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Personal Financial Management, a Financial Planning Approach, 2d ed.

Personal Financial Management, A Financial Planning Approach

2nd Edition, Greene, Mark R. and Dince, Robert R.

To be credible, a business textbook must be current. Unfortunately, Personal Financial Management is a 1987 financial textbook written on the basis of pre-1986 tax laws, obsolete before it ever reached its audience. No one, in good conscience, can recommend a book that is so out-of-date, even with the tax law supplements that are available (but were not made available for this review). Most chapters in this text have some reference to taxation and, in almost every case, the discussion is no longer valid or needs to be modified.

Particularly in need of current data are those chapters discussing topics heavily influenced by taxation: credit and borrowing, savings and inflation, and investment taxation. Each of these chapters properly considers the tax implications for varying circumstances but, with the tax law changes, these implications have changed and, in some cases, are now contrary to the authors' position. For instance, the discussion in chapter 3 of the nominal cost of borrowing is inaccurate now and will be totally invalid in 1989. The discussions in chapter 9 of sales tax and interest expense deductions and capital gains are invalid now.

Also seriously affected by new or amended legislation is the chapter on retirement planning. The tax status and advantages of many retirement programs have been markedly changes and the authors' advice must be amended to reflect this. No successful retirement planning can ignore these changes.

As a classroom text, this book has many aspects to recommend it. It has been arranged and presented in a logical, readable manner, eminently suitable for college students. The four main divisions, financial needs, protection of income and assets, guide to successful investing, and retirement and estate planning, are well organized. The writing style is clear and concise and transitions from topic to topic are smooth. The emphasis throughout the text, but specifically in the first chapter, is on the life cycle and how both goals and strategies change as one moves through the life cycle.

Key words and terminology are highlighted throughout the text making their identification and emphasis easier. An inset in each chapter, "Worth Considering for Financial Planning," highlights problems and concepts presented in the chapter and is an excellent teaching aide. Also included in each chapter are exercises to be run on Lotus[TM] 1-2-3[TM] or SuperCalc[R]3; a copy of the exercise diskette is provided free to adopters upon request and may be copied for student use.

The authors have done an admirable job of presenting risk management -- a topic all too often slighted in personal finance textbooks -- but greater emphasis could be placed on risk control. The discussions of insurance are adequate for a text of this nature and more extensive than many. The inclusion of social security at this point in the text is innovative and appropriate as a social insurance.

The chapters on securities and investment vehicles are excellent. Terminology of the financial market is clearly and concisely explained. Investment risk is broken down into its several components, each of which is described and then put into perspective within the context of investment goals. Financial information sources are satisfactorily covered. The tax issue is partially avoided by making yield comparisons on a pre-tax basis and treating the effects of income taxes in the chapters on Tax Planning and Investments and Some Practical Advice on Investments. The advice is basically sound except for the tax effect issues.

Personal Financial Management would be an excellent text for a personal finance course had the authors made the necessary changes with the passage of the 1986 Tax Act. Because they did not, it cannot be considered an appropriate -- or timely -- text.

Reviewed by Mary S. Wald, Temple University, Department of Risk Management and Insurance
COPYRIGHT 1989 American Risk and Insurance Association, Inc.
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Copyright 1989 Gale, Cengage Learning. All rights reserved.

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Author:Wald, Mary S.
Publication:Journal of Risk and Insurance
Article Type:Book Review
Date:Mar 1, 1989
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