Shannen Angell

8/3/16
Questions- The Millionaire Next Door
1. Explain the following two (2) concepts addressed in The Millionaire Next Door:
Big Hat, No Cattle: This phrase has to do with the appearance of millionaires.
The appearance that people think of when they think of a millionaire is often one of
luxury, excess, and pleasure. However, those who live above their means are often in
debt and dont have the money they appear to have. Hence, they have a big hat (or live
a wealthy lifestyle) but no cattle (or dont have the money for the lifestyle they live).
Go to Hell Fund: The Go to Hell Fund is an emergency fund where money
goes where you can live off of for, ideally, ten or more years without working in case of
losing your job or another emergency. It requires saving a lot of your income.
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).
The difference between Mr. Richards and Mr. Ford is what they do with the money they earn.
Mr. Richards is a prodigious accumulator of wealth, and may have earned his money by
investing wisely or saving large portions of his paychecks. He may also live a modest lifestyle.
This has led him to have a net worth of $1.1 million, more than double what the expected level
of wealth is according to the wealth equation. On the other hand, Mr. Ford is an under
accumulator of wealth and has a net worth of $226,511. Both men have an expected net worth
of approximately $460,000, but Mr. Ford is significantly under that amount. Why? The most
likely reason is that he lives above his means, spends money he doesnt have, and is in a large
amount of debt.
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? She told her husband that she really appreciated it and
continued to cut food coupons out of the newspaper.
Why would someone who is a millionaire need to budget? Budgeting is essential
to maintaining wealth. By continuing to save and budget money, millionaires are able to
earn more with the money they already have saved and continue to live in a reasonable
manner without losing money.
4. In the example of Theodore Teddy J. Friend and his parents, answer the following two (2)
questions:
The book describes Teddy as being possessed by possessions. Explain this
comment. The term possessed by possessions refers to someone who is concerned
with having, or at least appearing to have, a significant amount of wealth. Teddy was
determined to live affluently but never thought about actually earning the wealth he
needed to live the life he wanted.

 What was the small change Teddys parents could have made that would put
them in the millionaire category? (Be specific.) They could have set a better example for
Teddy by investing more and creating a budget that allowed for savings.
5. Mr. Rodney is a high-income/low-net worth corporate manager. Explain why he is described
as having sold his financial independence.
He sold his financial independence by not taking advantage of the opportunities presented to
him when he was young. If he had invested money and received the match in company stock
when he first joined the company, he would have more freedom than he does now.
6. Why did Mr. W.W. Allan decline the gift of a Rolls-Royce?
It simply didnt fit into his lifestyle. Because Mr. Allan enjoyed fishing, he would not be able to
use the car the way that he needed to. Sometimes owning the nicest car isnt the best decision
because it doesnt fit into the rest of your life.
7. Regarding Economic Outpatient Care (EOC), answer the following four (4) questions:
Define Economic Outpatient Care (EOC). Substantial economic gifts from
parents to children or grandchildren that can result in those children or grandchildren
earning less money than they would without receiving EOC.
Upon learning his parents were donating their property to the local private
college, describe Jamess reaction. James wasnt happy with their gift to the college
because he saw his parents property as his own.
Why was Jamess response predictable? As a receiver of EOC, James relied
heavily on income from his parents and saw their donation as a threat to his future
income.
As illustrated in the example of Henry & Josh, what is the fundamental rule
regarding wealth building? (Be specific.) Live below your means regardless of your
income. Despite being a teacher with a significantly lower income than his brothers,
Henry and his family were frugal, while Josh spent well above his means and had a
lower net worth despite being an attorney and earning much more per year than his
brother.
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? Because Beth and her husband received so much EOC
from her parents, their lives were controlled by what Beths parents wanted for the
couple, they were treated more poorly than Ann was, and lacked the self-confidence
needed to live without the support of her parents.
Explain the concept weakening the weak. Weakening the weak means to help
someone in a bad financial situation in the short-term but furthering their economic
problems later on by leading them to rely on your financial support even further.
What did Kens father tell him often? (Be specific.) Dont chase money. If you are
the best in your field, money will find you.

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 dog was not the root cause for the conflict between Mr. W and the residents of the vacation
condominiums. Instead, it was the difference in lifestyle as well as wealth. The residents all lived
wealthy lifestyles and yet were UAWs and didnt enjoy having the company of someone who
was a PAW yet lived a lifestyle that was more frugal than theirs. They simply didnt enjoy the
company of those who lived lifestyles they considered beneath theirs, as is evidenced when
Mr. W suggested turning his unit into a vacation spot for his blue collar company and they were
adamantly against it.
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? What are the two (2) concepts you found most useful? Give a specific example of
one small change you can make to improve your financial well being.
Reading The Millionaire Next Door has made me realize that not all millionaires live
luxurious lifestyles. Prior to reading this book, I had the idea that all those who had money,
spent money. Instead, I have learned that many millionaires live below their means, and that
often means living in middle class neighborhoods and being frugal so as to continue to gain
more wealth. As someone who enjoys shopping and spending money, this was a big eye opener
to me.
One concept I found useful in my life is the fact that those who receive economic
outpatient care often earn less money than those who do not receive such gifts from their
families. My grandparents are very wealthy, and I have often relied on them for money. Whether
it be for next semesters tuition or to buy a new laptop, if I ask my granny for money, she is
almost certainly going to give it to me. However, I can definitely see how this can inhibit my
potential for earning money in the future. I have already begun to rely on their gifts for income,
and since learning about EOC, I am determined to become financially independent.
Another concept I found useful was that of being possessed by possessions. As I
mentioned earlier, I enjoy shopping and spending money. After learning about this concept, I
realized that I myself am possessed by my possessions! Because I am still young, I havent
spent all of my money on things I cant afford, but I have always had a tendency to spend before
I even think about saving. Learning about this has made me realize that I need to be more frugal
in my life and to save money if I want to be financially secure.
One change I am going to make in my life is to increase the percentage of money from
my paycheck that I save. Currently, I only save about 40% of my paycheck in order to save up
for big purchases. My savings account is constantly being emptied because I want to buy a new
toy that I dont necessarily need. Now, however, I am going to save 60% of my paycheck in
order to create a Go to Hell Fund, savings funds for my future family, and money to put towards
investments later in life.