QUESTIONS THE MILLIONAIRE NEXT DOOR

1.

Explain the following four (4) concepts addressed in The Millionaire Next Door:
Big Hat, No Cattle It is the view of most people that are not wealthy that millionaires
own expensive clothes, watches and other status artifacts, that if you look wealthy we
assume you are wealthy. They have the looking wealthy part down but they do not have
a net worth and actually spend more than the typical millionaire.
Go To Hell Fund It is an accumulation of wealth that would enable you to live
without working for ten or more years.
PAW Prodigious accumulator of wealth. PAWs are builders of wealth. They are the
best at building net worth compared to others in their same income category and have at
least four times the amount of wealth than the UAWs.
UAW Under accumulator of wealth. UAWs tend to live above their means and have
high volumes of consumption.

2.

Provide short answers to the following four (4) questions:

How is wasteful defined in the book? A lifestyle marked by lavish spending and
hyper-consumption.
What is the cornerstone of wealth building? 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 stock, from taking his company public, what did his wife
continue doing? She continued to clip coupons and be frugal. She continued to do what
she has always done, be frugal.

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. Teddy believed that being better off
meant having a nice home in an upscale neighborhood, fine clothes for everyone in his
family, class cars, club memberships and items purchased at the best stores. Teddy never
gave much thought to building an investment portfolio and accumulating wealth. It was
all about acquiring things. He has a need to compensate for his background and is the
ultimate consumer and is possessed by possessions.

What was the message Teddys parents sent him about consumer behavior? One earns to
spend. When you need to spend more, you need to earn more.
What was the small change Teddys parents could have made that would put them in
the millionaire category? Invest small amounts of money periodically over time.
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? To him, those types of people would never be able to repay their debts because
they spend, spend, spend in anticipating of having money before they earn it.
Why did he decline the gift of a Rolls-Royce? Because there was nothing the RollsRoyce represented that was important in his life and he did not want to change his life to
own a Rolls-Royce. He would not feel comfortable with a luxury car, it was inefficient
and did not want to alienate his workers. It was not important.

5.

Regarding Economic Outpatient Care (EOC), answer the following four (4) questions:
Define Economic Outpatient Care (EOC). EOC refers to the substantial economic gifts
and acts of kindness some parents give their adult children and grandchildren.
Upon learning his parents were donating their property to the local private college,
describe James reaction? He viewed this as a threat to his future income.
Why was James response predictable? He is a gift receiver and feels that his parents
wealth is his income and his income is meant to be spent.
As illustrated in the example of Henry & Josh, what is the fundamental rule regarding
wealth building? (Be specific). Whatever your income, always live below your means.
Be frugal. Dont be a heavy consumer and invest.

6.

Regarding Affirmative Action, Family Style, answer the following two (2) questions:

Why were sisters Sarah & Alice so different regarding wealth accumulation? Sarah was
determined to be financially and emotionally independent from her parents and to
live her
life her way. She did not want to be controlled by her fathers wealth. She
wanted to be her own person. As a result she became a highly successful business woman.
Alice was
daddys girl and allowed herself to be controlled by his wealth. Her father
subsidized
her lifestyle and Alice did not have to learn to be self-sufficient or save money
because
papa would take care of things. As a result, she never learned how to save or
live
below her means so when the money ran out she had nothing.
What did Kens father tell him often? Teach your children to achieve, not just to
consume. Earning to enhance spending should not be ones ultimate goal.

7.

Explain the root cause for the conflict between Mr. W & the residents of the vacation
condominiums. Mr. W did not look or act like his neighbors and the condominiums were
not his style. He was a very modest man and his family would use the condominium for
short vacations. There were too many restrictive covenants passed regarding how and
what you should do if you were going to live there. He felt out of place even though he
probably had more net worth than anyone else that lived there. He did not fit the mold
and did not want to be controlled by people who wanted to tell you what you could and
could not have or do to live there.

8.

Now that you have finished reading The Millionaire Next Door, answer the following
three (3) questions in a minimum of three (3) paragraphs.
1.
How has your perception of millionaires changed? My perception of millionaires
has changed because I felt that if you owned many things and wore the best clothes and
ate at the best restaurants and had unlimited amounts of money to spend then you
obviously are wealthy. This is actually not the case.
I did not realize that in order to be wealthy you needed to be frugal and to invest money
in your future. You cannot live a lavish lifestyle and spend all your money up front. You
need to save for the future and accumulate wealth. In order to accumulate wealth you
need to not let material things control you. You do not need the newest car or the most
expensive suit. You can live a comfortable life without being poor.
Millionaires become millionaires because they know the value of hard work and
discipline. They know how to sacrifice and be frugal and most importantly, they know
how to make sound investments and to save money.
2.
What are the two (2) concepts you found must useful? Be frugal and invest. Plan
and budget.
3.

of

Give a specific example of one small change you can make to improve your
financial well-being. I could reduce my spending and start saving more. Instead
making two trips a day to Salt Lake for school and baseball, I could probably budget my
time a little better, stay on campus and take advantage of the free resources there, do
my homework in the computer lab, go to baseball and then drive home. This would save
me at least the cost of one extra tank of gas a week which is a savings of $30. Over the
course of a month I could save $120 which I could invest somewhere else.

Reflective Writing:
Learning Outcome #1: Think critically and creatively. This assignment has helped
me to better understand the role of finances in our lives. Reading the book The Millionaire Next
Door really opened my eyes to perceptions and how we seem to judge a book by its cover. It has
allowed me to think a little more critically in terms of accumulating wealth and that wealth is not
at all about how we look or how people perceive us. We need to get creative in being frugal and
still maintaining a quality of life. We need to have financial goals that are realistic and achieved
over time. I am more aware of saving for the future and some things that I can do now to save a
little bit of money and how I can apply these concepts to my personal life.
Learning Outcome #2: Students develop quantitative literacies necessary for their
chosen field of study. This assignment has helped me to identify my strengths and weaknesses
for my chosen career path and how it is important to take advantage of all the financial
opportunities from an employer. I have a better understanding of the benefits that may be
available through my job and how to fully take advantage of those opportunities to save and
invest for my future. The financial information I have learned has given me a better
understanding and knowledge of what the concepts mean and how to go about researching their
benefits. These skills will help me to make a decision on employment and benefits.