Jonathan Knudsen

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

o Many people think that Millionaires can be spotted by their looks,
but this is not always true. Big hat, no cattle describes this
assumption perfectly. When someone says this statement they
are referring to a person who may try to appear rich, but doesnt
have the funds to back it up. They act the part, but its only an
act, they arent truly what they appear to be.

Go to Hell Fund
o If one has a Go to Hell Fund it implies that they have earned
and saved enough money to live comfortably for ten or more
years without working during that time period.

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 is a lawyer and as described in the book, decides to spend a

lot more money than Mr. Richards on trying to keep a high status look
for his family and his job. He spends more money on what type of car
he drives and the suits he wears. Mr. Fords spending habits prohibit
him from having a lot of money to put into a savings or investing
account. Mr. Richard on the other hand lives a more simplified life as a
mobile home proprietor who is wiser with his money. He doesnt have
to have the newest car or a fancy suit. Because of his wise spending
and saving, Mr. Richards has been able to save more money, giving
him nearly five the net worth of Mr. Ford.

3. Provide short answers to the following three (3) questions:

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? Pg 37
o She thanked her husband and continued to cut out discount
coupons for .25 and .50 cents off of different foods. She
continued to live her life frugally, just like she had the day when
all the couple owned was a kitchen table.

Why would someone who is a millionaire need to budget? Pg.

40
o Because by budgeting and controlling their expenses, they can
become millionaires, and as they continue budget, they can
maintain their millionaire status.

4. In the example of Theodore Teddy J. Friend and his parents,

answer the following two (2) questions: pg. 49-52

The book describes Teddy as being possessed by

possessions. Explain this comment.
o This comment suggests that Mr. Friend only works and does
things for possessions. He feels that what he owns and what he
can show off to others shows his economic success. Having the
best of the best is what drives his motivation.

What was the small change Teddys parents could have

made that would put them in the millionaire category? (Be
specific.) pg. 54
o Mr. Friends parents would spend money when they had it and
wouldnt spend money when they didnt have it. Two small
changes I believe that they could have made would be first to
create a budgeting plan which could have allowed for them to
create a savings account which could be used for rainy days
along with being able to invest in stocks and bonds. They spent a
lot of money for small purchases like cigarettes which cost
them approximately $33,190 during the course of 40 years. If
they had budgeted this to be invested instead of buying
cigarettes, they could have made anywhere from $100,000 to $2
million dollars.

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

Explain why he is described as having sold his financial
independence.

Mr. Rodney hasnt taken advantage of the companies matching

stock purchase plan which would reduce his realized taxable
income as well as grow his financial portfolio. The reason he
didnt take advantage of this is because he has purchased to
many assets and is paying for them with the money he could be
using to invest. Because all of his money is tied up in paying for
his things like a vacation home, he cant afford to set money
aside. Because he cant set money aside to invest, he cant
become financially independent.

6. Why did Mr. W.W. Allan decline the gift of a Rolls-Royce?

He felt that with such an addition of a status product that it

would change his lifestyle. Many people feel that if they add one
thing of value to their collection that many other expensive
things must be purchased and added to fill the gaps. He also
stated that the things he likes to do, like fishing, wouldnt be
possible if he switched his vehicle to a Rolls-Royce. Overall he
liked his lifestyle and didnt want it to change because of
receiving a fancy gift.

7. Regarding Economic Outpatient Care (EOC), answer the following

four (4) questions:

Explain why Economic Outpatient Care (EOC) can be harmful.

o There are two sayings from the book that I think explain it
perfectly. The first saying is, In general, the more dollars adult
children receive, the fewer they accumulate, while those who are
given fewer dollars accumulate more. The other is, Its easier
to spend someone elses money than your own. I think both
these sayings show that its harmful because people on EOC tend
to focus on when the next dose of money is coming. They
become so financially dependent on the donor because they
become accustom to living a higher lifestyle then they can
afford. They also know that they will have enough money to

cover what they need so they are less motivated to go and make
their own money.

Explain this statement: The more dollars adult children

receive, the fewer they accumulate.
o I feel this statement is fairly self-explanatory. When someone
receives enough of something to meet their need, a natural
human instinct is to put less energy in to acquiring more. This is
exactly what this statement is implying. The more adult children
receive financial security from their parents, the less need they
feel to go and make their own income.

What is the likely financial outcome for Mary & Lamar once her
Mother passes away?
o When the mother passes away, they may receive some amount
of money to live for a while but once that money runs out they
wont have a large enough income to support their high income
living and will quickly fall into debt.

As illustrated in the example of Henry & Josh, what is the

fundamental rule regarding wealth building? (Be specific.)
o The fundamental rule regarding wealth building is Whatever
your income, always live below your means. That is to say that
whatever your income is, make sure you spend less. Making sure
you spend less allows you to have money to save and invest.

8. Regarding Affirmative Action, Family Style, answer the following

three (3) questions:

In the example of sisters Ann & Beth, describe the

consequences to Beth & her husband from receiving EOC?
o Beth and her husband became so financially dependent on her
parents that while they were living at the parents house Beths
husband was treated like a waiter and talked down to a lot being
treated like an inferior. Upon moving out they couldnt move far
and didnt have much say in the house they bought since Beths

parents were floating a lot of the bill. They became quite

controlled by her parents.

Explain the concept weakening the weak.

o Weakening the weak with the case of Beth and her husband
means when Beth and her husband began life together they
started out financially weak. They didnt have much. With Beth
parents caring for their every need the couple realized that they
didnt have to do much to still be supported. Because Beths
parents helped them so much the young married couples
attitude was more They will take care of us and not what do
we need to do to take care of ourselves making them weaker,
more vulnerable, people in society.

What did Kens father tell him often? (Be specific.)

o Its not about what people own but what they achieve that
impresses him. He also told him to always strive to be the best in
his field and dont chase money. If he becomes the best in his
field, money will find him.

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 root cause of the conflict with Mr. W and the residents is the
fact that he and his family didnt quite fit the mold of the
Wealthy vacation condominium owner. They judged the family
because they look more like a middle-class family compared to
those who own the rest of the condos. They tried to blame it on
the dog until they realized that the family was wanting to bring in
more middle class people to the condos weekly. Then they
decided to allow the family to keep the dog.

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?

o When I first started reading the millionaire book I pictured
millionaires as someone who shows that they have money to

everyone. I pictured them as someone who drives a nice sports

car and wears the latest style clothing. They owned a giant,
fancy home. But know I realize that many millionaires dont feel
the need to show off their money. They can live in simple houses,
wear simple clothes, and drive a beat-up truck. A millionaire
works hard, is frugal with his money, and knows how to save and
invest.

What are the two (2) concepts you found most useful?
o The first concept I found very useful is what Kens father told
him. He told him to not worry about money or what he owns, but
to focus on his achievements. He encouraged him to strived to
be the best in his field, and if he did that, money would come. I
think that is a very important statement. Its not good to always
focus on what you own or if you have the latest and greatest of
everything. Its important to reach for the stars and achieve your
goals in the field of your choice. As you do that, and follow the
steps of saving and investing, you can achieve your financial
dreams.
o The second concept I found very useful is that of Whatever your
income, always live below your means. This is a very important
statement. Many people spend way more money than they
make, creating a great amount of debt. A person doesnt
typically become a millionaire from one check. To become a
millionaire one has to be able to save money and invest. If you
spend more than what you make, then there is no money left
over to save or invest. If you follow this rule you wont ever feel
like you have to stretch and pull to make ends meet every
month.

Give a specific example of one small change you can make to

improve your financial wellbeing.
o One small change I can make in my own life to improve my
financial wellbeing is by budgeting and investing. I have been
fairly good at keeping a budget on spending and saving but I
have never thought about investing. After reading the millionaire
book I have seen a great importance put on budgeting and
investing. If I was to budget a portion of my income to
investments, that would be a great start to building my financial
wellbeing.

Reflective Writing
Compose 2-3 paragraphs explaining how completing this
assignment helped you achieve at least two (2) of the SLCC
Learning Outcomes:

The first learning outcome I believe this assignment helped me achieve

is that of critically thinking. While reading the book, it asked questions
and gave ideas that I had to think deeply about. It gives suggestions
about what people need to do to become millionaires. It really made
me think about my own choices in my financial planning and what I can
do to become more financially stable.

The second learning outcome I believe this assignment helped me

achieve is that of developing knowledge and skills to be civically
engaged. While reading the Millionaire next door, it teaches you ways
to be an effective member of society. Many people either overspend or
dont create budgets, which puts them in a hole of debt. This book was
designed to help people become better members of society by
teaching them the best strategies at becoming financially secure and
not being a financial burden on society.