Pamela Kevern

Fin 1050
Prof Howell
5/19/16
The Millionaire Next Door
1. Explain the following two (2) concepts addressed in The Millionaire Next Door:
Big Hat, No Cattle This concept refers to someone who likes to show that they are rich
by doing and owning prestigious things but they really do not have the money to back it.
Go to Hell Fund This concept refers to those that have enough wealth to live without
working for ten or more 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. Richards owns a mobile home dealership. He maintains a low profile. Mr. Ford is a
lawyer and maintains a high profile lifestyle by owning many different expensive suits,
driving luxury cars, joining country clubs, etc.
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? Clipping coupons and being frugal.
Why would someone who is a millionaire need to budget? In order to maintain their wealth
and have that wealth last throughout their lives, they need to budget and not overspend.

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.
Teddy is obsessed with accumulating possessions. As long as he can afford the monthly
payment he wants to have things.
What was the small change Teddys parents could have made that would put them in the
millionaire category? (Be specific.)
Had Teddys parents used their cigarette money to invest, they would have been put in the
millionaire category but they did not think that small change could make a difference.
5. Mr. Rodney is a high-income/low-net worth corporate manager. Explain why he is described
as having sold his financial independence.
Mr. Rodney spends all of his income on his mortgage, vehicles, club dues, and taxes
instead of contributing to his corporations tax-advantaged stock purchase plan.
6. Why did Mr. W.W. Allan decline the gift of a Rolls-Royce?
The Rolls-Royce did not represent his values and lifestyle.
7. 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 Jamess reaction. James viewed his parents gift as if they were giving away his
property.
Why was Jamess response predictable? His response was predictable because he had
received gifts from his parents throughout his adult life and viewed the gift as a threat to
his future income.
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. Henry makes less than Josh yet
he lives within his means and saves consistently. Josh overspends on his house and cars
and all sorts of luxury items. He does not save.
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? Beth & her husband did not develop much self-confidence. They are
not respected by Beths parents.
Explain the concept weakening the weak. By constantly making decisions for your child
and rescuing them from any financial pitfalls, you weaken them indirectly.
What did Kens father tell him often? (Be specific.) Kens father told him that, I am not
impressed with what people own. But Im impressed with what they achieve. He went on
to say, Dont chase money. If you are the best in your field, money will find you.
9. Explain the root cause for the conflict between Mr. W & the residents of the vacation
condominiums. (HINT: Its not because of his dog.)
The condominium owners did not like his lifestyle and felt that he was not beautiful
enough to own a unit in the complex.
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? Millionaires are not the people that look
like millionaires. Anyone can become a millionaire through steady and consistent saving
and investing.
What are the two (2) concepts you found most useful? The most useful concept that I
learned was that small investments can dramatically add up over a long period of time.
The second concept that I found useful is that in order to build wealth, you should start
early. Unfortunately, I am already in my late thirties and so I have some ground to make
up on the saving and investing.
Give a specific example of one small change you can make to improve your financial
wellbeing. After going through a major financial set back a few years ago, my husband and
I have been rebuilding. We have been really good about saving and paying off debt but we
need to be better about investing. Luckily we are playing wonderful offense. The one
specific change that we intend to make is to contribute the maximum amount that we is
tax deductible that we can to a retirement plan beginning this year and every year after.