Brenen Ketchum

Mr. Howell

Fin 1050

8 June 2017

The Millionaire Next Door

1. “Big Hat, No Cattle” is a concept that explains a person who is not frugal, buys luxuries,

and has few income producing assets. The big hat means they’re showy, and the lack of

cattle is their lack of wealth. The “Go to Hell Fund” is six months’ worth of income that

empowers to stay loyal to what your desires. As an example, if you want to quit your job,

you can and still have time to find another job.

2. Mr. Richards is an over accumulator of wealth and Mr. Ford is an under accumulator of

wealth. The wealth equation given in the book is age times income divided by 10. Being

greater that that number means you are an over accumulator and being under is UAW.

Mr. Richards is frugal, seeks tax shelters, and puts his money to work producing even

more money, all of which increases his wealth.

3. My brother is an excellent example of UAW. Even though he is young, it is still obvious

what direction he is heading. He doesn’t have a dime to his name. Money is burning a

hole in his pocket as they say. He is always asking my parents for money and is anything

but frugal. Aside from being a UAW, it effects how he buys things. Instead of careful

budgeting, he borrows money thinking he can pay in back later.

4. “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 was happy, but still continued to cut out coupons.

Why would someone who is a millionaire need to budget? They became a millionaire in

the first place because they budgeted, why would they stop now.

5. In the example of Theodore “Teddy” J. Friend and his parents, answer the following two


The book describes Teddy as being “possessed by possessions.” Explain this comment.

Teddy believes that being better off means having better things. He exchanges his

potential wealth for objects. Now possessions possess him.

What was the “small change” Teddy’s parents could have made that would put them in

the millionaire category? (Be specific).

They could have saved their money and invested it.

6. Mr. Rodney is a high-income/low-net worth corporate manager. Explain why he is

described as having “sold his financial independence.”

Mr. Rodney was offered a matching stock purchase plan, but did not participate because

he couldn’t afford to. Now he can’t retire due to lack of funds, yet if he had made it a

priority he would have had more money than when he started.

7. If your goal is to become financially independent, what should your plan be? (Be

specific) To be financially independent, one must budget, stay within their means,

eliminate debts, and invest.

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

He didn’t want the status that came with the car, he would rather not have the car than to

sacrifice his behaviors. It wasn’t something he wanted.
9. Regarding Economic Outpatient Care (EOC), answer the following three questions:

What is the likely financial outcome for Mary & Lamar once her Mother passes away?

Mary and Lamar will have a detrimental financial outcome. They expect to receive some

inheritance but they are unsure of the amount, yet no matter the size they will spend it all

as they desire more and more.

The parents of Ms. BPF were determined to give their daughter every advantage. After

they created an “ideal” environment for her, what was the result?

The result was that her parents were paying $60,000 a year for her, yet she isn’t taking

matters into her own hands and she is unable to make do with the $50,000 she makes.

In the case of Laura (A Woman of Great Courage), explain the primary message derived

from her story?

From Laura we learn that when you have no other option but to succeed then you will.

When you put your mind to something, you can do it. She was forced to find a more

suitable income and yet continued living within her means.

10. Regarding Affirmative Action, Family Style, answer the following two (2) questions:

In the example of sisters Ann & Beth, describe the consequences to Beth & her husband

from receiving EOC?

Beth and her husband feel and are constantly reminded that they can’t live without the

help from Beth’s parents. Their lifestyle is now crippled and Beth’s parents arrive

unannounced or require favors from her husband.

Explain the concept “weakening the weak.”

Rather than giving the weak the help they need, doing whatever they need for them never

solves the problem, but only makes it worse.
11. Explain the root cause for the conflict between Mr. W & the residents of the vacation

condominiums. (HINT: It’s not because of his dog.)

The root cause for the conflict between Mr. W and the residents was because Mr. W and

his wife were not considered “beautiful people.” The other residents in the vacation

condominiums wanted to preserve their perfect group. The residents just used the dog as

an excuse.

12. Now that you have finished reading The Millionaire Next Door, answer the following

three (3)questions in a minimum of three (3) paragraphs. (12 pts)

What are the two (2) concepts you found most useful? Explain why.

I found the concept of being frugal the most useful. I too was like Mr. Friend, I

believed that I must be better off that my parents and that means making more money to

keep up with a high consumption life style. I know see that if I’m frugal and save my

money, I will have more money in the future. I can relate this to Dave Ramsey and how

he says, “live today how others won’t, so tomorrow you can live like others can’t.”

Frugal today, wealthy tomorrow.

I found the concept of who wealthy people marry very useful. I’m a college

student, looking for a spouse. The Millionaire Next Door says, “Most people will never

become wealthy in one generation if they are married to people who are wasteful.”

Before I always looked for the girl who looks the best. Now, I can see that girls who

spend money on their appearance, who wear “big hats” are not the ones who are going to

help me in my pursuit of trying to get wealth. It’s the discipled, ambitious, money saving,

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


Just like in the story of the married couple who smokes a pack of cigarettes a day

in The Millionaire Next Door, I can stop going out to lunch every day and eat at home

instead. Small expenditures, when changed overtime, can amount to millions of dollars. I

already hold stocks in a range of companies, and funds. Taking the money, I save from

small changes will amplify my efforts. Turning insignificant change into hard to ignore


Reflective Writing

Compose 2-3 paragraphs explaining how completing this assignment helped you achieve

at least two of the SLCC Learning Outcomes:

Taking Personal Finance helped me to develop computer & information literacy.

As an online course, navigating, searching, studying in a different environment helps to

build computer skills. Typing skills, building and designing a website for an e-portfolio

are all beneficial to this skill. Information literacy is a benefit as much of the course was

understanding vocabulary about terms used in everyday life.

Taking Personal Finance helped me to Communicate Effectively. In my everyday

life knowing what insurance companies, banks, and policies are all saying decreases the

chance of miscommunication. Such miscommunications could be detrimental like the

consequences of co-signing a loan. Defining concepts as clear a possible is one thing

personal finance has taught me about effective communication.