., 57
Jones, Henry, and Sons, 133
Jones, Hugh, 24
Jones, Hugh, 99n
Jones, Inigo, 44, 136
Jones, John, 37n
Jones, William, 76
Jordayne, Thos., 24n
Joye, James, 112, 115n
Juxon, William, 65n

Kauffmann, Angelica, 151, 152, 153, 163, 169, 176

Keeley Street (formerly Little Wild Street), 99
Kekewitch, Robert, 11
Kemble Street, 34, 35
Kendricke, James, 113
Kendricke’s Yard, 141
Kensington, Henry Rich, Baron, 88
Kensington, Robert Rich, Baron, 88
Keroualle, Mdlle. de (afterwards Duchess of Portsmouth), 54
Killigrew, Elizabeth, 40n
King, Joseph, 31
King’s Gate, 21n
Kingsgate Street, 36
King’s Head, The, Broad Street, 125
King’s Head Inn, High Holborn, 15
Kingston (Kyngston), Edward, 20n, 24n, 122n
King Street (now Neal Street), 112, 113
King Street (now Shelton Street), 27, 30–31
Kingsway Theatre, 31n
Knapton, Samuel, 39
Knapton, Susan, 39
Kneller, Sir Godfrey, 47n, 54n, 55, 56n, 65n, 66
Kneller, Godfrey, the younger (Godfrey Kneller Huckle), 56
Kneller, G. J., 59n
Kneller, John, 56, 67n
Kneller, Sophia, 59n
Kniveton, Lady Frances, 135
Kniveton, Sir Gilbert, 135
Kyngston, Edward. (See Kingston.)

Lacey, Jas., 83
Lacost, John, 29n
Lamb Alley, 110
Lamb, Peniston, 108
Lambe, Henry, 110
Lambe, John, 110
Land Bank (Land Credit Office), 82
Lande, —, 159
Lane, Byzantia (afterwards Cartwright), 74
Lane, Mistress Elinor, 15
Lane, Elizabeth, 74
Lane, Mary (afterwards Countess of Macclesfield), 74, 76
Lane, Ralph, 74, 89
Lane, Robert, 74
Lane, William, Junior, 4, 5, 14, 15n
Lane, The, 125
Langhorn, Sir William, 91n
Langhorne, Richard, 52n
Langston, Jas., 157
Langston, Mrs., 157
Larchin, John, 9
Larchin, Mary, 9
Lavell, Miss, 56
Lawrence, Edmund, 110
Lawrence Street, 145
Layton, Richard, 123n
Le Blanc, Sir Simon, 175
Lee, Jas., 171
Lee, John, 14
Lee, Robt. Cooper, 171
Lefevre, Chas. Shaw, 159, 160
Lefevre, Helena (afterwards Shaw Lefevre), 160
Lefevre, John, 159, 160
Legh, Joan, Lady (afterwards Chaloner), 124, 126
Legh, Katherine. (See Mountjoy, Lady).
Legh, Sir Thomas, 34, 124, 126
Leicester, Countess of, 148
Leicester, Thomas Coke, Lord Lovel (afterwards Earl of), 148
Leigh, Hon. Charles, 135
Leivez (Leviez), Charles, 56
Lennox, Esmé Stuart, Duke of, 72, 101
Lennox House, 101, 106
Lennox, Katherine Clifton, Duchess of, 101, 102
Lenthall, William, 97
Lepers, Hospital for, 117–126
L’Estrange, Sir Roger, 136
Leverton, Lancelot, 163
Leverton, Thomas, 83, 84, 85, 150, 151, 152, 163
Leverton, William, 138
Leviez (Leivez), Charles, 56
Lewis, Jane, 110n
Lewknor, Sir Lewis, 30
Lewknor’s (Lutenor, Newtenor) Lane (now Macklin Street), 27–30
Lich Gate in St. Giles’ Churchyard, 138
Lightfoot, Richard, 144
Lindsey, 1st Earl of, 136
Lindsey House, Lincoln’s Inn Fields, 45n
Linley, Elizabeth Ann (afterwards Mrs. Sheridan), 66
Lisle, Sir John Dudley, Viscount, 118, 122, 124, 125, 145
Lister, Agnes (afterwards Lady Hartopp), 91
Lister, Sir Martin, 91
Little, Dr. W., 133
Little Denmark Street, 119
Little Earl Street, 113, 114
Little Queen Street, 14, 16, 37
Littleton, Sir Thomas, 75
Little Turnstile, 4, 5, 19n
Little White Lion Street, 114
Little Wild Street, No. 16, 99
Livingstone, Sir James (afterwards Earl of Newburgh), 72n
Lloyd, Elizabeth (afterwards Saywell), 119–120
Lloyd (Floyd or Flood), Robert, 118n, 119, 120n, 121n, 122
Lloyd, William, 113n
Lloyd. (See also Flood.)
Lloyd’s Court, 119, 120
London, Corporation of City of, 16, 186, 187
London Museum, 39
Long Acre (Field), 112
Loringe, William, 101n
Loughborough, Alexander Wedderburn, Lord, 155
Love, —, 138, 139
Loveday, Henry, 145n
Lovel, Sir Thomas Coke, Lord, 148
Lovell, Chas., 21n
Lovell, Nicholas, 105n
Lucas, John, 73n
Lumber Court, 114
Lumley, Sir Martin (of Bardfield Magna, Essex), 39
Lumley or Lomley, Sir Martin, (Lord Mayor), 39
Lushington, William, 183
Lutenor Street. (See Lewknor’s Lane.)
Lyde, —, 159
Lyde, Sir Lionel, 153
Lying-In Hospital, Brownlow Street, 103

Mabb, Edward, 60n

Macclesfield, George Parker, 2nd Earl of, 74, 76
Macclesfield, Mary, Countess of, 74, 76
Mace, William, 188
McGee, Jas., 56
Macklin Street (formerly Lewknor’s Lane and Charles Street), 18,
27–30
Magnus, Master, 125, 145
Maidenhead, The, Dyott Street, 125, 145
Majendie, Rev. Dr., 143
Mallard, —, 83
Mallors, Jas., 59n, 60n, 70n, 82n
Manners, Grace, (afterwards Lady Chaworth), 91–92
Manners, John, Marquess of Granby and Duke of Rutland (Lord
Roos), 80n, 91–92
Mansfield, William Murray, 1st Earl of, 149
Mansion House, St. Giles’ Hospital, 118
March, Esmé Stuart, Earl of (afterwards Duke of Lennox), 72, 101
Market, proposed, in High Holborn, 16
Markham, Sir John, 11
Markmasons’ Hall, 84
Marlborough, 2nd Duke of, 149
Marshlands (Masslings, Maslyn), 101, 106, 110–111, 112–114, 123
Martin, Joseph, 11
Martin, Oliver, 115n
Martin, Ralph, 28
Marvell, Andrew, 134
Mascall, Anne (afterwards Vavasour), 20
Mascall, James, 20, 24n, 107, 108, 126n
Mascall, Roger, 109n
Maslyn Fields (See Marshlands.)
Maslyn’s Pond, 111n
Massingberd, Henry, 11n
Masslings. (See Marshlands.)
Masters, Alexander, 29n
Matthew, Geoffrey, 108
Matthew, Godfrey, 107
Matthew’s Stables, 108
Mattingnon, Wm., 56
Maud, Queen, 117, 127
Maynard, Mary, 145n
Maynard, William, 145n
Maynard Place, 145
Maynard Street, 145
Maynwaring, Roger, 139
Medlicott, Edmond, 18
Mee, Sarah, 29
Mello, Francisco de, 97
Mennes, Capt. John, 72n
Mery, John, 126n
Methodist Chapel. (See Great Queen Street Chapel.)
Mickle, —, 57
Middle Row (Round Rents), Holborn, 125
Middle Yard, Great Queen Street, 46, 61, 86, 87
Miller, Gregory, 9
Miller, John, 8, 9
Miller, Luke, 28
Mills, Peter, 29n, 31n, 44, 60, 61, 86
Milner, Robert, 28
Moivre, Abraham de, 76
Monmouth, Duke of, 55
Monmouth Street, 112n, 113, 138
Monro, Sir Alexander, 164
Montagu, Anne Wortley, 89
Montagu, Anthony Maria, 2nd Viscount, 73
Montagu, Anthony, 6th Viscount, 65
Montagu, Barbara, Viscountess, 65
Montagu, Edward, 1st Earl of Sandwich, 89
Montagu, Edward Wortley, 89
Montagu, Elizabeth, Lady, 73
Montagu, Francis Browne, 3rd Viscount, 73
Montagu, Francis, 4th Viscount, 65
Montagu, Henry Browne, 5th Viscount, 65
Montagu, John, Duke of, 66
Montagu, Lady Mary Wortley, 89
Montagu, Sydney Wortley, 89
Montgomery, Margaret, 57
Mordsley, W. H., 63
More, Thomas, 119
Moreland, Henry, 39
Moreton, John, 84
Morgan, Sir Anthony, 52n
Morgan, Nicholas, 112
Morpeth, Edward Howard, Viscount, 92
Morpeth, Elizabeth, Lady, 92
Morris, Mrs. Eliz., 83
Mosen, Sir Edward, 92
Mountjoy, Lady Katherine Legh, 5, 20, 34, 107, 108, 109, 118, 121,
122, 124, 125n, 126, 144, 186
Mountjoy, Lord (Sir James Blount), 5, 20n, 24n, 34, 107, 108, 109,
122n, 125n, 126, 145, 186, 187
Mulberry Garden, 109
Mulgrave, Edmund Sheffield, 2nd Earl of, 73
Mulgrave, John Sheffield, 3rd Earl of, 73–74
Murray, William, 1st Earl of Mansfield, 149
Museum Street (formerly Bow Street), 29

Nash, J., 48
Nayler, John, 23n, 144n
Nayler, Katherine, 23n, 144n
Neal Street (formerly King Street), 111, 112, 113
Neale, Thomas, 113, 114n
Nelson, Samuel, 95, 96
Nettleton, Robert, 134
New Belton Street, 111
Newburgh, James, Earl of, 72n
Newcastle, Henry Fiennes Clinton, Duke of, 188
Newcastle, John Holles, Duke of, 188
Newcastle, Thomas Pelham-Holles, Duke of, 188
Newcombe, Edmond, 8
New Compton Street, Nos. 14–16, 141
Newlands, 111, 125
Newman, Arthur, 5n, 6n, 10, 15n
Newnham, Geo. L., 172
New Oxford Street, 146
Newtenor Street, 30
Newton, Humfrey, 6n, 10n
Newton, Joan, 9n
Newton, Thomas, 15n
Newton, William, 3n, 6n, 9n, 10, 11n, 38, 43, 44, 45, 46, 47n, 50, 59n,
60, 86
Newton, William, Junior, 59n
Newton Street, 17, 18, 27
New Turnstile, 15
New Yard, Great Queen Street, 46, 47, 48
Norfolk, Henry Howard, 7th Duke of, 55
Norfolk, Thomas Howard, 3rd Duke of, 124n
Norfolk House, St. James’s Square, 55
Normanby, John Sheffield, Marquess of, 73, 74
Normanby, Ursula, Marchioness of, 82
North, Catherine, 70
North, Charles, 5th Baron North and Lord Grey, 70
North, Dudley, 4th Baron, 80
North, Francis, 1st Baron Guilford, 79, 80
North, Frederick, Lord, 2nd Earl of Guilford, 173
North, Roger, 80
North, William, 6th Baron, 70
Northampton, Earl of, 11n
North Crescent, 186
Northumberland, Algernon Percy, 10th Earl of, 67, 71–72
Norton, Thos., 36n
Norwich, George Goring, Earl of, 88
Noseley, in Leicestershire, 111
“Noselings” (See Marshlands.)
Nottingham, Heneage Finch, 1st Earl of, 79
Noverre, Augustin, 71

O’Brien, Murrough, 6th Baron and 1st Earl of Inchiquin, 69

O’Brien, William, Lord, afterwards 2nd Earl of Inchiquin, 69
Offley, Robert, 9n
Olde White Hart. (See White Hart.)
Oldwych Close. (See Aldwych Close.)
Oniate, Conde de. (See Spanish Ambassador.)
Opie, John, 83
Ord, Jas., 83
Orme, —, 138
Orrery, Roger Boyle, 1st Earl of, 79
Owen, Thomas, 5
Oxenden, Lady (afterwards Countess Bellamont), 76

Paddy, Francis, 61n, 82n

Page, Wm., 87n
Pain (Paign), Madame, 92
Pale Close (St. Giles’ Precinct), 122, 125
Pale Pingle, 13, 14, 24n, 25, 29n
Palmer, Jno., 56
Paoli, —, 57
Parker, George, 2nd Earl of Macclesfield, 74, 76
Parker, Geo. Lane, 73n, 74
Parker, John, 42, 43
Parker, Mary, Lady (afterwards Countess of Macclesfield), 74, 76
Parker (Parcar), Philip, 31–32
Parker, William, 32
Parker Street, 16, 27, 29, 31, 32, 33
Parker’s Lane, 30, 31
Parnell, Thos., 87n
Parnther, Robt., 182
Parsons, Mrs. F. M., 67n
Partington, Mrs. Ann, 11
Partington, Elizabeth, 11
Partington, John, 11
Partridge Alley, 6n, 7
Paston, Sir William, 51, 52
Paulet, Elizabeth (afterwards Countess of Essex), 61, 72, 86n, 88
Paulet, Sir William, 88
Pavior’s Alley, 106, 108
Payne, R., 88
Pearson, John, 137
Peers, Robert, 177
Pelham-Holles, Thomas, Duke of Newcastle, 188
Pembroke, William Herbert, 1st Earl of, 119
Pembroke, William, 3rd Earl of, 30n
Pendrell, Richard, 138
Pennell, Margaret (afterwards Reede), 186
Pennington, Sir John, 67, 72n
Pennyston, Prescott, 8
Pennyston, Thomasin, 8
Pepys, Samuel, 12
Perceval, Sir Philip, 69
Percival, Rowland, 122n
Percy, Algernon, 10th Earl of Northumberland, 67, 71–72
Percy, Bishop, 57
“Perdita.” (Mary Robinson), 77–78
“Perepont, Jervas”, 11
Perrin, Henry, 11
Perry, Elizabeth, 89
Perryn, Sir Richard, 172
Persall, Sir William, 68
Pery, John, 109
Perye, William, 125n
Petre, Sir Francis, 68
Petre, Robert Edward, Lord, 75n