Amber Rector

FIN 1050
Millionaire Next Door Questions
E-Portfolio Assignment

1.
a. Big Hat, No Cattle playing the part of a person that has wealth or money, but not actually
having any. Big Hat means a person that wears a cowboy hat and acts like a cowboy or
dresses in expensive clothes and drives/lives in a nice car and house. No Cattle is not really
having any cows to back up the playing the cowboy roll. It would translate to not having any
accumulated wealth, spending what you earn.
b. Go To Hell Fund is the ability to financially survive for 10 years without working. It stems
from being able to tell your employer to go to hell when they want you to do something
that you dont want to. You would inevitably lose your job, but that is ok, because you have
your go to hell fund.
c. PAW- Prodigious Accumulator of wealth, people that are in the top 25% of wealth
accumulation. They tend to be frugal and use budgets, you mostly cannot tell these people
are wealthy by the way the dress or live their lives.
d. UAW- Under Accumulator of Wealth, people that are in the bottom 25% of wealth
accumulation. These people tend to make to spend, they earn large incomes but have little
to no savings or investments. They dress the part and live a lifestyle that is typical for a
wealthy person.
2.
a. How is wasteful defined in the book?a lifestyle marked by lavish spending or
overconsumption
b. What is the cornerstone of wealth-building? Being Frugal. Budgeting/planning
c. Most people will never become wealthy in one generation if they are married to people
who are? Wasteful
d. Upon giving his wife $8 million of stock, from taking his company public, what did his wife
continue doing? Cutting Coupons
3. In the example of Theodore Teddy J Friend
a. Provide three reasons why Teddy is considered a UAW
i. He is more concerned with competing with others in regards to things then to
save.
ii. He intentionally racks up high credit to force himself to work harder.
iii. Even though he spends lots of money on consumer goods, he doesnt not spend on
financial advice.
b. What was the message Teddys parents sent him about consumer behavior?
i. Having things and making other people believe that you had a lot of money by
having a lot of things was important.
4. In the example of Mr. W.W. Allen, a self-made multimillionaire:
a. He never extended credit to people who exhibited the Big Hat, No Cattle philosophy.
Why?
i. He believes they are unable to pay their debts, because they spend before they
have the money.
b. Why did he decline the gift of a Rolls-Royce?
i. It wouldnt fit into his lifestyle. He couldnt take it fishing or to the restaurants he
frequented. He didnt want his employees to feel exploited, that he was making a
ton of money at their expense.
5. Regarding Economic Outpatient Care
a. Define Economic Care (EOC)
i. Financial gifts and Acts of Kindness that affluent or wealthy provide to their adult
children and grandchildren.
b. Like the example of James, many EOC receivers (inaccurately) view themselves as?
i. Self-Made or I did it on my own
c. As illustrated in the example of Henry and Josh, what is the fundamental rule regarding
wealth building? Be specific.
i. Living below your means. Josh depended on his parents gifts to subsidize his
spending habits. Henry was never dependent on his parents money. In fact he had a
small salary but spent well below what he made.
d. Why did Laura succeed?
i. Her parents taught her to be independent. She was taught to be frugal and still is
even though she is financially successful.
e. Why were sisters Sarah and Alice so different regarding wealth accumulation?
i. Sarah didnt receive any EOC from her Papa while Alice was very dependent
financially on Papa. Alice never learned how to be independent. Sarah moved
away from her father and learned how to survive on her own.
6. Now that you have finished reading The Millionaire Next Door:
a. What are the two concepts you found most useful?
i. Budgets are important and both parties in the marriage need to abide by them
ii. Providing EOC for children doesnt benefit them in the long wrong.
b. How will you apply them into your life?
i. I am going to start trying to budget my finances better, and ask my Husband to do
the same. We need to sit down together and come up with some realistic financial
goals.
ii. I dont know if when my children are older, I will be in a position to provide any
significant EOC, but if I do, I will not freely give my money to them. It will have to be
earned.
c. In your own words, give your thoughts in a minimum of 3 paragraphs.
I enjoyed this book, and look forward to trying to implement some of the ideas into my own life.
I like the thought of reducing the income tax burden by reducing the amount of realized income. I do
participate in my companys retirement plan. They contribute 9% while I do 5%. I am getting a 3% raise
this month and I think I am going to increase my contribution to 6%. I was completely unaware that the
estate tax is 55% and I think that is unfair. I like the idea of a couple reducing that burden by giving gifts
to their heirs before death.
My husband and I have a fairly high income yet we have nothing to show for it. I would
say we are UAWs. We dont budget and we spend what we want. The only investing that we participate
in is through our companys retirement plans. Now that we have a family and are in our thirties, I think it
is time we buckle down and get serious about our finances. We both have a set of grandparents that
would be considered PAWs, but our own parents are not wealthy, frugal or disciplined. I want to
make sure that we raise children that will be financially independent and can take care of themselves.
I know that it is possible for most people to invest and save some of their money but this book
was published in 2006 before the most recent crash of our financial markets. The cost of living, even a
minimalist lifestyle, is increasing at a rate much higher than salaries are increasing. A lot of American
households dont have the luxury of a stay at home parent that can cut coupons and be thrifty or frugal.
It takes both salaries to make the mortgage, car payments, put food on the table and clothes on their
familys backs. While I understand the importance of saving, investing and living below your means, that
is not always possible even when people dont live lavish lifestyles.
The other thing I personally disagree with is having children and living so frugally to save for
your own retirement, that you are not doing fun things with your children or family. The book doesnt
mention what any of the frugal families do for fun or entertainment. While I dont think taking Disney
vacations every year is a good idea, I do think children need adventures and need to be taught about
other cultures and parts of their own country. I dont spend heavily on clothes or jewelry, but when my
children need or want things they do get them.
I really did enjoy the book and learned many lessons. It has forced me to open my eyes about
my own financial situation.



Reflective Writing

My field of study is business, I have not decided if there is a specific avenue that I will go down yet, but
this assignment and the text The Millionaire Next Door has given me some insight into a couple of
possibilities that a business degree could lead me to. I like numbers and dealing with money, in school I
was always the treasurer in whatever organization I was involved with. I could go into accounting or
finance and utilize some of the ideas this book provided, such as ways to legally reduce income tax.
The text The Millionaire Next Door helped me to develop critical and creative thinking skills. It put a
different perspective on money and what it does for people. Just because two people were born into
and raised by the same family doesnt mean, they will have the same financial outcome, it is what you
make of it. The text also is making me look at my own life and decide where I want my future to be and
what I need to do to get there.