Questions The Millionaire Next Door

1. Explain the following four (4) concepts addressed in The Millionaire Next
Door:
Big Hat, No Cattle Big Hat, No Cattle is a concept that refers to
someone who attempts to make everyone around them
believes that they are successful and wealthy thus the big
hat. In reality they are the people who may be in debt and
really dont have the funds to afford expensive things and
have a low net worth, which relates to the no cattle part of
the saying.
Go to Hell Fund The Go to Hell Fund refers to having enough money
saved to live comfortably the next 10 years or more
without working.
PAW

Prodigious Accumulator of Wealth: The people who are best at

building their net worth and live below their means are considered
PAWs. They are also low consumers.

UAW
Under Accumulator of Wealth: People who live above their means
and are high consumers. They also spend what they earn and dont
accumulate wealth and usually have a low net worth.
2. Provide short answers to the following four (4) questions:
How is wasteful defined in the book?

Wasteful is defined as a lifestyle marked by lavish spending and hyper

consumption, as in the opposite of being frugal.

What is the cornerstone of wealth-building?

The cornerstone of wealth-building is being frugal.

Most people will never become wealthy in one generation if they are
married to people who are wasteful.
Upon giving his wife $8 million of stock, from taking his company public,
what did his wife continue doing?

She thanked him and continued cutting out coupons from the weeks
supply of newspaper.

3. In the example of Theodore Teddy J. Friend and his parents, answer the
following two (2) questions:
List two reasons why Teddy is considered a UAW.
1. Teddy felt that he needed to be better off than his parents were which
to him was defined as having a nice home with fine clothes and classy
cars. He never thought of accumulating wealth and became the
ultimate consumer. He also believed that if he was wealthy he would
not be a top income generator.
2. He took the big hat, no cattle route with his finances and his desire of
overcoming a feeling of social inferiority and fear of debt became his
motivation. This lead to him using things to prove he was successful
instead of building an investment portfolio.
What was the message Teddys parents sent him about consumer behavior?
(Be specific)

Teddys parents left him with the message of earning their money to
spend it, not to invest it. Their financial plan was spending money
when they had it and stopping when there was no more.

What was the small change Teddys parents could have made that would
put them in the millionaire category?

If they had invested their cigarette money ($33,190) into the stock
market buying shares from Phillip Morris products and never sold
shares, they would have had a tobacco portfolio worth over $2 million.

4. In the example of Mr. W.W. Allan, answer the following two (2) questions:
He never extended credit to people who exhibited the Big Hat, No Cattle
philosophy. Why?

The reason he never extended credit to people who exhibited the Big
Hat, No Cattle philosophy was because he believed that they would
never be able to repay their debts. According to Mr. Allen they spend,
spend, and spend, in anticipation of having money before the even
earn it.

Why did he decline the gift of a Rolls-Royce?

The Rolls-Royce did not represent what was important in his life and he
didnt want to change his life to accommodate having a Rolls-Royce.

5. Regarding Economic Outpatient Care (EOC), answer the following four (4)
questions:
Define Economic Outpatient Care (EOC).

Economic outpatient care refers to adult children and grandchildren

who receive economic gifts from their parents or grandparents.

Like the example of James, many EOC receivers (inaccurately) view

themselves as financially well-off.
As illustrated in the example of Henry & Josh, what is the fundamental rule
regarding wealth building? (Be specific.)

The fundamental rule regarding wealth building is to live below your

means no matter what your income is.

Why did Laura succeed?

She set her mind to do something when she had no alternative except
to succeed and had a high level of integrity.

6. Regarding Affirmative Action, Family Style, answer the following two (2)
questions:
Why were sisters Sarah & Alice so different regarding wealth accumulation?

Sister Sarah was determined to become independent and liver her life
according to her own rules instead of her Papas rules. Because of
this, Sarah had to learn to fish for herself while Alice on the other
hand, played into the housewife role her father had planned out for her
and she and her husband depended heavily on her fathers economic
gifts.

What did Kens father tell him often?

I am not impressed with what people own. But Im impressed with

what they achieve. Im proud to be a physician. Always strive to be the
best in your field. Dont chase money. If you are the best in your
field, money will find you.

7. Now that you have finished reading The Millionaire Next Door, answer the
following three (3) questions in a minimum of three (3) paragraphs.

 How has your perception of millionaires changed?

What are the two (2) concepts you found most useful?
How will you apply them into your life?

My perception of millionaires has definitely changed

substantially. Millionaires are almost always portrayed as people who
own luxurious items such as homes, cars, expensive clothing, and the
latest technology but in reality that is not so. Those who are in
possession of a substantial amount of money and live luxurious lives
usually end up heavily indebted and in sticky situations. The real
millionaires who successfully distribute and execute their wealth are
those who are frugal, frugal, and frugal. I personally would have never
guessed that most millionaires are modest and frugal people. This book
truly opened my eyes as to how successful millionaires conduct
themselves and how important their modest and reserved ways are for
their success.
The first important concept that I found useful from this book
was the one I previously mentioned about being frugal. It amazes me
how we as a society, are indoctrinated to believe that money is meant
to be spent on lavish things and that success is associated to luxurious
possessions and expensive cars. This was a true eye opener and game
changer. The second concept that I found useful was about how
important it is to live below your means and to be a low consumer. This
concept is similar to the first but helps you become more goal oriented
in the sense that it helps you focus on your wealth instead of your
possessions. These two concepts will help mold my husband and I into
reaching our goals for our future and will help take us to the next level
from which our parents came from.
My husband and I are newlyweds and are in a very fortunate spot
where we have very substantial jobs with little to no debts or bills. We
dream of creating a foundation from which our future children can grow
and continue whatever it is we start. We recognize that our parents
came from very little and have supplied us the best they could and we
feel that it is up to us to take our families to the next level of success.
After reading this book, I did realize that our dream to creating a
foundation is a bit skewed because of the influence around us and the
need to prove ourselves to the people around us. The two concepts I
mentioned above will help us redirect our goals and help us reach a

place where we will be able to live comfortably and modestly with little
to worry on lavish things. This will also allow us to help our families live
comfortably and will allow us to be of help if any situation arises.

Reflective Writing
Compose 2-3 paragraphs explaining how completing this assignment helped you
achieve at least two (2) of the SLCC Learning Outcomes.

This assignment helped me achieve the knowledge and skills to be

civically engaged. I now have a much better understanding of the world of
finance. With this knowledge I am able to continue my studies in the Finance
Degree. This degree will eventually lead me to achieve my goal in helping
people in heavy financial situations in my community. I now feel more
confident in my pursuit of my financial degree and am eager to achieve
greater things with the knowledge I have acquired in this course. This class
has opened my eyes to a wide range of possibilities and opportunities that
are available in the finance world and has also allowed me to better
understand the different concepts and the different risks one can make in the
finance world.
This course has also helped me develop the knowledge and skills to
work with others. I have learned plenty in the areas of how to conduct myself
in certain business situations. This class has also helped me understand the
different mentalities and personalitys people may have when it comes to
wealth and finances. I am now more aware of how your way of thinking fully
impacts your professional work and business in different ways. I can now
confidently make decisions based off my financial position in different
aspects of my life. I also have a different mentality when it comes to growth
and wealth thanks to this assignment.