Aime Nguyen 1 The Millionaire Next Door

1. Explain the following four concepts addressed in The Millionaire Next Door: Big Hat, No Cattle A person who uses their money to show it off. Therefore, they have high-end cars and suits, but a low net worth. Go to Hell Fund The amount accumulated by a Prodigious Accumulator of Wealth that would allow them to live comfortably for a dozen years, not working yet maintaining their current lifestyle P.A.W. A Prodigious Accumulator of Wealth is someone who builds wealth by building his or her net worth, while living frugally. An Under Accumulator of Wealth is a person who may make a good yearly income, but is unwise with spending by using the money to live a high lifestyle

U.A.W.

2. In the example of Theodore Teddy J. Friend: Provide three (3) reasons why Teddy is considered a UAW. His net worth is only th of what would be expected for his income He does not invest to secure a stable future He associates being successful with having luxury material items, such as vacation homes, designer clothing, fancy cars, etc. What was the message Teddys parents sent him about consumer behavior? They essentially taught him that spending should be fun, and its important to make a lot of money so you can have this fun, not because its important to invest; that if you are spending for necessity, you are not successful. 3. In the example of Mr. W.W. Allan, a self-made multimillionaire: He never extended credit to people who exhibited the Big Hat, No Cattle philosophy. Why? He believes these people are ahead of themselves. They are spending more money, anticipating that they will always earn it. These people

cannot easily pay off their debts while maintaining the high-end lifestyle that is important to them. Why did he decline the gift of a Rolls-Royce? He declined the gift because he did not believe it represented anything important to him, nor important enough to change his lifestyle. 4. Regarding Economic Outpatient Care (EOC) Define Economic Outpatient Care (EOC): EOC refers to the immense economic gifts or cash gifts received from parents/grandparents or other relieves. Like the example of James, many EOC receivers (inaccurately) view themselves as __________ Self-made As illustrated in the example of Henry & Josh, what is the fundamental rule regarding wealth building? Be specific. Living below your means; being frugal. Why did Laura succeed? After the divorce, she was left to financially support herself and her children. She had to learn economic skills, and with that and hard work, she was able to make smart decisions in order for her family to survive without her husband. 5. Now that you have finished reading, give your thoughts: What are the two (2) concepts you found most useful? How will you apply them into your life? In your own words, give your thoughts in a minimum of three (3) paragraphs. The concept I found most useful was the benefits of living below your means. Before, whenever I got extra money through a bonus at work or tax returns, I would think Now I have this extra money to spend! which then Id proceed to take that money and go myself something pretty. Something far from a necessity, of course, because I viewed this as a reward. After reading this, its made me think a lot about how to make that money the most useful. And though sitting in a savings account doesnt seem useful to my young, shopaholic mind, putting that money away and only spending money on what I need, or, if I am treating myself, to be frugal and economically smart as I can be. A concept that more so opened my eyes, was the subject of EOCs. I always thought itd be nice to be able to leave money for my children or grandchildren when I grow old and die, but now that this book has made me think about it, I see the real dangers in leading them into a EOC lifestyle. I see that those who dont work as hard for their money, as in the occasion of receiving it as a gift, lose motivation, and feel like things in life can be served to them on a silver platter, and

Aime Nguyen 3 The Millionaire Next Door

speaking of silver platters, these people often tie up their money in showy riches, and end up being under accumulators of wealth. I will keep these lessons in mind as I go throughout my financial future. Not only will I use what I have learned to better my financial life, I will pass on these lessons onto my children, leading by example how successful you can be if you are smart about it. Money should not be a display, it should be an investment. I know that first class makes me feel fancy, but theres no special reason as to why I cant fly coach, and theres definitely no reason as to needing to feel fancy. Now I know Id rather have a simple hat and lots of cattle! Compose 2-3 paragraphs explaining how reading The Millionaire Next Door helped you achieve at least 2 of the following SLCC Learning Outcomes: a. Acquire Substantive Knowledge c. Think Critically b. Communicate Effectively d. Become Civically Engaged The Millionaire Next Door has helped me acquire substantive knowledge and to think critically The Millionaire Next Door might possibly be the most helpful book Ive read. Not only did it teach me what to do in the future, its helped me make the changes I need now, with both habits and mindsets. Ive known that I havent been the best with my money, but Ive always figured that Im young, so it doesnt matter right now, convincing myself that Ill know how to be responsible when the time comes. After not only reading this, but learning everything that I did in this personal finance class, I realized that I didnt have a clue what I was in for, and if it wasnt for this class, not only would I be stuck in a deep pit, I wouldnt have the knowledge on how to get out. Now, I understand what it means to be truly financially stable and independent. This helps me a lot, as I am going into a career that doesnt make a lot of money (teaching). Ive been really stressed over the income Ill be making, worrying over how Im supposed to raise a family and live a stable lifestyle if I end up marrying someone who would make such an unfortunate income as well. After this semester, Ive found a new confidence in my financial abilities, and I feel a bit more comfortable with how Im going to survive in the future. I know that spending requires thinking. Just because I have $200 in my pocket at Walmart, doesnt mean I should spend that $200 for the next weeks groceries. Just because I have the money to buy Advil, I should still buy generic brand Ibuprofen.