Answers to Twelve Questions About The Millionaire Next Door

1. The concept of Big Hat, No Cattle illustrates how people can appear to have a lot of wealth
(Big Hat) but not actually have anything to support that appearance (No Cattle). In The
Millionaire Next Door the authors emphasize from the beginning that the people who are
actually wealthy do not appear to be so from the outside. They show how it is more likely than
many Americans assume for a millionaire to be living in their neighborhood or even next door.
Without big hats, fancy cars, or other extravagant luxuries these people are able to accumulate a
lot of wealth (net worth).

2. Mr. Richards has fives times more net worth as Mr. Ford does because he does not spend as
much money with his lifestyle. Mr. Richards owns a mobile home park while Mr. Ford is an
attorney. Mr Ford is expected to spend more and appear more affluent, so he does.

3. It is much easier to recognize an UAW (Under Accumluater of Wealth) than a PAW

(Productive Accumulater of Wealth). UAWs purchase a lot of luxury things and appear affluent.
They often boast about all the things they have, where they live, etc. But when you talk to them
about the future of their finances they either flaunt more or become uneasy. PAWs more difficult
to recognize because they do not wear their money on their sleeve or their car or their house.
They live below their income level. They budget and invest. They are financially secure. When
you talk to them about the future of their finance they are secure and have a plan. From this,
people can learn that it is better to actually have money than to just look like it.

4.1. (Fill in the blank.) Most people will never become wealthy in one generation if they are
married to people who are consumer-minded.

4.2. Upon giving his wife $8 million of stock, from taking his company public, what did his wife
continue doing? She sincerely thanked him and then kept couponning for their groceries.

4.3. Why would someone who is a millionaire need to budget? The principles which govern
money and wealth do not change with the amount of money earned. The book highlights that
many millionaires gained that net worth by budgeting and that they keep it the same way.

5. Teddy believes that to live better as an adult than he did with his parents he has to show it by
the high price and quantity of things he buys. He is possessed by possessions to a great extent.
If his parents had not saved and splurged their money to look good Teddy could have learned to
be hardworking and frugal.

6. Mr. Rodney sold his financial independence by not investing his money; even when his
employer has good options for him. Rather, he is spending his income on luxury debts, dues, and
taxes.

7. If my goal where to be financially independent my plan would be:

Never spend more than I earn
Always be frugal and wise in my expenditures
Always budget (weekly, monthly, yearly, and lifetime) and keep track of what I spend
Study thoroughly and invest
Find a good financial adviser
Be Patient
Acknowledge the consumerism around me but
Remember I value the freedom of independence

8. If Mr. Allen had accepted the Rolls-Royce he would have had to give up fishing, spend a lot
money to maintain and match the lifestyle of a high-end vehicle, and worry that his employees
would feel he thought he was better than them or taking advantage or them. So, he turned it
down.

9.1. When Mary's mother dies, because she has been subsidizing Mary and her husband Lamar,
Mary's family will not be able to support their extravagant and high consumption lifestyle.

9.2. The result of Ms. BPF's parents subsidizing her business and her life backfired. Rather than
them letting her face the challenge to succeed and become independent they now constantly
support her and her business ($60,000 yearly in addition to room and board).

9.3. Laura's story is very inspiring; to be faced with the unexpected necessity of providing for her
children and conquering it. The main component to her success was she worked hard, very hard,
and built on the talents/experience she already had.

10.1. Because Beth and her husband receive EOC (Economic Outpatient Care or continued
financial support from parents) from her parents, they maintain a high consumption level, are not
financially independent, do not know if they ever can or could have been able to support
themselves, are a type of servant to Beth parents, and are likely to teach their children to carry on
their lifestyle.

10.2. The second of the Rules of Affluent Parents & Productive Children is the most all
encompassing. It is: No matter how wealthy you are, teach your children discipline and frugality.
This rule reveals a truth that principles are more powerful than money. When children catch a
vision of themselves grown up and independentin finances and all other things toothey want
to achieve and realize that vision. Also, this rule helps parents remember what is most important
no matter how ______ you are, teach your children... This could be taken a lot of different
ways. For the purpose of parents helping their children be able to build their own net worth these
phrases indicate that the important thing is teaching, not spending. Additionally, when parent are
not obsessed with how much money they do or do not have they can quietly and powerfully
teach their children the value of other things.

11. The residence of the vacation condominiums felt conflict with Mr. W because he did not fit
in with their high-end lifestyle. He was wealthy, but did not show it in his possessions. They felt
he and his family were inferior to them.

12. I was surprised there were so few basic principles (seven) that govern becoming
financially independent. The Millionaire Next Door focused a lot on millionaires; a concept
which is hard for me to envision. But I can envision financial independence and it is something I
have wanted to learn how to achieve since I understood that not everyone has that freedom. For
each of the millionaires, the one with a high net worth, it was noted that they did not worry to
much about their financial future or how they were going to support themselves during
retirement. I had never thought of it before but real millionaires are actually financially
independent.
Repeatedly as I read frugality was brought up often. This is a principle I have been
exposed to throughout my life and have tried to follow. Even though I have already been living it
to a great extent I found it very useful to be reassured I have been headed down the right path. I
also learned that being frugal has a real connection to quality as well. For example: It is more
frugal to shop at J.C.Penny's a couple times a year than to monthly run to the thrift store to find
something half decant. I am excited that I can become more frugal.
Satisfied with my new understanding of being frugal I noticed that the millionaires
invested the money they did not need to live on. They studied and made deliberate decisions in
their investments. I still know basically nothing about stock, bonds, and investments, but I want
to. It will take time for me to learn and make any decisions in that realm and that is what I need.
The Millionaire Next Door spelled out that it takes time to build wealth and I can patiently work
for that.

Reflective Writing
I learned how to think more critically and creatively by reading The Millionaire Next
Door. It takes critical thinking to understand the difference between appearing to be wealthy and
actually being wealthy. Critical thinking also helps me care about and plan for the future rather
than just following the trends of consumerism. It was great to be able to see all the contrasting
sides of the different people studied and what the present and impending results of their choices
and values are.
Money has a great effect on people and influences every day of our lives. This
assignment has helped me feel more able to communicate better about money and wealth.
Reading about how other people use money and interact with each other in regards to it was very
good. I was able to see more ways I can follow principles and be effective in communicating
about money and using it. Rather than not know what to say or do I now have a clearer set of
values and a plan.