Edwards 1

Alisa Edwards
Personal Finance 1050
Joe Howell
06-13-14
ePortfolio
1. EXPLAIN THE FOLLOWING FOUR CONCEPTS:
BIG HAT, NO CATTLE
This concept refers to the appearance of millionaires. Most millionaires do not drive the
latest model of car, and they spend less on their clothes. They live in modest homes, and work
dull-normal jobs such as: contractors, pest controllers, and auctioneers. In other words, you
would not recognize the true millionaire standing side by side with someone in an expensive suit,
Rolex watch, Italian shoes, etc.
GO TO HELL FUND
This fund is enough wealth that a millionaire can live without working for 10 or more
years. Because of this fund, most of them have a net worth of $1.6 million and they could live
comfortable for more than 12 years. They could actually live longer than that since they save at
least 15% of their earned income.
PAW
A Prodigious Accumulator of Wealth (PAW) is someone who is worth twice the level of
wealth expected. For example, a persons net worth/wealth should be approximately twice the
Edwards 2

expected value or more for their income/age cohort, or $635,500 multiplied by two equals
$1,271,000. If their net worth is approximately $1.27 million or more, than they are a PAW.
UAW
An Under Accumulator of Wealth (UAW) is someone whose level of wealth is one-half
or less than expected for all those in their income/age category. So if the example above were
an UAW, then their level of wealth would be $317,750.
2. IN THE EXAMPLE OF THEODORE TEDDY FRIEND:
a. PROVIDE 3 REASONS WHY TEDDY IS A UAW
b. WHAT WAS THE MESSAGE TEDDYS PARENTS SENT HIM ABOUT
CONSUMER BEHAVIOR?
REASON #1:
Teddy feels the need to compensate for his blue collar upbringing. He is more
interested in his material possessions and what he looks like on the outside. He has jet
skis, a boat, and 6 cars. He is more worried about his image than anything else.
REASON #2:
His net worth should be $1,060,800 according to income last year of $221,000.
Teddys net worth is actually less than one-fourth of the expected figure. He does not
live below his means. He buys the most expensive clothes and has a lavish home.
REASON #3:
Wealth accumulation is not what motivates him. It is fear of debt collection that
motivates him. He accumulates a lot of debt, and seeing the big mortgage payment and
Edwards 3

credit cards, motivates him to work harder so he can continue to pay for those things. He
works so hard, that he never has time to enjoy the things he has.
THE MESSAGE HIS PARENTS SENT:
Even though his parents had a modest income, they were not frugal. They spent
nearly all of their income. Any extra money was used for consumption. The tax return
was spent before the check had even been received. The message they sent him was: one
earns to spend. When you need to spend more, you need to earn more.
3. MR. W.W. ALLEN, A SELF MADE MULTIMILLIONAIRE:
a. He never extended credit to people who exhibited the Big Hat,
No Cattle philosophy. Why?
b. Why did he decline a Rolls Royce?
a) He thought that people like this wouldnt be able to repay their debts. He viewed
them as people who would spend, spend, spend, in anticipation of having money
before they earned it.
b) There is nothing important in his life that the Rolls Royce would represent. He didnt
want to change the rest of his life to match his car. He believed that certain things
changed people, and that if you had one luxury item, then you would need to adjust
your other items to match that.
4. REGARDING ECONOMIC OUTPATIENT CARE:
DEFINE ECONOMIC OUTPATIENT CARE (EOC)
Economic Outpatient Care (EOC) refers to the economic gifts and acts of
kindness that some parents give their adult children and grandchildren. Distributors of
Edwards 4

EOC are usually very frugal with their own spending and life. They conclude that their
adult children could not maintain middle class status without being subsidized.
LIKE THE EXAMPLE OF JAMES, MANY EOC RECIEVERS
(INACCURATELY) VIEW THEMSELVES AS:
Self-made. They tell people that they 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 regarding wealth building is: whatever your income,
always live below your means.
5. WHAT ARE THE TWO CONCEPTS YOU FOUND HELPFUL?
a. Big Hat, No Cattle
b. Economic Outpatient Care (EOC)
HOW WILL YOU APPLY THEM IN YOUR LIFE?
Big Hat, No Cattle example: Until I read this book, I thought that only rich
people drove luxurious cars. I learned that just because you have a recent-year model
car, it doesnt mean you have made it. I am one of those that is currently leasing a car
that is above my means right now. When my lease is up, I am going to get a more
reasonable car that is a couple years old.
EOC example: I did not know that there was an actual name for this. My mother
used to supplement my income when I was first married. It was something that I was
planning on doing for my children as well, until I read this book. I now have other ways
to help my children financially, and that doesnt necessarily mean giving them money.
Edwards 5

IN YOUR OWN WORDS, GIVE YOUR THOUGHTS IN A MINIMUM OF 3
PARAGRAPHS.
I would like to expand on the concepts that I learned above. Before reading this
book, I have to admit that I thought if someone was rich, they looked rich. I had
heard of people who lived humble lifestyles, and it wasnt later in life, that others realized
they were secret millionaires. I thought that these kind of people were a rare case of
millionaires. I had no idea that the people who flash nice clothes, jewelry, and cars were
actually the ones who really dont have wealth. I am definitely going to look at people in
a different lens from now on, and not judge a book by its cover.
The EOC section really stood out to me. I come from a very hard upbringing. I
was sort of like the example of Teddy. The only difference between my parents and his,
is that my parents tried to save everything they could of their meager income. My clothes
always had patches on them, and I didnt get new shoes until they were literally falling
off my feet. I would get teased at school because of this. My mother later remarried and
was able to get a higher degree of education. This brought in more income. I was finally
able to have new clothes more often, along with extra activities outside of the home. Our
financial situation had made a complete 180.
After I married, my means had become humble again, but I still wanted the
lifestyle I had at home. My mother overcompensated for my poor upbringing, and would
give me money and gifts to supplement my income. This went on for almost 10 years of
my marriage. It became a source of income for me and my family. I am proud to say
that I am now completely independent. It took me finally telling my mom to cut me
off. I knew it wasnt helping my situation, and none of my other friends my age were
Edwards 6

getting money from their parents still. It has been the best thing. I now value the money
I earn, and I am more careful with how I spend it. I am doing better financially today
than I was when my mom was giving me gifts and money.
REFLECTIVE WRITING
Acquiring substantive knowledge in the field of their choice. I believe that I have
definitely acquired knowledge for my field of Social Work. I will be working with all types of
people, with all types of backgrounds. This has taught me not to base a persons wealth on the
clothes that they are wearing. I have always tried not to judge people on the way that look
because I was judged so harshly growing up, but I didnt realize that nice clothes were an
indicator of wealth. I have seen people who have Medicaid and food stamps, and they will drive
a really nice car or have designer clothing. I am guilty of judging them for taking advantage of
the system. I am now more aware that this is not an indicator of wealth.
Thinking critically. I feel that I have obtained enough knowledge in this course to
apply it to my own life. I always known that my finances needed some guidance, and I feel
confident that I have the basic tools to get started. It has taught me how to start and execute a
budget. I have always wanted to have a budget, I just didnt know where to start. My goal is to
purchase a home within the next year, and I feel that the skills I now have, will help me with that
goal. I am also more aware of how to teach my children when it comes to finances. I think that
if I can teach them at a young age the right way to save and spend, they will have an advantage
with managing money for the rest of their lives.