The Millionaire Next Door Response Paper

The Millionaire Next Door Response Paper

Jordan Benzon

Finance-1050-Sp15 Howell

4/13/2015

The Millionaire Next Door

1.

Too me the " Big Hat, no Cattle" phrase simply entails exactly opposite of this phrase, "If you got it flaunt it", or portrays a similar meaning as the phrase "All bark and no bite". Many people try to show what they have even if they do not have it, even myself at times have fallen into this trap. But it is not only trying to be something you are not, it also includes simply showing you have a lot by buying expensive things and letting everyone else see them, and then losing out in the long run due to all of the expensive purchases.

The " Go to Hell Fund" in a nutshell is simply just a savings account that has enough in it to last you for many years. Since history repeats itself, we can without a doubt know, that one day again the economy will collapse causing turmoil and suffering, or in other terms, send a bunch of people to hell. So without this fund, if you get sent to hell, there will be almost no way to get a "Get out of hell card" that lets you continue playing. I have learned from my family that before investing your money make sure you save enough.

PAW, in terms of what the book has supplied, is simply an individual or couple, who live well below their means, and accumulate a large portion of their money, and save/ invest it. This not even necessarily being for the future. Nor does it exclusively mean someone who has a high income and only uses a small portion of it. It can also mean someone who has an average income but spends it very wisely, and overtime increases their Net-worth by investing and saving.

UAW, has the meaning of any individual, with or without a Large income, who unwisely manages their money, and overtime loses out on large gains due to poor budgeting in the first place. The individuals categorized in this category usually fall under those who purchase items which they cannot afford to simply show status. It is also those who have a high income but in the same sense use a large portion of their income to live a "High Pleasure Life" while they work.

2.

In the book, the term deemed "Wasteful", is defined as one who lives a , "lifestyle marked by lavish spending and hyperconsumption." Or in other words one who enjoys spending money to purchase items which are high in price and not 100 percent needed. For example maybe one who simply needs a car to get around, but instead of buying just a car, they buy the nicest sports car they can find. By doing this they throw out more money than was actually necessary, furthermore, they wasted money that could have been invested.

From reading and listening to the book, the thing that stood out to me as the "Cornerstone of wealth-building" was being very careful of what you spend. I guess the book calls it being frugal, but that term seems to have a low connotation to it. I think that it is buying the necessities at a good price, and using the rest to place into savings and or investing it. In a nutshell spending as little as is possible.

“Most people will never become wealthy in one generation if they are married to people who are ______.” ANSWER: UAWs

She simply continued clipping out coupons for the shopping.

3.

One of the two basic reasons Teddy is considered a UAW, is because he was influenced by his parents in; 1. seeing them never save any money and living from pay check to paycheck , and 2nd constantly having the image in his own head that "being better off" was having more nice possessions. This was also influenced possibly by seeing many of the "Wealthy Student's" possessions while attending High School.

His parents were very high consumers, and as the book mentioned any income they had or would have, was used immediately. Thus causing them to seem to have even less than they really did. They showed him that buying was more of a necessity than was saving.

If Teddy's parents would have used the money they used for cigarettes to invest in that cigarette company, they would have been placed into the millionaire category.

4.

He said that it was because if they have the attitude of always spending, then they will never ever be able to repay him.

According to Mr. W.W. Allan, the reason he did not except the free Rolls-Royce was because it did not represent anything he stood for. He did not like showing his money, he enjoyed saving it.

5.

It is the Gifts that wealthy parents, grandparents, give out to their children and grandchildren to either help their children exceed when they are struggling or to avoid certain taxes.

They view themselves as "Self-Made".

Ok, so specific can either be a single word that is quick and precise, or it can be a statement which gives a large amount of detail. Since I am not sure which one you want me to shoot for I will do both. 1. Frugal. 2. It was of course based on their standard of living. Josh, being a school teacher lived in a cheaper residential situation, thus he had no need to drive the best car or have the nicest house, and being a teacher he did not have to have the nicest clothes. This helped him become frugal. Whereas on the other Hand his brother Henry was a lawyer, and with his title, was required to have nice possessions which are very costly, such as a nice suit, car, house etc.

Laura succeeded because she was always very frugal in her purchases despite being very affluent. Also, something that stood out to me is that rather than complaining she would keep a good attitude and try to find a fix. I think attitude can build money!

6.

The largest difference between Sarah and Alice was their individual attitudes. Sarah, despite not having any gifts from her father was determined to become wealthy and through hard work and diligence was able to prove to herself and others that she could do it. With this will she was able to accomplish it, and along the way learned for herself the way to do it. Whereas her sister relied almost solely upon the help of her father, and knew that daddy would back her up if she spent too much. Again success is in the attitude.

Ken's Father told him to be the best in his field and to not chase money, and that if he does so the money will find him.

7.

How has your perception of millionaires changed?

Since reading this Book my Ideas of Millionaires has quite change. Growing up one of my close Brother-in-laws, whom I lived with for a little while and was a financial advisor, always told me these things. He frequently said, " A real Millionaire would surprise you Bro." He mentioned time and time again how they lived below their means and the reason I would be surprised would be because I would never be able to physically see their MILLION DOLLARS in anything they owned. Even then I did not believe him, but he always told me of his very wealthy Uncle who is the Owner of the " Rainbow Vacuum Company". He would say how he did not drive a fancy car, but would rather drive his old broken pickup truck because he liked it. But for some reason while I was younger that image never clicked as it did until after I read this book.

Another thing changed in my mind was how to invest. I had always thought it was a good idea to invest, but one thing that stood out to me was to give up something small I enjoy, and with the savings there invest it into that company. It seems like many financially successful people do things like that.

The book also showed me how much less status is shown by possessions but rather by personal drive and hard work. Heck it shows in many religious and historical texts that when a group of people got rich, and started to show they were rich to others and grew pride, that civilization would fall.

What are the two (2) concepts you found most useful?

In this book there were many concepts that proved useful for me, but I specifically found two that I needed to watch out for. I have never seen myself in the lower quarter, or in the middle, or even the top, but rather the upper 3/4 range of the spectrum of life. And so I have tried to live a life that would allow me to show I was in that position, not the best but not the worst. But these two things helped me find the best way to change.

First the idea that those who have wealth should not show it for praise. I am not "wealthy" by any means being so young, but I like nice things, nice is not bad, but expensive is. From reading this it has really helped me see how I want to live my life and how to better achieve it. I know that I can achieve a decent income, but through reading this I have realized in order to be in the "PAW" category I need to become more frugal.

Second is probably the largest, and it was the way to invest. I mentioned it in the last section a little bit, but the idea of limiting myself on a small expense that I enjoy such as Buying Dr. Pepper, and rather investing it into a Decent company. By doing so I will save money on my health, and on the drink itself, and then have my net worth grow by the interest of my investments.

Reflective writing

I have to be honest, doing this paper really did not help me develop any the SLCC Learning outcomes, they had no relationship with this paper. But I can tell you what it did help me with. It helped me plan for my future and create a more stable and secure Idea of what I need to do so that I can support a family. It created a foundation for my future, and started me thinking about some things in my future earlier than I would have thought about them if I did not have this class. This including; Place of desired residence, Place of desired profession, Style of living, and how to secure a stable retirement.

The only other thing that this paper might have helped with which is listed in the SLCC Learning Outcomes list is, "how to communicate effectively" with myself, by helping sort out my thoughts of what I truly desired, and not what the media decided I wanted. And lastly it helped me think Critically and creatively about my future and what I need to do to get there. This reflective writing made me think creatively because I had to figure out what to say in order to write it . :)