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The Millionaire Next Door Questions

1) Explain the following four (4) concepts addressed in The Millionaire Next Door:
Big Hat, No
Cattle
This refers to individuals who spend money before they earn it and who are more
interested in looking like they are wealthy than in actually being wealthy.

Go to Hell Fund
It is the point of choice, where an individual can have enough money accumulated
to live without working for 10 or more years. Basically you get to tell your boss,
Go to Hell.

PAW
It stands for Prodigious Accumulator of Wealth. This refers to individuals who are
builders of wealth. People who are very good at building their net worth
compared to their income/age category.

UAW
It stands for Under Accumulator of Wealth. This refers to individuals who tend to
live above their means. People who can make a good income however they tend
to spend close or more than what they earn.


2) In the example of Theodore Teddy J. Friend:

Provide three (3) reasons why Teddy is considered a UAW.
What was the message Teddys parents sent him about consumer behavior?
Reason #1
Teddy is an UAW because he is the ultimate consumer. He has boats, jet skis, 6
cars, etc. The point is that he is more concerned with impressing the people
around him than increasing his net worth and what he is really worth.

Reason #2
Another reason why Teddy is a UAW is because he believes that to drive his
performance to the highest level he has to use fear as a motivator, meaning that
since he owns so much money he always has the fear of defaulting on his debts if
he doesnt perform.

Reason #3
Mr. Friend is not thinking about his future. He doesnt make investments and has
a cheap accountant. Although he has so many upscale things, he doesnt get to
enjoy them or spend time with his family.

Parents Message
The message is that the money that is earned is meant to spent, and if more
money is needed for more consumption, you need to earn more.




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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?
Why did he decline the gift of a Rolls-Royce?
Philosophy
The reason behind it is that those types of people would never pay him back. Mr.
Allans thoughts were that those types of people only spend and spend money
even before they have earned it.

Rolls-Royce
There are several reasons why he declined the gift; First of all he didnt want to
have the pressure of owning a Rolls-Royce since when you drive a vehicle of that
caliber people expect you to play the part. Also he stated that he wouldnt have
the opportunity of doing the things that he likes to do, like fishing or going out to
eat to certain restaurants that he likes. Also he thought about his employees and
that they might think that he is exploiting them.


4) Regarding Economic Outpatient Care (EOC):

Answer the four (4) EOC questions below.
Define Economic
Outpatient Care
(EOC).
EOC is when parents or grandparents give a substantial amount of money per
year to adult children or grandchildren instead of letting them grow and handle
their own finances.

Like the example
of James, many
EOC receivers
(inaccurately) view
themselves
as____________.
They see themselves as part of the I did it on my own club. The authors of the
book were surprised when they heard from these people that they feel they have
earned every dollar they have.
As illustrated in
the example of
Henry & Josh, what
is the fundamental
rule regarding
wealth building?
Be specific.
The fundamental rule of wealth building is Whatever your income, always live
below your means. What this means to me is that no matter what income a
person has, there will always be more things to spend money on, but they need to
spend less than what they make if they want to build wealth.
Why did Laura
succeed?
Lauras success is attributed to hard work, frugality and also the fact that she had
to care for her three children and failure was not an option.




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5) Now that you have finished reading The Millionaire Next Door, give your thoughts

What are the two (2) concepts you found most useful?
How will you apply them into your life?
In your own words, give your thoughts in a minimum of three (3) paragraphs.

The first concept that has had a big impact on me is that frugality is essential even if you are a
millionaire and especially if you want to become a millionaire. Before I read this book I thought that
someone could become a millionaire just by making a high level income however, I have learned by
reading this book that by being frugal and investing in your future, you can become wealthy. On the
other hand someone might have a high level income but will never be a millionaire if they dont learn to
budget, be frugal and invest properly.
The second concept that I have learned is that when it comes to millionaires, you cant judge a book
by its cover. Someone may live in a big home, drive an imported luxury car, have a thousand dollar
watch, etc., but that doesnt mean that they are millionaires or can afford their lifestyle. Since reading
this book I have started to notice friends and neighbors and analyze their spending habits. I realized now
that a lot of people in our society live to impress their neighbors even if they cant afford it.
As I ponder about the different concepts that I have learned by reading this book, I feel that
continuing to follow a household budget will help my family and me to have a better future. By
budgeting we will be able to live frugally and live within our means. Also I have decided that the best use
of my money is to save and invest rather than spend every penny or even use credit to try to look
wealthy and impress the neighbors.

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
Reading The Millionaire Next Door helped me to acquire substantial knowledge about how to
manage my own finances and how to plan for the future. This knowledge will not only help me in
my personal finances but also with running a business in the future or managing an office budget.
Think Critically & Creatively
This book has helped to think more critically about how my choices today will affect my future and my
familys future. Also I have learned that there are many different professions or businesses that a person
can get into to make a high level of income, however, it requires critical thinking and planning especially
at a young age.