Joel Milne
Fin-1050-F16-Howell
11/15/2016
ePortfolio Assignment
1. Explain the following two (2) concepts addressed in The Millionaire Next Door:
“Big Hat, No Cattle”
“Go to Hell Fund”
The “ Big Hat, No Cattle” concept refers to people who have fat incomes and thin balance sheets meaning that just because you have a high income, it doesn’t mean that you necessarily have a high net worth.
The “Go to Hell Fund” concept refers to people who have saved enough money so they don’t need to work for more than a decade if they wanted to. They are the ones who more than likely have invested at least 15% of their money.
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).
Because Mr. Ford being the UAW that he is has more of an inclination to spend than do members of the PAW group, so he must spend a lot more of hishousehold's income to maintain and show off his family's upper-middle-class lifestyle. He puts way too much emphasis on consumer consumption than he does building wealth. I think it may have to do with his ego as well.
3. Provide short answers to the following three (3) questions:
“Most people will never become wealthy in one generation if they are married to people who
are hyper-consumers and are all about lavish spending.”
Upon giving his wife $8 million of stock, from taking his company public, what did his wife
continue doing?
She smiled and said thank you and continued to remain frugal.
Why would someone who is a millionaire need to budget?
Because being frugal and budgeting are the cornerstones of building wealth
4. In the example of Theodore “Teddy” J. Friend and his parents, answer the following two (2)
questions:
The book describes Teddy as being “possessed by possessions.” Explain this comment.
I think it means that the possessions people own, end up owning them and it often turns into a loss of control of one’s self and financial well-being.
What was the “small change” Teddy’s parents could have made that would put them in the
millionaire category?
To not be UAW’s and to take the money they spent on cigarettes and invest it.
5. Mr. Rodney is a high-income/low-net worth corporate manager. Explain why he is described as
having “sold his financial independence.”
Because at his job he was offered a matching stock purchase plan that could work out to his favor in the future but he said he couldn’t afford to spend his money on it at the time.
6. Why did Mr. W.W. Allan decline the gift of a Rolls-Royce?
Because he couldn’t wrap his mind around someone spending money on something like that. It didn’t fit his lifestyle for the outdoors.
7. Regarding Economic Outpatient Care (EOC), answer the following four (4) questions:
Explain why Economic Outpatient Care (EOC) can be harmful.
Economic Outpatient Care can be harmful because it put children in a position where they don’t necessarily have to earn the money they receive. When they never have to earn the money they receive, they never really understand the value of a dollar. They also become extremely dependant.
Explain this statement: “The more dollars adult children receive, the fewer they accumulate.”
The children who receive funds from their parents rarely invest the money, if at all. Most of the time the money is spent on frivolous items.
What is the likely financial outcome for Mary & Lamar once her Mother passes away?
More than likely, with no understanding of the value of a dollar, they will become broke and in debt.
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 to be frugal. It’s o.k. to have nice things, but you must remember to live within your means.
8. Regarding Affirmative Action, Family Style, answer the following three (3) questions:
In the example of sisters Ann & Beth, describe the consequences to Beth & her husband
from receiving EOC?
That because they are so dependent on the parent’s, they haven’t laid any ground work to start developing their own financial freedom. Because they are so dependent, if her parents get ruined financially, they do as well.
Explain the concept “weakening the weak.”
That the people who are the least productive and most dependent, receive the most help with money matters. They are the easiest to control due to their dependence on everybody for their well-being. It teaches them to not be financially responsible because others will pick up the pieces for them.
What did Ken’s father tell him often? (Be specific.)
“I’m not impressed with what people own, but I’m impressed with what they achieve. Always try to be the best in your field. Don’t chase money. If you’re the best in your field, money will find you.”
9. Explain the root cause for the conflict between Mr. W & the residents of the vacation
condominiums. (HINT: It’s not because of his dog.)
Because although they are wealthy, they both have different views on how a wealthy person’s lifestyle should be lived. The dog was just an excuse.
10. Now that you have finished reading The Millionaire Next Door, answer the following three (3)
questions in a minimum of three (3) paragraphs.
How has your perception of millionaires changed?
In all honesty, I always thought the millionaires were all extravagant spenders and didn’t need to worry about how they spend the money they do. Now I know that it takes frugality and smart spending and investing to achieve that status and once it is, the habits generally stay the same as they did that got them there.
What are the two (2) concepts you found most useful?
The two concepts that I found most useful are being frugal and smart investing. I can’t tell you how much frivolous spending I have done and still continue to do today. If I think back just over the past year and add up all of the purchases that I have made unnecessarily it would literally make me sick. If I could go back and make investments with that money, I would definitely be singing a different tune.
Give a specific example of one small change you can make to improve your financial well-being.
Becoming more frugal. I know that by doing that I can come that much closer to fulfilling my dreams for retirement. The mindset that I have of, “It’s only $10 or $20 dollars it won’t matter if I spend it, I won’t miss it, is out the door, because fact of the matter is, it does matter and it does add up. It’s a change that I not only recognized needed to happen, but have started applying it as well.
REFLECTIVE WRITING-
Communicating Effectively:
This class has helped me understand the importance of proper and effective communication. Before this class, my significant others and I’s financial goals have never really been talked about. We both have our 401k and other forms of investments however, we haven’t really implemented a budget plan or spent very frugally, we have always thought that we are headed in the right direction but the truth is, there can always be room for improvement. By communicating effectively with each other, it brought a new light and a different angle to what we both ultimately expect from one another and that has had such an amazing impact on our relationship.
Thinking critically and creatively:
This class has helped me look at different situations from multiple angles. It has provided me the tools necessary to think outside the box not only financially but with my career and relationship as well. There is always different opinions and approaches towards certain situations and events and granted, depending on the scenario, you make the best decision possible at the time. However, it’s nice to have a toolshed you can pull from and if you don’t then it doesn’t hurt to start creating one. It is with this mindset that despite what problem I may be faced with down the road I will without a doubt not only surprise myself but others as well with my ingenuity.