Thomas Robinson

The Millionaire Next Door Questions

1. Explain the following two (2) concepts addressed in The Millionaire Next Door:

Big Hat, No Cattle

Go to Hell Fund

Big Hat, No Cattle, is an expression used in the book that describes how people use their
wealth. There is an example of how the owner of a diesel trucking company drives an older car
and wears older clothes but has a lot of wealth because he does not spend a lot of money on
liabilities and luxuries. This man describes himself as not having a big hat, but having a lot of
cattle. A Person with a big hat and no cattle might have money, but not as much as they could
because they spend so much money on luxuries hence the expression, Big Hat, No Cattle. The,
Go to Hell fund, is basically a fund with enough wealth accumulated over many years that the
person who owns it could live comfortably on this fund for at least 10 or more years.

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. Richards is described as a Prestigious Accumulator of wealth or PAW. Mr. Ford is described
as an Under Accumulator of wealth or UAW. Both men make a nice yearly income. However,
Mr. Richards, the PAW, is more concerned with being frugal and saving as much as he can while
investing wisely. Mr. Ford is more concerned with maintaining his lifestyle and owning a lot of
luxuries and liabilities such as houses and cars. Mr. Ford is also not as wise as an investor as Mr.
Richards is. The value of being frugal and investing wisely is the reason why Mr. Richards has a
net worth five times as much as 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 ______________.
Upon giving his wife $8 million of stock, from taking his company public, what did his
wife continue doing?
Why would someone who is a millionaire need to budget?

Most people never become wealthy in one generation if they are married to people who are
wasteful.

Thomas Robinson

Even though his wife gained $8 million in stock, she continued to live frugally by saving as
much as she can when she can. The book mentions his wife using coupons or buying alternative
products to popular brands.
A millionaire needs a budget because their resources will never outweigh their wants. Even a
millionaire can go broke. There have been plenty of professional athletes that were millionaires
that are now broke because of poor spending habits and being wasteful. A millionaire still needs
to live within their needs.

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.
What was the small change Teddys parents could have made that would put them in
the millionaire category? (Be specific.)

Teddy is, possessed by possessions, because he is most concerned with the possessions that he
has and the things that he wants. Teddy lives outside his income due to bad spending habits.
Teddy has accumulated a lot of debt because of his bad spending habits which can be devastating
to his credit and future.
Teddys parents could have encouraged Teddy to save and invest his money instead of allowing
him to develop poor spending habits. If Teddy was educated on investing, saving, and being
frugal then he could have ended up in the millionaire category.

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 sold his financial independence by overconsuming. Instead of living within his
means, Mr. Rodney chose the purchase multiple homes, vehicles, and other liabilities. Mr.
Rodney is running on an earn-consume treadmill where all of his money is just going to things to
maintain his lifestyle. Due to his financial choices Mr. Rodney was unable to take advantage of
the stock investment opportunity at his company because of his financial choices. Mr. Rodneys
financial habits do not give hi financial independence since he is always paying for liabilities.

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

Thomas Robinson

Mr. W.W. Allan declined the Rolls Royce because it made him feel uncomfortable and did not fit
his lifestyle. Mr. W.W. Allan had become so used to being frugal that he simply would have been
out of place driving a Rolls-Royce.

7. Regarding Economic Outpatient Care (EOC), answer the following four (4) questions:

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

Explain this statement: The more dollars adult children receive, the fewer they
accumulate.
What is the likely financial outcome for Mary & Lamar once her Mother passes away?
As illustrated in the example of Henry & Josh, what is the fundamental rule regarding
wealth building? (Be specific.)

Economic Outpatient Care can be harmful because it might put pressure on the recipient to live a
more luxurious lifestyle than they are used too. Someone who inherits a lot of wealth might start
spending it on things that they cannot afford and begin to live out of their means. The wealth
that is inherited also creates a false sense of financial security. The new owner of the wealth
might spend money carelessly because the think that they will still have a lot of money after
spending.
The statement, The more dollars adult children receive, the fewer the accumulate, simply
means that after getting used to living off of their parents money, an adult child might not see a
reason to create their own wealth. Adult children might believe that their parents are going to
continue and pay for them forever so the more money that their parents give them the less money
that the will have to earn on their own.
The financial outcome for Mary and Lamar is pretty unclear. Once their mother passes it will be
unclear how much money is in her trust fund and the lifestyle that they are maintaining most
likely wont be obtainable anymore. Mary and Lamar consume so much and have so many
materialistic things that they will eventually run out of money to pay for their lifestyle after her
mother passes and they have to start paying for things themselves.
The fundamental rule of wealth building is living below your means. By living below your
income you are able to save more money and invest more money. Building your wealth can
simply be done by not buying things that you do not need and being frugal with the things that
you do need.

8. Regarding Affirmative Action, Family Style, answer the following three (3) questions:

Thomas Robinson

In the example of sisters Ann & Beth, describe the consequences to Beth & her husband
from receiving EOC?
Explain the concept weakening the weak.
What did Kens father tell him often? (Be specific.)

Beth and her husband have all sorts of consequences from receiving an EOC. Beth and her
husband live under control of Beths parents because of finances. Beths parents believe that
Beth and her husband would be unstable without them and because of this Beth and her husband
are always living under her parents means and are unable to maintain and control their own
lives. They could be considered to be on a financial leash.
Weakening the weak, can be described as a form of enabling. Instead of a child getting the
proper help they need they are just enabled or given an incorrect solution. An example could be
Beth and her husband in the book. Instead of being given the resources and advice to help them
start their own wealth and live their own life they are just weakened because Beths parents do
everything for her. Beth is further weakened by this solution because she becomes even more
dependent on her parents and does not possess any knowledge or skills on how to live her own
life or manage her own finances.
Kens father always said, I am not impressed with what people own. But I am impressed with
what they achieve. I am proud to be a physician. Always strive to be the best in your field. 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 conflict existed because the residents of the vacation condominiums were upset with the
appearance of Mr. W. They were upset that they would go on vacation and feel less elegant
because of Mr. W. The residents just used the dog as a reason to try and get Mr. and Mrs. W. to
leave.

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
wellbeing.

Thomas Robinson

Before I read this book I often felt lie millionaires had it easy and did not have to make the
financial sacrifices that the middle and lower class people have to make. After reading this I was
shocked on how wrong I was. It seems like the wealthiest people are often the most frugal. I
could be walking down the street and see someone in some old clothes but they could still be a
millionaire. Being a millionaire does not have an image like I originally thought. Being a
millionaire is almost about having a certain mentality. My original perception of a millionaire
was a fancy man and woman that live in a big house. However, now I see that this is incorrect
and being a millionaire is more about developing good financial habits and not necessarily being
concerned with materialistic things.
One of the most important concepts I found in the book was being frugal. I often like to
spend money on the nicest clothes, the nicest phones, etc. However, I realize that I can be better
off if I value being frugal. If I buy cheaper clothes and have older phones then I will have more
money to invest in things that will make me real money. This concept does not only apply to me
right now, but also in the future. If I were ever able to make a nice yearly income I would try and
live below my means. By doing this I can be a lot safer financially and will be able to stretch my
wealth a lot further. The other concept I found important was how EOCs can be harmful. I have
am very grateful that my parents have supported me throughout my life. At the age of 19 I am
able to have some very nice things because of how hard my parents work. However, I realize that
it is important for me to develop my own finances and educate myself in financial literacy. I have
seen how being dependent is a bad thing and the concept of EOCs opened my eyes on how
important it is to develop your own financial skills.
A way that I could improve my financial wellbeing would be to start living below my means.
I have a job. However, I have a car payment and other bills and I should try and cut my bills
down so I have more money to invest in things like a home later on in my life. Living below my
income will also help reduce stress about making payments and being able to afford things.