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Questions - The Millionaire Next Door

After reading The Millionaire Next Door, answer the following ten (10) questions and compose
Reflective Writing.
1. Explain the following two (2) concepts addressed in The Millionaire Next Door:
* Big Hat, No Cattle
This describes what most wealthy people look like. They dont spend a lot of money on clothes or
material goods, but they have a successful business and live comfortably.
* Go to Hell Fund
Accumulating enough wealth to live without working for at least 10 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).
A lot has to do with the difference in lifestyle. They each live and dress to the expectations of
those around them. Comfortable home vs. large home, luxury car vs. well-made car, expensive
suits vs. khakis. Mr. Richards lives well beneath his means where as Mr. Ford may live paycheck
to paycheck.
3. Provide short answers to the following four (4) questions:
What is the cornerstone of wealth-building?
Defense, being frugal, anchored by budgeting and planning
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?
She continued to do exactly what she had always done. She continued clipping coupons and
staying on her budget.
Why would someone who is a millionaire need to budget?
When you budget you plan and control where your money is going.
4. In the example of Theodore Teddy J. Friend and his parents, answer the following two (2)
The book describes Teddy as being possessed by possessions. Explain this comment.
Teddy works to own things, not to be financially independent. He works so that he can impress
others with what he feels are the symbols of success.

What was the small change Teddys parents could have made that would put them in the
millionaire category? (Be specific.)
If Teddys parents had stopped smoking and used their cigarette money to invest in a tobacco
company, they could have about $2 million in their portfolio.
5. Mr. Rodney is a high-income/low-net worth corporate manager. Explain why he is described as
having sold his financial independence.
Because Mr. Rodney has never utilized the companys stock purchase plan, he has only worked
to buy and have things; he hasnt planned for the future. He has never set aside any money for
the future.
6. Why did Mr. W.W. Allan decline the gift of a Rolls-Royce?
He didnt want it because it didnt fit or represent his lifestyle. It also didnt help him do the
things he enjoys, like fishing.
7. Regarding Economic Outpatient Care (EOC), answer the following four (4) questions:
Define Economic Outpatient Care (EOC).
Economic gifts given by parents to adult children and grandchildren, thinking that its an act of
kindness. They feel compelled and obligated to help them continue their lifestyle.
Upon learning his parents were donating their property to the local private college, describe
Jamess reaction.
James basically threw an adult tantrum, maybe even a 4 year old tantrum.
Why was Jamess response predictable?
James thought of that property as his. Im sure he was planning to use it to fund his lifestyle.
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?
Sarah and Alice had almost opposite ideas about money. I think that first you have to look at the
personality types of the two girls. Sarah has a much stronger independent personality than her
Sarah and Alice had a very domineering father. He felt women had a role that they should stick
to and not change.
It sounds like from an early age Sarah debated with her father about many things including
womens roles. She sounds a lot like her father , she had a very strong personality too. When she

left home at a young age she knew she would have to do it on her own. With a lot of hard work
and a lot of sacrifices she proved that she could do it on her own and even better.
Alice on the other hand didnt have a strong personality. She did what she was told, married
someone her dad approved of (or could control), moved into the right neighborhood and allowed
her father to continue to take care of her. She never had to become independent.
These two sisters had different ideas about money I think. When you work so hard for something
you are much more careful what you do with it, therefore Sarah became more careful with her
money. And she proved to her father that she didnt really need him. On the other hand when
you are just handed whatever you need you dont have to be responsible. And you dont have to
worry about how you are going to pay for the next thing you want. Alice proved to her father that
she did need him after all.
What did Kens father tell him often? (Be specific.)
I am not impressed with what people own. But Im impressed with what they achieve. Im proud
to be a physician. Always strive to be the best in your field Dont chase money. If you are the
best in your field, money will find you.
By this statement Kens father expressed his attitude towards work and money.
9. Explain the root cause for the conflict between Mr. W & the residents of the vacation
condominiums. (HINT: Its not because of his dog
I believe the root cause was that the majority of people who lived in the upscale condominiums
didnt feel that Mr. W and his family were part of the beautiful people or the right type.
Instead of coming right out to ask them to sell, because that would be rude, they made rules on
the condominium covenants to make Mr. W and his family feel uncomfortable to live there.
After reading this book, Im sure Mr. W and his families were very conservative in dress and what
they wore. If they had worn really expensive clothes, drove really nice cars, and looked like what
they felt a millionaire should look like I wonder if the Dog Law would ever have even been
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?
My perception of millionaires hasnt changed much, but I have a different outlook on what a
millionaire should look like because of examples growing up.
My parents had a couple friends that were very wealthy, but they didnt flaunt it. They both
drove midsize cars, and they drove them for at least 10 years. Their homes were about 2400 sq.
feet and decorated conservatively. They didnt go on lavish vacations or wear expensive clothes.
They both have pools though and I have always equated having a pool to being successful.
The one thing that has changed for me though is how many people with real wealth there are.
Part of that is because they usually do live below their means, and so dont look the part.

What are the two (2) concepts you found most useful?
The concepts I found helpful were budgeting and not to become a parent who provides too much
Most of my adult life I have known the importance of budgeting. I can easily create a budget, the
hard part for me is creating a real budget and then sticking to it. This book showed examples
of the importance of creating a realistic budget plan. Not just a budget that you will stick to but
also budgeting investment money; because without a plan nothing will happen.
The second concept I found helpful was the EOC concept. I have seen examples in my own
family of the effect this can have on adult children. I found it helpful to see mistakes others have
made along with successes. It was good to see that the more successful children were those
who were taught concepts of being frugal and self-sufficient. If children are taught to work for
what they have and not just given everything.
I believe that if I can implement these two concepts I can become more independent and I can
also help my children to become that way too.
Give a specific example of one small change you can make to improve your financial wellbeing.
One small change my family can do to improve our financial well-being is to eat out less. We eat
out on average about 4 meals a week. If we cut that down to 1 meal a week we would save
about $100 - $120 per week.
One of the ways to reduce eating out is to plan ahead. We need to sit down as a family and
discuss how to make this change. We need to decide together what day we will eat out and then
what we will make for the rest of the week. Without a plan we will continue to spend our money
on convenience foods.
Another thing we need to do is to decide where this money will be invested. By investing in
ourselves we are investing in our future.
If we go forward with this one simple change we will have saved over $60,000. If we are smart as
we invest it it will become much more.

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)

Students think critically and creatively.

As I completed the reading of The Millionaire Next Door, I tried to really look at how I view
money, possessions, investments and many other things. With each example and theory I

looked at the things I am doing and what changes I can make to better my financial
As I look at the many concepts that were taught throughout this book I found things my
family was doing well. Some of the things we have done that have helped financially are that
we live in a home where the mortgage is only about double our annual income, we drive well
maintained conservative cars and we dont wear expensive clothes.
I also found areas in which we need a lot of improvement. We need to not just create a
budget, but to create a realistic budget and stick to it. We also need to budget for investing.
Another thing we can change is not eating out as much and then turning around and
investing that money. We invest money into the companys 401k but not the full 6% that the
company will match. That is investment money that we are just giving up and need to utilize
this opportunity to its full extent.

Learning Outcome #2 (Paragraph #2)

Students develop the attitudes and skills for lifelong wellness.

I have learned that some of my attitudes towards money need to change and by doing so I
have the potential to become better prepared for day to day living and retirement.
If I look at money as something I can control, I will make changes daily that will help me to
become more frugal. I will have the ability to live beneath my means and then be able to
turn around and invest that money.
As I invest in my future, I believe that I will be able to no longer just live paycheck to
paycheck but will have the ability to save and prepare for future difficulties and for the time
when I want to retire.