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 describes someone that has the appearance of having a lot of money because of
the clothes they wear, cars they drive, or even the house they live in. In reality they
do not have that much money because they live beyond their means.
Go to Hell Fund
It is the amount of accumulated wealth that will be necessary to live without working
for ten or more 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).
Mr. Ford must spend more to maintain and display his upper-middle class life style,
such as: high quality work suits, country club memberships, purchasing expensive
silverware and serving trays, etc. Mr. Ford also spent 7 years in college so he started
in the workforce 7 years later and probably has excessive student loan debt. He
emphasizes consumption and de-emphasizes many of the key factors that underlie
wealth building.
3. Provide short answers to the following four (4) questions:
What is the cornerstone of wealth-building?
Being frugal is the cornerstone of wealth-building.
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?
According to her husband of thirty-one years, she said, I appreciate this, I really do.
Then she smiled, never changing her position at the kitchen table, where she
continued to cut out twenty-five and fifty-cents-off food coupons from the week's
supply of newspapers.
Why would someone who is a millionaire need to budget?
They became millionaires by budgeting and controlling expenses, and they maintain
their affluent status the same way.
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. His motivation and his thoughts are focused on the symbols of

economic success. Unhappily, he has never convinced himself. In essence, he works,

he earns, and he sacrifices to impress others.
What was the small change Teddys parents could have made that would put
them in the millionaire category? (Be specific.)
To spend the money that they would have spent in tobacco on purchasing, reinvesting
dividends and never selling shares in Philip Morris.
5. Mr. Rodney is a high-income/low-net worth corporate manager. Explain why he
is described as having sold his financial independence.
Because he did not take advantage of his employer's offered matching stock
purchase plan. He could have purchased, every year, the equivalent of 6% of his
income in shares of the corporation which would have reduced his realized taxable
income. Also, the corporation would have matched his purchase of company stock up
to a certain percentage of his income.
6. Why did Mr. W.W. Allan decline the gift of a Rolls-Royce?
Because there is nothing the Rolls-Royce represents that is important in his life. Nor
he would want to have to change his life to go along with [owning] the Rolls. He loves
to fish which includes throwing bloody fish in the back seat which would be incongruent with driving a Rolls-Royce down to the lake. He would have to not go
fishing or refuse the Rolls. He also thought that the Rolls would be out of place in an
old industrial area, where his office was, or would have to keep two cars which was
inefficient. He also felt that a luxury car would alienate many of his workers because
they might feel that their boss was exploiting them. How else could he afford such an
expensive vehicle? He also thought that the Rolls would be out of place driving into
the crummy restaurants that he enjoyed going into.
7. Regarding Economic Outpatient Care (EOC), answer the following four (4)
questions:
Define Economic Outpatient Care (EOC).
It refers to the substantial economic gifts and acts of kindness some parents give
their adult children and grandchildren.
Upon learning his parents were donating their property to the local private college,
describe Jamess reaction.
He felt like the property was his too, and he viewed his parent's idea of giving their
capital to the college as a threat to his future income.
Why was Jamess response predictable?
Because he had received substantial gifts from his parents throughout his adult life
and he needed an annual gift equivalent to about 20 percent of his income to cover
his annual expenses.
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.

8. Regarding Affirmative Action, Family Style, answer the following two (2) questions:
Why were sisters Sarah & Alice so different regarding wealth accumulation?
Because their dad encouraged Sarah to become PAW while fostering the opposite
trait in her sister. He strengthened the strong daughter while weakening the weaker.
When Sarah left home, she burned her bridges. She received no outpatient subsidies.
She had no choice but to learn how to fish for herself. And taught herself very well.
Her sister became progressively more dependent on her father for his money.
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.

9. Explain the root cause for the conflict between Mr. W & the residents of the
vacation condominiums. (HINT: Its not because of his dog.)
Because the action committee was using the dog as leverage to evict his entire
family. He and his family were not considered to be beautiful people. The people in
the complex were in contrast (in Mrs. W's parlance) the best-scrubbed condominium
owners one could ever imagine.
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?
This book has shown me that people that have huge houses, new luxury cars, boats,
etc, are likely not millionaires. To be wealthy is to have accumulated wealth, which
means that a lot of millionaires don't waste money on many luxuries but live
modestly.
What are the two (2) concepts you found most useful?
1. It is not necessary to have a degree to be a millionaire. A lot of millionaires are
self employed and started to work early which got them ahead of people that
spent years in school and didn't earn any money until much later in life.
2. To be a millionaire it is not necessary to earn a six figure income. It is more
important to live below your means, save your money and invest in something
that will keep making money for you.
Give a specific example of one small change you can make to improve your
financial well-being.
To bring food to work instead of going to the cafeteria and save the money I would
have spent and invest it in stock by the end of the year.

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 & Creatively
This class has helped me to think critically about what being wealthy really is about.
To be wealthy does not happen usually randomly, it takes a lot of planning, sacrifice,
goal setting and sometimes there is some risk involved. This class also taught me the
difference between looking rich and being rich. This class helps creativity because it
gives examples of how to help your finances and the many different tools available to
help you become wealthier.
Learning Outcome #2 (Paragraph #2)
Develop Computer & Information Literacy
With this class I learned about different online tools to help and plan my finances. I have learned about
mortgage calculators, budget sites, and different online resources to learn about investing in stocks,
bonds etc, which were unknown to me and I plan to use after this class.