Questions: The Millionaire Next Door

1.	Explain the following four concepts addressed in The Millionaire Next Door.
“Big Hat, No Cattle”	Meaning a person who has the looks of a very successful life, but who is living paycheck to paycheck with a small net worth.	
“Go to Hell Fund”	Enough wealth saved up to live without working for ten or more years and being able to live comfortably.	
PAW	Prodigious accumulators of wealth are the best at building net worth compared to others in their income/age category.	
UAW	Under accumulators of wealth tend to live above their means; they emphasize consumption, and tend to de-emphasize many of the key factors that underlie wealth building.	
2.	In the example of Theodore “Teddy” J. Friend:
•	Provide three reasons why Teddy is considered a UAW.
•	What was the message Teddy’s parents sent him about consumer behavior?
Reason #1	Teddy is a consumer not a saver; he has two boats, one jet ski, and six automobiles. He also is a member of two country clubs and wears a watch that cost over $5,000. He always buys his clothes from the best stores and has a vacation condo.	
Reason #2	Wealth accumulation is not what motivates him and he firmly believes that if he were really wealthy he would not be a top-income generator.  Instead of wealth accumulation to motivate himself he uses an increasing level of debt-based fear.	
Reason #3	Teddy works for things. His motivation and his thoughts are focused on the symbols of economic success. Thus, he is feels a constant need to convince others of his success.	
Parent’s Message	His parent’s spent when they had money, stopped when they didn’t, and only saved when necessary.	

3.	In the example of Mr. W.W. Allan, a self-made multimillionaire: 
•	He never extended credit to people who exhibited the “Big Hat, No Cattle” philosophy. Why? 
•	Why did he decline the gift of a Rolls-Royce? 
Philosophy	The wanted credit may have had the necessary assets but Mr. W.W. Allan knew that people whose philosophy was based on “Big Hat, No Cattle” their character made it an enormous risk.	
Rolls-Royce	Unlike most wealthy people Allan didn’t flaunt his riches. Even though it was a gift he felt that money shouldn’t change someone’s values.	

4.	Regarding Economic Outpatient Care (EOC)
•	Define Economic Outpatient Care (EOC).
•	List three (3) reasons EOC can be harmful to the recipient?
Define EOC	Giving money to your adult children.	
Reason #1	It can hurt the child's ability to get their financial life together. Thus, causing them to remain semi-dependent on their parents.	
Reason #2	The adult can adjust their life based on the EOC money and expect it. 	
Reason #3	The adult will more than likely spend the money instead of investing it in to a savings account or stocks.	
5.	Thoughts on The Millionaire Next Door
•	What are two concepts you found most useful?
•	How will you apply them to your life?
•	Additional thoughts.
        I thought the book was interesting and fun to read.  It had many useful concepts and gave me things to think about. I know I would like to acquire some wealth but like Mr. W.W. Allan, I don’t want it to change the things I value. I think he showed me how to during this book.  No, I don’t think I would give up a Rolls-Royce but I do know that I will always want to ski, go to the beach, and fly fish because I value my time spent doing those activities.  The way he thinks about wealth and life is so unique and is the perspective I would like to acquire. That was probably one of my favorite concepts in the book.
        The other concept I found to be enlightening was how economic outpatient care could be harmful. As a person that plans on becoming wealthy and having children, this made me think.  I have never thought of EOC as a bad thing until I read this book. I know I will want to spoil my kids to death but I now realize that I can only do it so much or at least up to a certain age.  With EOC it also applies to myself. If I receive money from my parents I will, hopefully, be aware not to take it and squander it on luxury items or to rely on the handouts to pay for items I have previously said I could pay for.  But I also believe that EOC can be good especially when it comes to education.
        Even though I found I disagree with parts of The Millionaire Next Door, I have found it enlightening and applicable to my life.  I will probably remember the different concepts and use the knowledge that has been made available to me in future decisions.  The book was one of the most useful school-assigned books I have read so far.  I hope to continue to find use for it.	

Reflective Writing: 
        The Millionaire Next Door is an effective book because not only do you learn about finance but you gain other abilities while reading the book. In school you gain a vast knowledge of a variety of subjects.  The Millionaire Next Door has helped fill a gap in my knowledge by teaching me about the effects of wealth and how to gain it.
        It is a book in which you must think about what you read. Unlike the books I typically read, reading The Millionaire Next Door I noticed that I would constantly need to think about what I was reading and how it applied to my own life.  Not only did the book give me useful tips when it comes to wealth, it also has helped me develop my ability to think critically.