Sarah Bailey 5/13/15ePortfolio Assignment

Explain the following four (4) concepts addressed in The Millionaire Next Door:

1. Big Hat, No CattleThis saying is a way to describe a person who looks the part but does not have the actual means. It also means someone who has the means but does not look the part based on social expectations. 2. Go to Hell FundThis fund idea determines how long you can sustain your life style without working. It is calculated on the amount of wealth you have accumulated divided by how much you spend each year. 3. PAWP.A.W stands for Prodigious Accumulator of Wealth. These are the people who have doubled the amount of their expected net worth and continue to build wealth. They live well below their annualized income and make the most out of every dollar they receive. 4. UAWU.A.W stands for Under Accumulator of Wealth. These are the people who, despite their annualized income, do not meet their expected net worth. This is because they spend just about as much as they make in a year to sustain their life style and rarely attempt to build their net worth. Provide short answers to the following four (4) questions:

1. How is wasteful defined in the book?

They define wasteful by making a comparison to its monetary antonym. If being frugal is not wasteful then the opposite is defined as being wasteful. This would mean that a lifestyle of liberal spending and over consumption is considered wasteful.

2. What is the cornerstone of wealth-building?The cornerstone is being frugal. You can only build wealth if you spend less than you make and make wise decisions with how your money is being spent. 3. Most people will never become wealthy in one generation if they are married to people who are ______________.Wasteful4. Upon giving his wife $8 million of stock, from taking his company public, what did his wife continue doing?She thanked him and continued cutting out coupons. In the example of Theodore Teddy J. Friend and his parents, answer the following two (2) questions:1. List two reasons why Teddy is considered a UAW.Because his net worth is lower than the expected for his age and annual income. He is also a hyper consumer with a lavish lifestyle who works for possessions and not building wealth. 3. What was the message Teddys parents sent him about consumer behavior? Despite their income, his parents still spent nearly all of their income instead of saving, investing or building wealth. Any additional money or anticipated money was already allocated for consumptions. His parents taught him that you make money to spend money. 4. What was the small change Teddys parents could have made that would put them in the millionaire category? If they had invested their cigarette money. In the example of Mr. W.W. Allan, answer the following two (2) questions:

1. He never extended credit to people who exhibited the Big Hat, No Cattle philosophy Why?

Mr. W.W. Allan believed that these individuals would not repay him because they are hyper consumers who spend money before they even have it.

2. Why did he decline the gift of a Rolls-Royce?

He believed that societys pressure in products of distinction would not stop at just one product. If you have one, you will have to get another. This, he believed, would lead someone down a consumption path that would alter their lifestyle which is why he declined the temptations of a Rolls-Royce. Regarding Economic Outpatient Care (EOC), answer the following four (4) questions:1. Define Economic Outpatient Care (EOC).EOC is financial support from parents or grandparents to adult children and grandchildren. 2. Upon learning his parents were donating their property to the local private college, describe Jamess reaction?James reacted as a typical dependent of EOC. He perceived his lifestyle was threatened because he depended on yearly financial gifts to cover his expenses. 3. Why was Jamess response predictable?Because he grew accustom to financial assistance from his parents. 4. As illustrated in the example of Henry & Josh, what is the fundamental rule regarding wealth building?Live below your means. Even though Henry made less annually, he saved, invested and grew his net worth. Josh and his wife consumed to the point that they were depended EOCs and despite making more annually, they had less net worth than Henry. Regarding Affirmative Action, Family Style, answer the following two (2) questions:1. Why were sisters Sarah & Alice so different regarding wealth accumulation?Their dad taught each of them different traits when it came to money. He encouraged Sarah to fish for herself while he supported Alice into her adulthood making her become an EOC dependent. 2. What did Kens father tell him often?I am not impressed with what people own. But I'm impressed with what they achieve. I'm proud to be a physician. 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. (Thomas J Stanley, Ph.D, William D. Danko, Ph.D)Reflective WritingCompose 2-3 paragraphs explaining how completing this assignment helped you achieve at least two (2) of the SLCC Learning Outcomes.Remembering is one of the most important things we can do. We can review something over and over but if we do not remember it, we did not really learn it. Evaluating my own life and how I treat money is a good reminder of some of the financial principles I have reviewed in the past but maybe have forgotten. This assignment helped me to think about what I was reading and how it will impact my life. By being able to put down in words and communicate my impressions of the book it has helped me to critically analyze and understand the principles. I loved this assignment because I was able to connect it to my own person story in a creative way but still complete the assignment. Now that you have finished reading The Millionaire Next Door, answer the following three (3) questions in a minimum of three (3) paragraphs.Princesses, fairies and talking mice, these are the play characters of a little girls imagination. At the age of two I had one goal in mind; I wanted to meet favorite character, Minnie Mouse. She was all I could talk about, dream about and think about. And lucky for me my dreams were about to come true in the most magical place on earth, Disneyland. Arriving at the park my eager one tack mind was quickly tethered by my parents with, the leash. This was a hot pink full body dog leash that my parents utilized in order to keep track of me. I had the tendency of wandering off to accomplish what ever task my little brain had laid out for me, which usually caused panic for my parents. Today of all days I was particularly determined with my goal, however, my family did not seem to have the same goal in mind.After waiting, which felt like years, I was finally promised that I could meet Minnie Mouse after we ate lunch. We strolled into the sandwich shop which had all sorts of trinkets, mouse ears and t-shirts adorned with Minnie Mouse. I just about died. My little heart could not take any more waiting. I had to meet her and I had to meet her now. I looked around and my father went to the bathroom, my mother was ordering food and the rest of my family was annoying each other as usual. Since they were not going to take me, now was the perfect opportunity for me to find Minnie Mouse on my own. I took the end of my leash off the back of the chair and I walked myself right out of that sandwich shop. Disneyland is a very large place. As a two year old little girl, I was very small. Like usual I wandered around looking for my target, however, I was getting tired and frustrated because I could not find Minnie Mouse. Eventually I asked for some help but the person just kept asking where my parents were. Other adults gathered around and again did not seem to catch the urgency of finding Minnie Mouse but were more interested in finding my parents. I was whisked away behind a few doors and rooms with screens and monitors of the park and rides and placed in a room titled, Break Room. Defeat and exhaustion swept over me and I slumped forward on my chair placing my head on my hands and sighed. A tall gentleman entered the room and asked me a few more questions about my family and then asked if I would like any ice cream or maybe some mouse years. I agreed to all of the above and he laughed then said he would be back in just a few minutes. Another door opened and my heart stopped. My favorite person in the whole wide world walked through the door. I was stunned; I could not move or make a sound. They did not seem to notice me as they piled into the room and did something my little two year old mind could not comprehend; one by one they took off their heads. First Pluto, then Goofy, Mickey, Donald, Daisy and finally a person helped Minnie take off her head. They went on not noticing me while they were joking and laughing about a performance they had just given. I sat there, terrified. They were not real, and the person that came out of my hero, Minnie Mouse, was a man. My whole universe was shattered. Through out my life I have never run into anything as disappointing as the Minnie Mouse experience, until I read The Millionaire Next Door by Thomas J. Stanley and William D. Danko. Like my perception of Minnie Mouse changing, the authors reviled that my vision and assumptions of Millionaires were wrong. These authors, in essence, took the costumes off and compared what really makes a millionaire and showed that millionaires do not even wear the costumes society expects. They are simply people who look just like everybody else. The main concepts I learned can be boiled down into three sentences. 1. Live below your means 2. Do not spoil your children 3. Invest wisely. My parents have always been great examples of living below your means. I grew up in a house that fostered the idea of saving money and living on one income, despite both parents working. I can remember earning pennies from my grandparents to put into my bank for our family vacations, which were not always disastrous life shattering events. My parents did not spoil us but taught us patience in making money ourselves. This was a very hard lesson to learn but as an adult and reading this book I value the fact that my parents were wise enough to teach us these principles because I see the impact it has on my life and my goal to becoming financially wealthy. I will apply these lessons in my life by teaching my children the same principles my family taught me. I will continue to earn money before I buy anything and avoid unnecessary debt. I have also decided to max out my 401K contributions each year instead of just an automatic withdrawn amount from my employer.Not everyone is as lucky as I was at the age of two years old. I learned that things are not always what they seem but if you are determined enough you will eventually find your target. The only question is, is your target what you expected or not? Works CitedThomas J Stanley, Ph.D, William D. Danko, Ph.D. "The Millionaire next Door." The Millionaire next Door. LongStreet Press, 1996. 207.