Questions - The Millionaire Next Door

After reading The Millionaire Next Door, answer the following ten
(10) questions and compose your Reflective Writing.

1. Explain the following two (2) concepts addressed in The

Millionaire Next Door:

Big Hat, No Cattle

o Big Hat, No Cattle is a way of saying that looks can be
deceiving. Many people have an ideal image of what a millionaire
is expected to look like. Although many think that millionaires
should appear in extravagant ways, this is often not the case.
Big Hat, No Cattle refers to those that try to appear wealthy,
but arent in reality.

Go to Hell Fund
o A go-to-hell fund is wealth saved up that could provide a
comfortable living, without working, for at least 10 years.

2. In the examples of Mr. Richards (PAW) & Mr. Ford (UAW), both
men are close in age & yearly income. Explain why Mr. Richards has
nearly five times the net worth of Mr. Ford. (Be specific).

Mr. Ford, a lawyer with a yearly income of $92,330 is expected to have

a net worth of $470,883 at his age. Mr. Richards on the other hand, is a
mobile home dealership proprietor who has a yearly income of $90,200
and is expected to have a net worth of $451,000. Although Mr. Fords
career and income suggest that he should be wealthier than Mr. Ford,
this is not the case. While Mr. Richards saved his income and
maintained the lifestyle of his blue-collar family, Mr. Ford continually
spent his money to maintain and display the lifestyle of his uppermiddle-class family.

3. Provide short answers to the following three (3) questions:

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?
The wife thanked her husband and continued to search for and collect
discount coupons for as little as $0.25 and $0.50 off of her groceries.
Despite the huge sum of money received from stock, she continued to
live a frugal life- just like in the past when all the couple owned was a
kitchen table.
Why would someone who is a millionaire need to budget?
By budgeting and controlling expenses one can become a millionaire
and by continuing to budget and control expenses, one can remain a
millionaire.

4. In the example of Theodore Teddy J. Friend and his parents,

answer the following two (2) questions:

The book describes Teddy as being possessed by

possessions. Explain this comment.
Saying that Teddy was possessed by possessions suggests that
possessions control all of Teddys wants, needs, goals, and financial
decisions. He had the mindset that his belongings showed his
economic status and that was what was the most important to him.

What was the small change Teddys parents could have

made that would put them in the millionaire category? (Be
specific.)
Mr. Friends parents would spend their money when they had it, and
wouldnt spend money when they didnt have it. A small change that
would have benefited his parents would have been budgeting to invest
some of their money. For example, the Friends made many small
purchases like cigarettes which cost them about $33,190 through the
course of 40 years. If the friends would have invested that money
instead of spending it on cigarettes, they could have made anywhere
from $100,000 to $2,000,000.

5. Mr. Rodney is a high-income/low-net worth corporate manager.

Explain why he is described as having sold his financial
independence.
First of all, Mr. Rodney did not take advantage of his companys tax
advantage benefit. Second, instead of being wise and saving/investing his

money, Mr. Rodney was on a perpetual earn-and-consume treadmill- in

other words, he had a bad habit of spending all of the money from his
paychecks. Because he developed a bad habit and kept it for many years, he
suffered later when he could have prospered.

6. Why did Mr. W.W. Allan decline the gift of a Rolls-Royce?

He had the opinion that status products and high consumption lifestyles
can act as a burden to financial independence. When one owns one status
product, they often fall into a vicious cycle that includes spending more to
complete the socially expected picture, which eventually leads to an entire
lifestyle change. He wanted to keep his lifestyle and knew that a fancy gift
could threaten that.
7. Regarding Economic Outpatient Care (EOC), answer the following
four (4) questions:

Explain why Economic Outpatient Care (EOC) can be harmful.

Explain this statement: The more dollars adult children

receive, the fewer they accumulate.
Many recipients of Economic Outpatient Care (EOC), and people in
general, seem to have an easier time spending money that they didnt
have to work hard for. The more money that adult children are given
from their parents, the less motivated they are to work to earn their
own income.

What is the likely financial outcome for Mary & Lamar once her
Mother passes away?
Although her mother may have some inheritance left for Mary and
Lamar, it will probably not take very long for them to carelessly spend
the money. Going from constant EOC, to nothing, will likely result in a
harsh financial reality for the couple. They will no longer receive their
usual income so they will not be able to support their extravagant
living and will likely fall into bankruptcy and/or debt.

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 Whatever your
income, always live below your means. This statement suggests that
one should always spend less than they make. This strategy allows one
to have extra money to save and invest.

8. Regarding Affirmative Action, Family Style, answer the following

three (3) questions:

In the example of sisters Ann & Beth, describe the

consequences to Beth & her husband from receiving EOC?
By receiving EOC from Beths parents, the parents see Beth and her
husband as economically handicapped. The parents think that Beth
and her husband would be basically lost in life without their help. After
a few years of EOC, Beth and her husband lost their drive, economic
self-confidence, and independence. They never had the opportunity to
see if they could have been successful on their own.

Explain the concept weakening the weak.

If a child is independent, motivated, well disciplined, etc., their parents
likely continue to let the child make their own decisions and support
them. However, when a child has difficulties in certain areas, some
parents will weaken the weak by making their decisions for them. In
this case, the child doesnt learn anything and the parent makes them
even more dependent. As the child grows up they will likely lack
motivation, but will have a high tendency to spend.

What did Kens father tell him often? (Be specific.)

Kens father often told him: 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. These thoughts show
the importance of achievements over money/symbols of success. The
ultimate goal should never be to earn in order to spend more money.

9. Explain the root cause for the conflict between Mr. W & the
residents of the vacation condominiums. (HINT: Its not because of
his dog.)
Mr. W, a PAW with middle class consuming habits and average looks, was
bullied by the UAW residents of the vacation condominiums, being told that
his dog shouldnt be allowed at the condos. Although the residents made
such a big deal about Mr. Ws dog, they were simply using the dog issue as
leverage. They really just didnt think that Mr. Ws family fit in with the
expectation of beautiful, rich, condo owners. The UAW residents assumed

that because Mr. W wasnt displaying a high-consumption lifestyle like them,

that he and his family were inferior.

10. 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?

I hate to admit that my initial perception of millionaires was very
stereotypical and nave. Like many, I had always assumed that
millionaires were the people who drove fancy cars, lived in extravagant
homes, wore expensive clothing, etc. Like the title of this book reads:
The Millionaire Next Door, I have come to realize that millionaires
often are the typical guy/girl next door. They work hard for their money
and know that in order to be financially successful, they have to save
and invest. I now know that I shouldnt ever make assumptions about
people simply by the way that they spend or dont spend their money.

What are the two (2) concepts you found most useful?
o One of the concepts that I found to be very useful was whatever
your income, always live below your means.. I think that people
are often tempted to buy expensive luxury items when they think
that they have the money to spend. The concept of living below
your means is very effective for accumulating money by saving
and investing. Although it may be hard at times to live below
your means when you have a high income, it will pay off in the
long run.
o Another concept that I found to be useful was the harm that
comes with being possessed by possessions. When someone is
possessed by possessions, their possessions control all of their
wants, needs, goals, motivations, and financial decisions. When
someone thinks that their belongings are the most important
part of their life, their addiction to spending overcomes their
entire life. People should avoid this mindset and realize that
there are wiser ways to manage money and that there are more
important things in life than owning expensive things.

Give a specific example of one small change you can make to

improve your financial wellbeing.

One small change I can make in my own life to improve my financial

wellbeing is creating and living by a budget. We learned in the book
that budgeting and controlling expenses are important factors that
contribute to the making of a millionaire. By doing these things and
continuing to do these things, one can remain financially successful.

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

Learning Outcome #1 (Paragraph #1)

o This assignment helped me achieve SLCCs Learning Outcome:
Communicating effectively. There are many ways in which being
financially wise involves effective communication. For example, I
learned that as couples/families live together, they have to
communicate with each other about how they want to spend,
save, and invest their money. If families dont communicate with
each other about their financial situations, it can result in harmful
financial decisions and damaged relationships.

Learning Outcome #2 (Paragraph #2)

o This assignment also helped me achieve SLCCs Learning
Outcome: Thinking Critically. Many people assume that becoming
a millionaire is as simple as having a high income job/career.
Reading The Millionaire Next Door taught me that being
financially successful isnt that simple. One has to critically think
about many financial strategies that will help them to reach their
financial goals.