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Molly Wabel

Summer Semester 2014


ePortfolio Assignment FIN 1050
The Millionaire Next Door by Thomas Stanley & William Danko
Part 1- Questions and Answers
QUESTION 1
Big Hat, No Cattle
Ive heard this phase throughout my life and it was also present in the book a few times. My
understanding of this phrase is that it means All talk and No action. The young Texan in the book
had little talk or peacocking but he had the cattle to back it up!
Go To Hell Fund
Frankly, I need one of these! The way it was explained in the book was that this is a fund
that you can live off of if it hits the fan. Basically, how long could you live income-free if you lost
your job or the economy tanked, a security fund for you and your family.
PAW
PAW or prodigious accumulator of wealth is someone who is in the top quartile for wealth
accumulation. This means a person who is a PAW should have an accumulated wealth that is twice
the expected value or more for his age and income. For instance, if I were a PAW, my accumulated
wealth should be about $100,000 for my age and income.
UAW
UAM or under accumulator of wealth is the opposite of PAW. This is a person is someone
who has under accumulated for their age and income. This person would most likely have a higher
monthly household income, not enough savings and have a higher propensity to live above their
means.

QUESTION 2
In the example of Theodore Teddy J. Friend,
* Provide 3 reasons why Teddy is considered a UAW.
* What was the message Teddys parents sent him about consumer behavior?
1. His net worth is less than a quarter of what it should be for his age and income.
2. He has 6 automobiles, 2 are leased.
3. He thinks because he earns a high income that he needs to show it off. He works and earns
to impress other people.
4. One earns to spend! When you need to spend more, you need to earn more.
Molly Wabel
Summer Semester 2014

QUESTION 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?
These people spend, spend, spend and are never able to repay their debts. They think about
what they are going to spend the money on even before they earn it.
* Why did he decline the gift of a Rolls-Royce?
The status gift was not congruent with his values and he does not want anything to do with
high consumption artifacts. It represented nothing that was important in his life.

QUESTION 4
* Define Economic Outpatient Care (EOC): EOC refers to substantial economic gifts and acts of
kindness some parents give their adult children and grandchildren.
* Like the example of James, many EOC receivers (inaccurately) view themselves as: James views
himself as self-made and a member of the I did it on my own and earned every dollar I have
club.
* As illustrated in the example of Henry & Josh, what is the fundamental rule regarding wealth
building? Be specific. Rule: Whatever your income, live far below your means. Henry lives far
below his means as a school teacher and leads a frugal lifestyle, lives in a modest home and in a
middle class neighborhood.
* Why did Laura succeed? She succeeded out of necessity and left with no other option then to
succeed. She was a housewife who was disciplined and independent that after a divorce found a
career in real estate and did very well for herself.

QUESTION 5
Now that you have completed the book, give your thoughts:
* What are the 2 concepts you found most useful?
How do I choose just two?! I have learned so much from this book that Im on overload. I
have learned that my husband and I really need to re-evaluate our budget and how we look
at money. We tend to just spend our salaries instead of planning and saving. We currently
have our money separate and after reading this book, we will be evaluating that process.
One concept that I really want to take to heart is setting aside bonds or stocks for our
Molly Wabel
Summer Semester 2014
daughters college education. Ive had to loan out my education and I dont want her to
have to do that.
* How will you apply them into your life?
I feel like we have so many questions that we will be seeking the advice of a financial
advisor. I want to make sure that we have a clear retirement and financial plan that we can
start on. Currently, my husband has no retirement plan and that scares me to death! We
have a lot to evaluate and a lot more education to consider.
* In your own words, give your thoughts in a minimum of 3 paragraphs.
After reading these books (the text and the Millionaire Next Door), I have a lot of
conflicting feelings. I feel a lot of guilt for the current lifestyle my husband and I maintain.
We dont live a horrible life but our finances are all wrong. We certainly dont have a net
worth like we should! We werent afforded any financial guidance from our parents, who
were blue collar, live paycheck to paycheck, and spend it as fast as we earn it, kind of
people. Good people, but not financially smart people. Retirement was something that
was never discussed or planned for and still to this day they are relying on Social Security
for retirement. Scrapping by was a way of life and a savings account was more of a dream.
After completing this book, I know there needs to be a major overhaul in our finances so we
dont perpetuate the cycle of misinformation and misguide our children.
Secondly, I feel motivated but overwhelmed. There is so much information rolling
around in my head that I can barely put two thoughts together. After several ill-fated
conversations with my husband trying to relay the information Ive gained, I told him we
may want to consider professional financial advising so we can make our money work for
us. The text book is a wealth of information and Millionaire Next Door is a book my
husband is now reading so he can gain valuable perspective as well. I think now that we are
aware of what should be done, we wont sit idle by and just let our finances happen to use.
Lastly, I want to live a frugal lifestyle. After reading how successful these individual
have been simply by living life outside the Keeping up with the Joneses mentality and
maintaining a budget, I feel motivated to join them! We have a short term goal of starting a
family business but now Im a little scared to attempt that before we have our own finances
under control. I really dont want to be one of those people that W.W. Allan doesnt trust
with money. I feel like Im a trustworthy person but I dont think my whole financial
picture would rely that to potential investors or loan officers.





Molly Wabel
Summer Semester 2014
Part 2- Reflective Writing
Reflective Writing
Compose 2-3 paragraphs explaining how reading The Millionaire Next Door helped you achieve at
least 2 of the SLCC Learning Outcomes. (Acquire Substantive Knowledge, Communicate
Effectively, Think Critically, and Become Civically Engaged.)
I think the book; The Millionaire Next Door has really opened my eyes on how much
communication with our partners is important if we want to achieve our financial goals
together. I think that creating a budget and financial plan is cornerstone to achieving financial
independence and daily communication with your spouse is essential. I had no idea through
careful planning, living frugally and extensive research and education you can really get the
most out of even a modest income.
This book has also shown me that Im going to need to acquire substantially more personal
finance knowledge in order to create my own financial independence. Due to the education Ive
received from the book and this class, I will be actively seeking the advice of a financial expert
in order to get my finances on track. We want to start our own business, put our children
through college and have a relaxed and secure retirement and frankly, I have no idea how to
accomplish those goals without help. Education and knowledge are the only way those goals are
going to become a reality. Its exciting and scary all at the same time!