Questions- The Millionaire Next Door

1. Regarding the concept of Big Hat, No Cattle:

The concept of Big Hat, No Cattle refers to the perceived image of millionaires. Most
people associate millionaires with fancy cars, food, clothes and houses, however that is
not the reality. In fact, most millionaires became millionaires, by not living like
millionaires. While others try to present the image of the affluent without the actual
wealth to back up that image. In other words, Big Hat, No Cattle means people may walk,
talk, and look like “millionaires,” but do not have the wealth to back it up.
2. In the examples of Mr. Richards (PAW) & Mr. Ford (UAW), both men are close in age
and yearly income. Explain why Mr. Richards has nearly five times the net worth of Mr.
Ford.
While Mr. Ford and Mr. Richards are of similar age and income, they have completely
different lifestyles. Mr. Ford is an attorney who lives a high price lifestyle that includes an
expensive home, designer suits, and luxury automobiles. Mr. Ford is an Under Achiever of
Wealth (UAW) meaning he lives a high consumption lifestyle and spends as much as he
makes. Mr. Richards on the other hand lives the modest lifestyle of a blue-collar worker
and does not spend his money on status objects. Since Mr. Richards lives well below his
means, he can afford to save and invest his money, which increases his net worth. Mr.
Richards is therefore considered a prodigious accumulator of wealth or (PAW).
3. UAW’s live beyond their means. PAW’s are builders of wealth. Describe someone you
know who is either a UAW or PAW (or is headed in that direction) and what can be
learned from their example.

I believe that a fitting example of a PAW or prodigious accumulator of wealth, is my

husbands employer. Von is an independent small businessman who over time has
increased his personal financial freedom through investment. While a multimillionaire,
Von lives in a small house in Murray, wears jeans and t-shirts, and still goes to work every
day. Von sets an excellent example of how to grow and maximize your wealth by living
below your means and diversifying your investments.

4. Provide short answers to the following four 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?
 Answer: His wife’s demeanor did not change in any way and she continued to clip
coupons at the kitchen table.

 Why would someone who is a millionaire need to budget?

Answer: Someone who is a millionaire, became a millionaire, by budgeting and

controlling expenses, they maintain their wealth the same way.

 Explain the comparison between a fit runner and someone who is financially fit.

Answer: A fit runner is disciplined and committed to staying in shape to achieve

their goal of running. Someone who is financially fit is equally disciplined and
committed to their goal of obtaining wealth.

5. In the example of Theodore “Teddy” J. Friend and his parents, answer the following two
questions:

 The book describes Teddy as being “possessed by possessions.” Explain this

comment.
Due to Teddy’s feelings of inferiority based on his low socioeconomic status as a
child, he is compelled to accumulate possessions. Teddy furiously spends his
money in the pursuit of imagine and status to convince others of his success.

 What was the “small change” Teddy’s parents could have made that would put
them in the millionaire category?

Teddy’s parents smoke three packs of cigarettes a day. If, instead of spending that
money, they invested it into the Phillip Morris company they would now have a 2-
million-dollar tobacco portfolio.

6. Mr. Rodney is a high-income/low-net worth corporate manager. Explain why he is

described as having “sold his financial independence.”

Mr. Rodney is described as having sold his financial independence because he

chooses to spend his money on a highly consumptive lifestyle; instead of taking
advantage of his company’s stock options. By choosing to spend his money
instead of investing it, he is trading his financial independence for objects.

7. Why did Mr. W.W. Allen decline the gift of a Rolls-Royce?

 Mr. W.W. Allen refused the gift of a Rolls-Royce because he found it to be
incongruent with his beliefs concerning lifestyle and wealth. Further, Mr. W.W. Allen
believes that the purchase of objects should compliment the life you live, not force a
different lifestyle upon you, and Mr. Allen does not live a Rolls-Royce type of life.

8. Dr. Bill (an engineering Professor) earns only about half of what his neighbors (The
Normans) earn. However, Dr. Bill has a net worth that is nine times greater than The
Normans. Explain how Dr. Bill has accumulated so much more net worth than his higher
paid neighbors.

Dr. Bill accumulates his wealth by being frugal, budgeting, and buying used
vehicles. By living below his means, Dr. Bill can save for investment purposes. By
carefully saving and managing his investments, Dr. Bill successfully increases his
net worth.

9. Regarding Economic Outpatient Care (EOC), answer the following three questions:

 As illustrated in the example of Henry and Josh, what is the fundamental rule
regarding wealth building?

The fundamental rule regarding wealth building is, whatever your income, always
live below your means.

 The parents of Ms. BPF were determined to give their daughter every advantage.
After they created an “ideal” environment for her, what was the result?

Ms. BPF still lives at home and has no commercial- related debts, her parents
finance her business, and continue to provide her with $60,000 every year. In
short Ms. PBF has learned to become a heavy spender, dependent on someone
else’s dime.

 In the case of Laura (A Woman of Great Courage), explain the primary message
derived from her story.

The principle message conveyed in the story of Laura, is that no matter your
situation or background, you can do anything you set your mind too.

10. Regarding Affirmative Action, Family Style, answer the following to questions:
  Explain why sisters Sarah and Alice are so different regarding wealth
accumulation.

While some of the financial differences between Sarah and Alice is because of
personality type, the bigger reason is due to each sister’s relationship with their
father. Their father was very opinionated about the role of women in society and
believed that a woman’s role was to get married, have children, and remain in the
home. Sarah strongly disagreed with her father which resulted in arguments
between them. Consequently, when Sarah left home to pursue a career her
father cut her off from all financial support. Without her father’s support, Sarah
had to learn to be financially independent. Alice, on the other hand, fulfilled her
father’s expectations and continued to receive financial support well into
adulthood. Alice was never required to learn financial independence.

 Select one of the Rules of Affluent Parents and Productive Children and explain
why you think this rule is the most important.
I believe the most important rule you can teach your children is “No matter how
wealthy you are, teach your children discipline and frugality.” In my opinion, if you
teach children the basic principles for success such as discipline and frugality, they
will always be able to replicate results on their own.

11. Explain the root cause for the conflict between Mr. W & the residents of the vacation
condominiums.

The reason for the conflict between Mr. W and the other residents had to do with plain
old-fashioned snobbery. The residents were more concerned with the appearance of
wealth than affording Mr. W his rights as a tenant. Since they did not think Mr. W
portrayed the appropriate image, they created a hostile environment by establishing
restrictive covenants and laws without regard to Mr. W’s right to representation.

12. Now that you have finished reading The Millionaire Next Door, answer the following
two questions in a minimum of three paragraphs.

After reading the Millionaire Next Door, the first concept that I found the most useful, is to
always live well below your means. I feel that this concept is a critical component to increasing
personal wealth because it allows for opportunities to save and invest. For example, if I live a
paycheck to paycheck lifestyle, I will always live paycheck to paycheck. However, if I budget, and
plan to live below my means, I will have the resources available to invest. By investing those
resources, I will increase my potential for financial freedom. Further, by living below my means I
am controlling the type of lifestyle I live, and it is not my lifestyle controlling me.
So, it follows that the next concept I found most useful from the text is that, millionaires
believe, financial independence is more important than displaying high social status. I think that
in the capitalistic society that we live in, wants have become confused with needs. We need the
necessities of food, clothes, and shelter; we want the comforts of fast foods, fancy clothes and
nice houses. However, to obtain those things we are trading our financial independence for
immediate gratification. By becoming aware of why we spend our money, it is possible to shift
the focus back to the purpose and functionality of how we spend our money.
One small change that I can make to improve my financial well-being is to modify my
spending behavior. By modifying my spending behavior, I can increase my saving potential which
will create opportunities to invest and grow my personal wealth. If I do not create a change in my
financial situation, I will reach the end of my earning potential and have nothing to show for it
but “stuff.” As Dave Ramsey says, “Live like no one else now so later you can live like no one
else.”

Reflective Writing
Completing this assignment assisted me with achieving the Salt Lake Community College
learning outcome of thinking critically. While I gained a lot of information by reading the
Millionaire Next Door, answering the assigned questions created an opportunity for me to reflect
on the information. For example, most of the principles contained in the reading, are presented
in the form of a story. Therefore, to answer questions about the reading, I had to not only
understand the story, but understand how the principle applied to the context of the story.
Having the assignment broken down in this way, provided a deeper understanding and an ability
to apply the information across many different situations.
Another Salt Lake Community College learning outcome that this assignment promoted is
the ability to communicate effectively. The types of questions and the formatting of the
assignment, challenged me to read and comprehend the questions, and to clearly communicate
my written responses. This required deep consideration, and focused deliberation, to ensure
that my writing clearly conveyed my answers. Since many of the questions required an
explanation, it was also necessary to organize and present the information in a way that made
logical sense. Completing this assignment, offered me the opportunity to strengthen and refine
my written communication skills, furthering my abilities as both a writer and a student.