The Millionaire Next Door

E-Portfolio Assignment
Alexis Porter
June 11, 2016

1. Explain the following two (2) concepts addressed in The Millionaire Next Door:
Big Hat, No Cattle
This refers to the observation that to look wealthy is not to be wealthy.
Go to Hell Fund
To be able to have enough savings and wealth to live without working for ten plus 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).
Despite his 7 year education, Mr. Ford lives lavishly. He spends a significantly amount of
his income to maintain an upper-middle-class lifestyle. He probably lives above his
means and is guilty of over-consumption, neglecting many of the key factors that
encourage the building of wealth.
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?
She continued to cut coupons from the weekly newspapers.
Why would someone who is a millionaire need to budget?
Same reason why someone who wants to lose weight needs to track their diet and
exercise. Without a plan, its easy to live frivolously.

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.
His financial aspirations revolve around the accumulation of things. He works to buy
things, by which he thinks his success is measured.
What was the small change Teddys parents could have made that would put them in the
millionaire category? (Be specific.)
If the Friends had invested their cigarette money (nearly $100,000) in the stock market,
they might have built a portfolio worth over $2 million.
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 has traded his financial independence for a high-end lifestyle (a large
mortgage, two leased vehicles, tuition bills, club dues, and a vacation home). Because
of his high monthly expenses, Mr. Rodney refused to participate in his company stock
which would have provided him with reduced income tax.
6. Why did Mr. W.W. Allan decline the gift of a Rolls-Royce?
The Rolls-Royce did not fit into Mr. Allans current lifestyle. He feared that he might
have to make changes in order to make the car fit. For instance, Mr. Allan enjoys
fishing and is able to travel out the lake and put the catch of the day in the back of his 4year-old suburban. He couldnt do that in a Rolls-Royce.
7. Regarding Economic Outpatient Care (EOC), answer the following four (4) questions:
Define Economic Outpatient Care (EOC).
The substantial economic gifts or support that some parents give their adult
children/grandchildren.
Upon learning his parents were donating their property to the local private college, describe
Jamess reaction.
Thats my property, too, and the college people cant come in to my yard!
Why was Jamess response predictable?
Because James was used to receiving substantial cash gifts from his parents and now
depended on them to supplement his income, he viewed the news as a threat to his
income and lifestyle.
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. Henry and his wife live frugally
and as a result have accumulated more wealth than his brother, Josh. Josh has the
higher income, but he and his wife are heavy consumers, spending above their means
and depend on their parents EOC as supplemental income.

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?
The couple are unable to build their self-confidence and independence. Beths parents
do not respect her husband. It seems that they are unable to escape the grasp of Beths
parents.
Explain the concept weakening the weak.
As a parent you would not have the instinct to bail out your independent, welldisciplined, successful children, but might feel that you must intervene with your less
resourceful children. This leads to strengthening of the strong and weakening of the
weak.
The more dollars adult children receive, the fewer dollars they accumulate, while those
who are given fewer dollars accumulate more.
What did Kens father tell him often? (Be specific.)
I am not impressed with what people own. But I'm impressed with what they achieve.
I'm proud to be a physician. Always strive to be the best in your field. ... Don't chase
money. If you are the best in your field, money will find you.
Kens father taught him the importance of achievement, not consumption.
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 and his familys lifestyle and appearance did not fit with that of the rest of the
condominium residents.
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 have to admit that I am one who assumed that income equals wealth. All the people I
would see driving nice cars, wearing nice clothes, and living in nice houses, to me, were
wealthy. And I aspired to that. But now, I understand that income does not equal

wealth. Most millionaires dont live like I used to think millionaires lived; lavishly. Most
millionaires are frugal and live an upper-middle class lifestyle.
What are the two (2) concepts you found most useful?
Financial independence is more important than displaying high social status this is
going to have to be a bit of a paradigm shift for me. Ive lived all my life thinking that in
order to be happy and wealthy I have to look wealthy and would become happy as a
result. So wrong!
Live well below your means again, this is going to be a difficult transition. Ive
accumulated a lot of things, which is accompanied by an accumulation of debt. While
going to school full time and working very few hours at half my current pay, I felt the
need to spend much more than I was making. This resulted in thousands in credit card
debt. Now, instead of being able to save or invest my earnings, it all goes to bringing
down the debt. Though, I am learning to live with not much more than the necessities,
and it actually feels really good.
Give a specific example of one small change you can make to improve your financial wellbeing.
For me, the first step will be to get out of debt so that my money can start working for
me. Up until now, I have been living well beyond my means. Fortunately, I have married
a guy who is frugal and is teaching me to be happy living below my means and I no
longer feel as possessed by possessions as I once did. Slowly, but surely, I will change
my paradigm of what it means to be wealthy.