Herbert Beagley

FIN-1050-402
Joseph Howell
10/7/16
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
This is term used when someone looks like they have
a lot of money but in reality they do not. These people
are UAWs. They spend their money on showy items
and don't invest in their future.
Go to Hell Fund
This is when someone has enough money to last them
10 years or more without working. This is based on
their current lifestyle.
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 is a UAW, meaning he does not invest in his

future, rather he spends now for now. He buys items
to show others that he has a lot of income.
Mr. Richards on the other hand does not lead this type
of lifestyle. He lives a frugal life, not buying expensive
cars or clothes.
Regardless of how much money you have coming in,
not living a frugal life will leave you with little to
nothing to show for it.
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 still used coupons, saving money, and living a
frugal life.
Why would someone who is a millionaire need to
budget?
Keeping a budget and sticking with it is the best way
to live a frugal life. This is the key to becoming and
remaining a millionaire, not how much money you
earn.

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.
He lives in a lavish home. He buys lavish clothes. He
does not invest in his future.
What was the small change Teddys parents could
have made that would put them in the millionaire
category? (Be specific.)
They could have stopped smoking and invested the
money instead.
5. Mr. Rodney is a high-income/low-net worth
corporate manager. Explain why he is described as
having sold his financial independence.
He did not take advantage of the opportunity to invest
in a matching stock plan. Taking advantage of this
would decrease his taxable income, in turn, making
his money work for him for retirement. He now is
more vulnerable than he would have been in the long
run.
6. Why did Mr. W.W. Allan decline the gift of a RollsRoyce?
Because it didn't fit his lifestyle. He couldn't see
himself throwing his fishing equipment in the

backseat or showing up to work in that car. He would

either have to own two cars or change his lifestyle.
7. Regarding Economic Outpatient Care (EOC), answer
the following four (4) questions:
Explain why Economic Outpatient Care (EOC) can be
harmful.
It leaves the person receiving it vulnerable to
pressures that are outside of their control. Also, if a
person is being supported by their parents, they
typically don't use these resources to invest or save.
These funds are typically earmarked for something
before they even get them.
Explain this statement: The more dollars adult
children receive, the fewer they accumulate.
The adult children who receive funds from their
parents don't often invest the money wisely. Most of
the time the money is spent on non-accumulating
items.
What is the likely financial outcome for Mary &
Lamar once her Mother passes away?
Given that they don't make nearly enough annually to
afford their lifestyle, they will need to change their
spending habits and will no doubt encounter
hardships once whatever inheritance they receive is
gone. If they continue their current lifestyle they will
likely burn through even a sizeable one quickly.

 As illustrated in the example of Henry & Josh, what is

the fundamental rule regarding wealth building? (Be
specific.)
No matter what your income, always live below it. By
living frugal now, you can increase your chances of
ensuring your financial independence in the future.
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 and her husband are very dependent on her
parents at every step of the way. It started off by
living with them while her husband completed school.
Then he started working for her father. Where Beths
parents go financially, so go Beth and her husband.
Explain the concept weakening the weak.
This refers to the situation many affluent parents
encounter. Most of them have two or more children.
When it comes time to re-distribute their wealth to
their children, the children who have been more
financially dependent receive more of the wealth.
Thus making them even weaker than they were
before.

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

He told him, Im not impressed with what people
own, but Im impressed with what they achieve.
Always try to be the best in your field. Dont chase
money. If youre 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 real issue is that Mr. W is a PAW, while it is likely
the other residents are not. Although he has money,
he is not as pretentious as the other tenants. This rift
is the root cause of the issue.
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, along with the majority of people, assumed that
wealth was tied to primarily income. Thus, to become
a millionaire, the majority of my future efforts should
be used to find more opportunities for income. I now
know that the key contributor is not income, rather
frugality and investment. I am newly engaged and
above saving for a wedding, we will be looking to
invest in our first house. The information in this book
and class has helped me see the importance of
budgeting and investing wisely.

 What are the two (2) concepts you found most

useful?
1.

2.

Investing. I have been absolutely nervous about

investing outside of my own 403b. I now know
that this is not something to be feared, rather it is
something to be investigated and taken
advantage of.
Taxable income. Ive always tried to resist having
much in the way of assets because of how
complicated taxes are. This is obviously not the
right attitude to have and I will be changing that
as soon as possible.

Give a specific example of one small change you can

make to improve your financial well-being.
I am planning on being more involved in my 403b
plan at work. I now know that I have a say in where
my investments go and am planning on being much
more involved in it.

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)

Think critically and creatively: I now know that

there is no reason to avoid wealth management
moving forward. I wanted to take this class to improve
my situation moving forward. Through critical, out of
the box thinking, and the knowledge accrued in this
book, myself and my fianc will no doubt be able to
plan better for our financial future. We plan on saving
for our wedding and a house in the very near future.
We will do this by setting a budget and sticking to it.
Learning Outcome #2 (Paragraph #2)
Communicate effectively: As stated above, my
fianc and I will need to communicate well when it
comes to our budget moving forward. She and I have
already begun doing so. We have come up with a list
of our assets, income, and financial responsibilities.
Now we need to add resolve and a well-planned
budget to this. I have enjoyed this assignment and
have taken so much from it that will help me and my
family in the future.