Finance 1050
Professor Howell
Trevor Holgreen
The Millionaire Next Door Questions
1. Explain the following four concepts address in the Millionaire Next Door.

Big Hat, No Cattle.
Big hat no cattle refers to not being flashy with the things you own.

Go to Hell Fund
A “Go to Hell Fund” is when someone has enough money to live without working for 10 or
more years.

PAW
If you are in the top quartile of wealth you are a PAW, or Prodigious Accumulator of Wealth.

UAW
If you are in the bottom quartile of wealth accumulation you are a UAW, or Under
Accumulator of Wealth.
2. Provide short answers to the following four questions:

How is wasteful defined in the book?
A lifestyle marked by lavish spending and hyperconsumption.

What is the cornerstone of wealth-building?
The cornerstone of wealth-building is being frugal and not spending beyond your means or
impulse buying.

Most people will never become a 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?
His wife told him “I appreciate this, I really do” and continued to cut out twenty-five and
Fifty cent food coupons.
3. In the Example of Theodore “Teddy” J. Friend and his parents, answer the following two
questions.

List two reasons why teddy is considered a UAW.
While he was growing up, he was among the poorest in a blue collar community and his
parents taught him to never save and to always spend

What was the message Teddy’s parents sent about consumer behavior?
One earns to spend. When you need to spend more, you need to save more.

What was the “Small change” Teddy’s parents could have made that would put them in
the millionaire category?
That they wished they would have invested more, and spent less.
4. In the example of Mr. W.W. Allan, answer the following two questions:

He never extended credit to people who exhibited the “Big hat, no Cattle” philosophy.
Why?
He did not believe that being flashy was important or showing your wealth was necessary.

Why did he decline the gift of a Rolls-Royce?
He did not want to be seen as wealthy or flashy.
5. Regarding Economic Outpatient Care (EOC), answer the following four questions:

Define Economic Outpatient Care (EOC)
Giving money to your adult children and grandchildren.

Like the example of James, many EOC receivers (inaccurately) view themselves
as________.
“self-made” They have somehow convinced themselves that they earned all the money they
have rather than it being given to them.

As illustrated in the example of Henry & Josh, what is the fundamental rule regarding
wealth building?
The fundamental rule to building wealth is being frugal. Specifically, if you want to
accumulate wealth then you need to live below your means.

Why did Laura succeed?
Laura succeeded because she had to. After her husband left her and her children alone, she
had to use the skills she had to be able to survive.
6. Regarding Affirmative Action, Family Style, answer the following two questions:

Why were Sisters Sarah & Alice so different regarding wealth accumulation?
Their “Papa” told them women had no place in the workforce. Sarah disagreed and left
home and was financially cut off by her father. Alice did as her father wanted and he
rewarded her and her husband by giving them money and gifts.

What did Ken’s father tell him often?
He told Ken “I am not impressed with what people own. I am impressed with what they
achieve. Always strive to be the best in your field…don’t chase money. If you are the best in
your field, money will find you.”
7. Now that you have finished reading The Millionaire Next Door, answer the following three
questions in a minimum of three paragraphs.

How has your perception of millionaires changed?
My perception of millionaires has changed a lot after reading this book. I always think of
millionaires as famous actors, athletes, etc. I think the biggest thing that changed for my
view is that anyone can be a millionaire, it just takes hard work. I really like that. I don’t
want to work my life away, but I also don’t want to have just enough money to scrape by.
Henry and Josh’s rule of “always being frugal” is something that I think is so important.
Growing up, my family went on a lot of vacations and we had a nice house and nice things. I
didn’t realize how much my parents saved though. Being young, I never thought about
money and I always thought about the stuff we had or the stuff I wanted. Looking back, my
parents were very frugal and very good with their money. If we wanted something, we
wouldn’t just go out and get it, we would save for it and make sure it was something
important.
After reading this book, I realize that there are millionaires all around us. It doesn’t
matter what you do for a living, as long as you are smart with your money and know how to
save, you can be wealthy and possibly even a millionaire.

What are the two concepts you found most useful?
The two concepts I found most useful were being frugal like Henry and Josh stated,
and also “Big hat, No Cattle” I think both of these are very important when it comes to
wealth and I don’t think a lot of people see it that way.
Being frugal is huge. I know a lot of people, even family members, that don’t worry
about saving and think that everything will work out in the end. They spend a lot on trips,
cars, their house, boats, four-wheelers and everything in between and they don’t look at the
big picture.
I really like the “Big hat, No Cattle” philosophy. I don’t think it is important to drive
fancy cars or have a huge house. I want nice things, of course, but having a flashy car or a
huge mansion on the hillside isn’t what is important and there is no reason for it. I would
much rather live in a modest house with nice things, than having huge, flashy house and
cars that are too expensive to drive.

How will you apply them into your life?
I think there are a few ways to apply these concepts into my life. There are so many
people that don’t think it’s important to be frugal or so many people that are wealthy or
want to appear wealthy that show off what they have.
Being frugal might be hard. But I think the best way to apply this to my life is to stick
to the budget that my wife and I have made. We don’t make a lot of money, but we get by
just fine. If we want something, we really save for it and make sure that it is something that
is worth the money. I think that is a great way of being frugal is making sure it is something
that you really want and not just impulse buying. We also try to put 300-500 dollars into
savings each month. It doesn’t seem like a lot, but it really makes a difference and every
little bit helps.
If I ever become a millionaire, or even a little bit wealthy, I will apply the “Big hat,
No Cattle” concept to my life by not being flashy. I don’t want to be seen as wealthy. I just
want to be seen as a normal guy that likes nice things. I think being wealthy and showing
your wealth can really affect friendships. People see you as wealthy and think that you can
afford to go and do all these things or pay for dinner for everyone when you go out. People
try to spend your money for you. I wouldn’t want anyone knowing how much money I have,
I would just like to be able to have a nice house and a nice car and be able to take my family
on vacations every once in a while.