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Tessy Wadsworth Finance 1050 The Millionaire Next Door- Eportfolio 1) Explain the following four (4) concepts addressed

in The Millionaire Next Door:  “Big Hat, No Cattle” – This concept is when someone acts like they are wealthy. They try to put on this front to the world that they are rich and can afford expensive items, when in all reality everything they own is most likely on credit. As the book says, “One way we determine whether someone is wealthy or not is based on net worth – “cattle,” not “chattel (pg. 12).”  “Go to Hell Fund” – Is the concept of accumulating enough wealth to live without working for ten or more years. In other words, just saying “to hell with it,” and walking out of your job without having to worry about where you are going to go to next and where you are going to continue to get your income from (pg. 10).  PAW – Prodigious Accumulator of Wealth, meaning you are in the top quartile for wealth accumulation given your age and income and how your net worth matches up (pg. 14).  UAW – Under Accumulator of Wealth, meaning you are in the bottom quartile for wealth accumulation given your age and income and how your net worth matches up (pg. 14). 2) In the example of Theodore “Teddy” J. Friend:  Provide three (3) reasons why Teddy is considered a UAW. Reason #1: He has a need to compensate for his “primitive blue collar” background and his perceived educational deficiency (pg. 50). Reason #2: He allows “significant others” to determine his financial lifestyle (pg. 51). Reason #3: His parental guidance. They taught him, that income was designed to be spent (pg. 51).  What was the message Teddy’s parents sent him about consumer behavior? Parent’s Message: One earns to spend. When you need to spend more, you need to earn more. Also, to purchase a fine home, luxury automobiles, and expensive clothing, one has to earn big to spend big (pg. 52 & 53).

3) In the example of Mr. W.W Allan, a self-made multimillionaire:

He never extended credit to people who exhibited the “Big Hat, No Cattle” philosophy. Why? Philosophy: Because in his mind, such people would never be able to repay their debts. Those types of people, according the Mr. Allen, “spend, spend, spend, in anticipation of having money before they even earn it (pg. 109).” Why did he decline the gift of a Rolls Royce? Rolls Royce: He declined it because “there’s nothing the Rolls Royce represents that’s important in my life. Nor would I want to change my life to go along with (owning) the Rolls. I can’t throw fish in the back seat of the Rolls, like I do right now when I go fishing (pg. 111).” He also stated that the Rolls would be out of place at his office, which is in a manufacturing place in a old industrial area. He would not be able to go to the crummy restaurants that he enjoys going to. And Life has its own burdens, why add excess baggage (pg. 112)?

4) Regarding Economic Outpatient Care (EOC): 1) Define Economic Outpatient Care (EOC) – refers to the substantial economic gifts and “acts of kindness” some parents give their adult children and grandchildren (pg. 142). 2) Like the example of James, many EOC receivers (inaccurately) view themselves as “Self-made (pg. 156).” 3) As illustrated in the example of Henry & Josh, what is the fundamental rule regarding wealth building? Be specific. o Whatever your income, always live below your means. 4) Why did Laura succeed? o Laure succeed because she is independent and realized that in order to provide for her and her children her teaching career was not going to cut it. She then got involved with real estate. She feels that if you set your mind to something, it’s amazing what you can do. And she understands that succeeding is the only alternative. Her success was also a function of her high level integrity (pg. 172-174). 5) Now that you have finished reading The Millionaire Next Door, give your thoughts: The two concepts that I found the most useful while reading this book are the concept of investing and the concept of net worth. I also enjoyed the concepts behind PAW’s and UAW’s, and I found the chapter on “you aren’t what you drive” interesting. The concept of investing was very interesting to me. Especially, when it came to taking unnecessary purchases and investing them, such as the story of

Mr. Friend’s parents smoking. It came to a shock to me on how much money they had spent on cigarettes in one year, and how much money they could have if they would have taken that money and invested it. I will use this concept in my life daily. I am always finding ways to talk myself out of spending money on unnecessary purchases, and from this story I know that I could invest that money. The concept of net worth has been extremely interesting to me. It was really interesting to see what bracket a fit in for my age group. It was also interesting to read the stories throughout the book, and picking out things that I do that I could change like the book would talk about. I had no idea how to figure out my net worth, or really what it meant. Between the book and the financial forms, we completed I find myself thinking about this often when spending and earning money. 6) Reflective Writing: Achieved SLCC Learning Outcomes. Throughout reading The Millionaire Next Door I have been able to achieve a sense of all of the SLCC Learning Outcomes. But the ones I have achieved the most would be: acquire substantive knowledge and think critically. Acquiring substantive knowledge has been achieved by providing me with knowledge and a clear understanding of financial tools, that I will be able to use throughout the rest of my life. Knowing how to calculate my net worth, will help me to know if I can afford something or not. It will allow me to make smart financial decisions, so that I do not end up in debt. I have also learned about ways investing will pay off in the future, no matter what the amount is. I learned tools when purchasing a vehicle. And gained knowledge, how a millionaire lives theirs lives. Think critically has been achieved by the readings making me think of my own life and evaluate it based upon the examples given. It also helped me to look at my own finances and too see where my strengths and weakness’ are. Throughout the readings, there were short descriptions on ways to save that can be easily remembered while making decisions on big or small purchases. I plan on using those tools in my future purchases such as buying another home, or purchasing another vehicle. Overall, I really enjoyed this book. And plan on reading more like it.