Michelle Lambert

Fin 1050
Feb. 24, 2016
The Millionaire Next Door
1. Explain the following two (2) concepts:
Big Hat, No Cattle The authors first heard this from a Texan millionaire who
had a business that rebuilt diesel engines. This refers to someone who has the
appearance of wealth, but in reality have little or no money saved. They are overconsumers who pay too much for their cars, houses, watches, clothes, etc. so they
look wealthy. The Texan didnt have big hats, but he had a lot of cattle.
Go to Hell Fund Basically enough money in the bank to live off of
comfortably for 10 years or more. This would vary, depending on your needs.
2. In the examples of Mr. Richards (PAW) and 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.
Mr. Richards is a proprietor of a mobile-home dealership, doesnt dress to impress
or dive a fancy car, and lives well below his means. Mr. Richards is an attorney so
he spends more on his clothes, cars, house, education, and entertaining clients.
3. Provide short answers to the following four (4) questions:
- What is the cornerstone of wealth-building? Being frugal.
- 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? Cutting coupons at the kitchen table.
- Why would someone who is a millionaire need to budget? To make sure their
money is going where it is supposed to go. That was how they probably
became a millionaire in the first place.
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 works for things and to appear successful to others. If he feels
he is loosing his competitive edge, he gets more debt because fear is his
biggest motivator.
- What was the small change Teddys parents could have made that would put
them in the millionaire category? (Be specific.) They could have budgeted,
not bought things on installment loans, saved a little to invest and for
emergencies.

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

described as having sold his financial independence. He is on the perpetual
earn-and-consume treadmill. He is leasing 2 vehicles, has a $4200/month
mortgage, tuition, club dues, and a vacation home. He doesnt own anything, but
owes a lot.
6. Why did Mr. W.W. Allan decline the gift of a Rolls-Royce? It was incongruent
with his lifestyle.
7. Regarding Economic Outpatient Care (EOC), answer the following four (4)
questions:
- Define Economic Outpatient Care (EOC). It is substantial economic gifts
(money) some parents give their adult children and grandchildren.
- Upon learning his parents were donating their property to the local private
college, describe James reaction. He basically threw a temper-tantrum. He
said, Thats my property too. He felt his future gifts to be threatened.
- Why was James response predictable? He has received gifts throughout his
adult life and has come to rely on them.
- As illustrated in the example of Henry & Josh, what is the fundamental rule
regarding wealth building? (Be specific.) Again we see that being frugal is the
fundamental rule. You wont worry about over-consuming and that leaves
some money for investing and saving.
8. Regarding Affirmative Action, Family Style, answer the following two (2)
questions:
- Why were sisters Sarah & Alice so different regarding wealth accumulation?
Alice received EOC, while Sarah did not by her own choice. Sarah worked
very hard to make it on her own, but Alice was happy to have papa cover
anything they over-spent and give her EOC.
- What did Kens father tell him often? (Be specific.) Im not impressed with
what people own, but what they achieve.
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 other buyers
passed so many restrictive covenants he didnt feel comfortable in his own place.
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?
- What are the two (2) concepts you found most useful?
- Give a specific example of one small change you can make to improve your
financial well-being.

I really respect hard working people, and probably know several of these
millionaire next door type. I think the only perception that may have changed is the smart
ones dont look any different than their hard working neighbors. They are careful with
their money so you probably wouldnt guess their net worth would be that high. I aspire
to be one someday.
Live beneath your means and invest what you can are the two concepts that I
found most useful. I have always budgeted and made a menu, but seem to fall short
sometimes because of entertainment. I have 5 kids that really like to go to the movies,
even the dollar show can be a $30 outing when you get popcorn to share and a few
drinks. Being aware of this helps me stay in my budget when I put that in there, but when
things are tight we usually dont go. I have been wary of investing because we are usually
tight on money. I really dont want to be like my father who is trying to scrape by on just
Social Security, it isnt enough.
The one small change I can make to improve my financial well being is to get out
of debt. I have a plan and can make it happen, except my house, in about 6 months. I
have tried to not carry a balance on my one credit card and went 8 years without a car
payment. It was easier back then. At the moment I am making extra payments and want
to pay off my car. Then I will take that car payment money and use it to invest in mutual
funds.
Reflective Writing
I think that by completing this assignment I have achieved two very important
SLCC Learning Outcomes: communicating effectively and thinking critically and
creatively.
By reading this book, then writing about it, finding an organized way of
presenting what I understood from it, and discussing it with others has helped me
communicate effectively. I really enjoyed the scenarios and wonder how my children
would act if I were to become a millionaire next door.
I have reasoned from the evidence presented in this book that I can make changes
and become more like the millionaire next door. I can be creative in my problem solving
to save a little more and start investing. I can analyze the investment opportunities to
make the best choice for my family and our future. This will take constant evaluation as
we go.