Abraham Lopez

FIN 1050, Fall 2017

1. Regarding the concept of Big Hat, No Cattle:

The concept of Big Hat, No Cattle refers to people with high consumption lifestyles. They
spend all or more of their income and as a result they have no accumulated wealth. An
example would be a person that spends all his yearly income on expensive goods and
services but never save or invest their money. The Big Hat would symbolize all of the
goods and services purchased and No Cattle would symbolize the nonexistent savings
account or wealth. This concept is very relevant to the book because its important to not
only overachieve with income earnings but to excel in accumulating wealth.

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. Richard lives well below his means. As a result, he lives a comfortable life because
he strives to be financially independent. Even though he makes good money selling mobile
homes, he saves finds no need to show off his materialistic belongings. This makes it easier
for him and this makes him happy. On the other hand, Mr. Ford live a high consumption
lifestyle. His need to show his high income, results in him spending more money in suits,
car, and him home. Consequently, he never saves and therefore his net worth is
significantly less than Mr. Richard.

3. UAWs live beyond their means. PAWs are builders of wealth. Describe someone you
know who is either a UAW or PAW (or is headed in that direction) & what can be
learned from their example.
I consider my sister to be a UAW or at least heading in that direction. The other week I
spoke to her and she mentioned she had $12,000. When I asked her how, she told me she
got approved for a new credit card. She started telling me how she planned on being
responsible with the card, like setting up automatic withdrawals from her checking account.
Thinking back, I realize that I used to be very similar to her in the sense that we shared
similar views on credit cards. It was interesting to listen in on how she was able to
rationalize how a credit card is a must and how its an important tool to build your credit.
My biggest takeaway from this conversation is that so many people have the wrong
paradigm when it comes to credit cards. I realize Its important to have personal finance
knowledge because it helps you see the bigger picture. As a result, this helped me see the
situation completely different and now Im more motivated for financial independence.
4. Provide short answers to the following three question:
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?
The $8 million dollars worth of stock didnt change her. She went back to cutting
her coupons and she remains a PAW.

Why would someone who is a millionaire need to budget?

According to the book, the majority of the millionaires are PAW and have strong
habits for budgeting and investing. Thats how they became millionaires in the
first place and continue to budget to maintain their financial independence.

5. In the example of Theodore Teddy J. Friend and his parents, answer the following
two questions:
The book describes Teddy as being possessed by possessions. Explain this
comment.
Teddy has the misconception that the goods one possesses determines your
financial success. As a consequence, Teddy is always buying the latest and
greatest to show how successful he is. The quote signifies that Teddy will always
live a high consumption lifestyle because he has a need to show his worth.
What was the small change Teddys parents could have made that would put
them in the millionaire category? (Be specific).
They couldve set a better example by budgeting, saving, and investing. Instead
they always spent all of their income and never saved; thus Teddy grew up with
bad spending habits.

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 has sold his financial independence because of all his expensive
possessions. He has two houses, leased cars, and other services. This has him working
only to pay for high consumption lifestyle. This holds him back from investing and
saving. As a result, he missed an opportunity to buy stocks from his employer that were
also going to be matched up to a certain percentage. Thus, Mr. Rodney Sold his
financial independence.
7. If your goal is to become financially independent, what should your plan be? (Be
specific).
The only way to become financially independent is for me to develop good spending and
saving habits. I have to learn how to budget more effectively and save. Im aware that I have
to change my current lifestyle consumption because at times I purchase goods that are
Wants and not Needs. Its going to be hard not buying stuff I want now, but the savings
will pay off in the future.

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

The reason Mr. W.W. decline the gift was because he felt it didnt fit in his lifestyle. He
was also aware that if he accepted the gift it could lead to other bad spending habits;
this potentially includes buying the next years model and so forth.
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?
Due to their high consumption lifestyle they will struggle because theyre
accustomed to living that way. If they get an inheritance, it wont last long because
its now two of them spending heavily without their mothers source of income.
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 Ms. BPF wasnt confident about her future. This was most likely a
result of all the help she received from her parents. This hindered the normal
development of business skills she wouldve acquired if she didnt receive so much
financial help.
In the case of Laura (A Woman of Great Courage), explain the primary message
derived from her story?
The primary message from the story is that no matter what happens in life, you have
the power to choose your outcome. In the case of Laura, her husband left her for his
secretary. Laura being a strong person, she responded in a proactive way. Instead of
giving up on life and feeling pity for herself, she decided to do more with her life. As
a result, she became a successful business owner.

10. Regarding Affirmative Action, Family Style, answer the following two questions:
In the example of sisters Ann & Beth, describe the consequences to Beth & her
husband from receiving EOC?
Beth and her husband are financially dependent on Beths parents. As a result,
they have to accommodate their needs and sacrifice a few things in order to
maintain the financial help they get. The consequence of this is that Beths
husband is treated poorly by the parent, but because theyre so dependent on
them; theres nothing they can do.
Select one of the Rules of Affluent Parents & Productive Children & explain
why you think this rule is important.
The rule I chose is, No matter how wealthy you are, teach your children
discipline and frugality. The reason I think this rule is very important is because I
believe conditioning when you are young is very important. Kids look up to their
parents while growing up, many pick up good and bad habits from their parents.
If theyre taught at a young age discipline and frugality, its very likely that it will
stick with them when they grow up.

11. Explain the root cause for the conflict between Mr. W & the residents of the vacation
condominiums. (HINT: Its not because of his dog.)
Mr. W is considered a PAW. He has a net worth of $30 million and he owns various
companies that produce industrial equipment. Hes also in the business of real estate.
Consequently, he bought a condominium where he and his family would stay, this
 included his dog as well. He passed out flyers before the construction began informed
future tenants that his dog would be living there. After a while, the tenants banded
together and decided that no dog over 15 pounds was allowed. This made Mr. W furious
because he believed the dog wasnt the issue but instead it was the appearance of his
family. The tenants didnt consider them beautiful people. Eventually they formed a
committed and harassed Mr. W to the point where he threated to give his
condominiums to his factory line workers. This quickly scared the tenants and they
allowed him to keep his dog. Eventually Mr. W left because he didnt want to be
surrounded by people like them.
12. Now that you have finished reading The Millionaire Next Door, answer the following
three questions in a minimum of three paragraphs.
What are the two concepts you found most useful? Explain Why.
Five a specific example of one small change you make to improve your financial
well-being.
The first concept I found useful was, living below your means. I chose this concept
specifically because Im the complete opposite. This is the hardest one for me, but I now realize
that its one of the most important habits to develop. I usually dont tell myself No when I
want something. Im able to rationalize that I deserve it and therefore I need it. Looking at the
bigger picture, I realize that living below my means now, will result in a more comfortable life in
the future.
The second concept that stood to me was learning about the importance of budgeting
and practicing it. To be completely honest, I dont budget whatsoever because I never saw a
real need for it. Upon understanding the concept in a deeper lever. I realize that budgeting is a
good habit that will benefit me greatly in the future. I think the structure aspect helps identify
what you really need and dont need. This in turn helps keep you disciplined and resist the
temptation of impulse buying.
One thing Im currently doing is building a budget every two weeks. Im not rushing into
this because I know its something I consistently have to do. Therefore, my budget at the
moment is somewhat high. My plan is to apply both concepts I mentioned above, this includes
budgeting below my means; by doing this, I can consistently save money. The specific thing Ive
done is opened up a shared savings account, and named it Emergency Fund. I did this in order
for me to not spend the money in that account. My plan is to save 15% of my biweekly check
and deposit the funds into that account. I hope in the long run; I can use a percentage of the
savings to invest in stocks.

Reflective writing:

Students develop quantitative literacies necessary for their chosen field of study:
Reading The Millionaire Next Door, was a very insightful learning experience. It
completely changed the way I look at spending and helped expand my vocabulary with financial
terms. Im still undecided If I want to pursue Marketing or Finance. But regardless, the literacy I
learned while reading the book will help me in any business field.

Students think critically and creatively:

 This learning outcome was the one I gained the most knowledge from. I say this because
I had to think critically about many concepts the book introduced. Before I read the book, my
overall views on spending was greatly skewed. It was almost a personal dilemma when I read
the first few chapter because I didnt want to believe what the book was saying. At times, my
stubbornness got in the way to the point where I was dissatisfied with the book. I had to learn
to think critically and creatively in order to shift my parading on how I look at spending. It was
hard at first, but eventually with enough practice I was able to understand and accept the
concepts that the book was teaching.