Bill Danko 0:00
The greater your net worth, the greater the probability that you had investment real estate. Right now those folks who are below the median net worth in America, the vast majority of their net worth is their home value. Those who are the millionaires and living in these, you know, $300,000 houses, which is relatively modest in many respects, are also invested in office buildings.
Welcome to CREPN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast. Whether you’re an investor, broker, lender, property manager, attorney or accountant We’re here to learn from the experts.
J Darrin Gross 0:48
Welcome to Commercial Real Estate Pro Networks CREPN Radio, Episode Number 259. Thanks for joining us. My name is J. Darrin Gross. This is the podcast focus commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio. Let’s get into the show.
Today my guest is Dr. William “Bill” Danko. He is the co author of The New York Times bestseller, the Millionaire Next Door, and also his newest book, Richer Than a Millionaire. And in just a minute, we’re going to talk with Bill about happiness and money. But first, a quick reminder, if you like the show, CREPN Radio, there are a couple things you can do. You can like, share and subscribe. And as always, you can leave a comment. We’d love to hear from our listeners. And if you’d like to see how handsome our guests are, be sure to check out our YouTube channel. And that’s Commercial Real Estate Pro Network. And also please consider subscribing. It helps all the algorithms and and lets other people know about us. With that I want to welcome my guest. Bill, welcome to CREPN Radio.
Bill Danko 2:11
Thank you, Darrin. Glad to be here.
J Darrin Gross 2:14
And this is truly the Frankenstein addition here. Bill has been very, very generous with this time already. We’ve been trying to string this one together. So but I’m so delighted to have you on today and did not want to waste the opportunity. Before we get started, though, if you could take just a minute and share with the listeners a little bit about your background.
Bill Danko 2:36
Sure. I was a Professor of Marketing for 31 years at the State University of New York at Albany and I was also a consultant during that time and public speaker. Just having my career path as a as a marketing been, it’s been very rewarding. But at the same time, I’m also a family man. Married for 45 years and three adult children, five grandchildren and life is grand.
J Darrin Gross 3:15
Great. Well, I got to tell you there are a few books in the 90s or before the 90s that I ever read cover to cover and made notes on and highlighted and and kind of set a real frame of mind for me and, and one is my copy of the The Millionaire Next Door. And I’m just so delighted to have the opportunity to speak with you today. As we kind of jump into the topic here. I’d love to get a little bit of a sense of you know, you mentioned you were a marketing instructor or professor you know, How much of your your what were the course of your tech? Teach me in marketing? That’s kind of a broad spectrum of, of, you know, study. Can you get into that a little bit?
Bill Danko 4:16
Yeah, I mean, it really comes down to one course in particular I took with Professor Tom Stanley in 1973. And then that course a consumer behavior course which I did very well in, I got an A. He asked me to assist him with his very first study of the affluent market. And that’s when the ball really got rolling. I mean, so right marketing has so many aspects. I mean, I like to think of there’s marketing and then there’s everything else. Right? Well, in this particular vein of research, we concentrated on survey research and statistical Analysis of who really has wealth in America. And so Tom encouraged me to get an MBA and continue studying with him. And I did. And he also then encouraged me to go get my PhD, which I did at Rensselaer Polytechnic Institute. And the point is, during this period from 1973 to 1993, Tom and I had done a series of academic studies together, as well as a number of consulting studies. But in 1993, kind of a pivotal year he called me up. He was then working in Georgia and I was still in New York. He called me up and described a new project called “Big Hat, No Cattle”, and it was about the illusion of wealth in America. So using our survey, research skills, In fact, while I was at the university, one of the favorite courses that I would teach would be Marketing Research, Statistical Analysis and Computer Analysis of Datasets to infer something about market segment. So using those skills, we did another nationwide survey for the Big Hat, No Cattle project. And by 1996, the book was published. And the rest is history. It’s, it was a New York Times bestseller for three consecutive years. And it changed a lot of lives, changed my life in many ways, in a very positive way. It paid a lot of bills, that’s for sure. And it keeps on giving. It’s It’s wonderful. But that’s how we got there with the plan for a Millionaire Next Door.
Then in 1996, though, when the book was launched, that was also a pivotal year in my life. Which was really life changing in so many ways. I was still teaching, still doing the research. But at that same time, it was when my mother had a stroke. Now, that’s unfortunate, but she happened to be the primary caregiver to my quadriplegic brother. So guess what? I became more involved on a daily basis. Dealing with my brother, his care, and I followed my wife and I vowed to keep him out of a nursing home, which we did. We bought him a house, it was great. And all the problems that go with maintaining somebody outside of a nursing home, but we helped him age with dignity. And he really, during the visits, in fact, that was the weekend aid most of the time because it’s so hard to hire an aide for a weekend. We would have these discussions about life and you know, you Here’s a guy who couldn’t even scratch his nose. And he really had to have everything done for him. And it was really an act of love. And but here I am a New York Times bestseller being a home health care aide. Now. I would do it again in a heartbeat, that’s for sure. But my point is, it’s a humbling experience. And when you realize we’re all on the same path together, you know, we get born we live and we die. It’s what we do in between. That really motivated the research for the Richer Than a Millionaire, which I did with my colleague, Rich Van Ness, who lives in New York State. He’s another professor. And we looked at it in the sense of what lessons do we want to give our children and our grandchildren and in fact our students, who we look at our as children in a figurative sense What life lessons do we want to extend? And the idea is, money is good, but money and happiness are better. And that is how the two books diverged from each other. Millionaire Next Door shows you how to make the money, Richer Than a Millionaire reiterates many of the lessons in Millionaire Next Door, but it takes it to another dimension. It looks at your psychological health. Are you well adjusted, or are you maladjusted? And what are the correlates of those who are happy and wealthy? That’s the path we took. Now want to talk about both of those in more detail of course.
J Darrin Gross 9:45
Yeah, no, I would love to I mean, what a what a crazy kind of a, you know, combination of paths. I mean, in one end, you’re studying the millionaires and you’re having great success and and The way I think most Americans would look and you know if you were to describe wealth or success you know being a best seller on the New York Times and you know all that and then the the human factor strikes and you know the opportunity to have such a human experience with your immediate family like that or I mean your extended family your brother and and that and wow what a what a what a fascinating ride you had there Yeah. So I’m curious you know, because in the The Millionaire Next Door You know, there there are a couple things that I remember you know, specifically it was basically looks are deceiving I guess, because of the way I would summarize it and that the you know, if somebody looks like a millionaire it’s kind of the like you say the no hat or the Big Hat, No Cattle kind of thing. The They may have all the the newest nicest cars and, and all the vacations and all that stuff. But chances are after spending all their money, they’re probably gonna keep it all keeping any of it.
Bill Danko 11:11
This is true. Yeah, this is looks hard to see being that’s probably the number one lesson to be learned here. You know, if you look at the appendix in the Millionaire Next Door, we have a litany of about 150 job titles of millionaires we’ve interviewed over the years, and it’s really quite an eclectic group. Yeah, there are physicians and there are attorneys and there are executives, and there are architects. But also on that list are things like trailer park owners, car wash franchise owners, bovine semen distributors. Yeah, that’s a auctioneers Right. I mean, if you do a content analysis on that list, you find that about 80% of the people on the list would be considered blue collar millionaires, and the other 20% the professions which are, you know, wonderful people. But here’s the problem. We have found, and this has been, repeatedly study after study, that for every person who can actually afford one of the high end items like a fabulous house, or a brand new car on a regular basis, there are four to five others who buy the same item because they want to look like a millionaire. And so we have these people who, again, it’s the Big Hat and No Cattle. They have all the looks, but they also have the mortgage and the expenses that go along with it. But this stuff dove tails into the happiness issue. You know, in the book of Proverbs in the Bible, Chapter 22, verse seven, there’s the line, “the borrower is a slave to the lender”. Well, when you have a wall to wall mortgage, and you have onerous car payments, you can’t get off your economic treadmill. You have to keep working to keep that lifestyle going. On the other hand, when you have these satisfied, in many cases, blue collar millionaires who live in ordinary neighborhoods, drive pickup trucks or older cars, they’re not worried about car payments. They’re not worried about a burdensome mortgage, but they have a lot of financial independence. And that makes all the difference in the world in terms of your outlook on life. You know, having money that’s free and clear, and a positive cash flow is a lot better than Saying I have to get up to work because I am a slave to the lender who lent me this money. And look at the problems we had, you know, 2008 and 2009. I mean, didn’t we get to the point of like zero down payments on houses?
J Darrin Gross 14:16
Oh, yeah, they were they were paying you for a while to take out a loan.
Bill Danko 14:19
And 100% mortgages. I mean, yeah, it was folly. All right. So anyways, we bring these problems on ourselves. When we don’t understand what we’re really getting into.
J Darrin Gross 14:34
Yeah, no, the, the, you know, the whole book. I mean, it really kind of gave me an appreciation for the way my dad lived, not that he was any kind of, you know, Uber, wealthy guy, but there was a contentment in his life that as a child growing up, I couldn’t understand, you know, I, I wanted the new, flashy, whatever it was, and then is As I, you know, got a job and started a career and was trying to, you know, make my way I, there’s a certain sense of like, yeah, my dad didn’t know what he was doing, you know kind of thing.
Bill Danko 15:14
Yeah, in fact, you know, on one of our surveys and and, and the results are included in Richer Than a Millionaire we have a graph that answers the question How much is enough? Now listen to this perspective. When we ask people, what is their net worth? And we’ve asked hundreds of them about this very issue. What is your net worth? And the follow up question is how much you think you would need to feel rich? And basically it goes like this. It’s it’s a curve that says if you have $500,000 in net worth, in actuality, to feel rich, you say you need five times as As much for 2.5 million, and then we ask the people who have 2.5 million, how much do you need? Unfortunately, they don’t need five times they only need twice as much on average to feel wealthy, or 5 million. It’s ridiculous. But right now in America, and it’s hard to say with the adjustment in the stock market this past couple of weeks. You know, one report says we’ve lost 500,000 millionaires in this meltdown. But irrespective of that, basically, of all the households in the US the median net worth is about $100,000. And from 100,000, tough to the million dollar mark, that puts you in the top 12% of all households, to be a one percenter. Basically, $11 million dollars will do it. And so when people say they need these lofty amounts Like, I have two and a half million now I need 5 million. You know, you’re in the stratosphere in terms of where most people’s are not even close to having that wealth accumulation. And so people have this distorted perception as to how much is enough. And so when you talk about your dad, you know, he was well adjusted, I hope, I suspect from what I gleaned from what you’ve said,
J Darrin Gross 17:29
Oh, yeah, he was. Yeah, he was not, you know, chasing some crazy thing. He was, you know, certain he had had leisure, but he wasn’t he was not a spend, didn’t spend every dime he had, you know, he was kind of tight with a purse
Bill Danko 17:47
and was probably brought up during the Depression era.
J Darrin Gross 17:50
Yep, yep. Yep. He’d drive the wheels off a car, you know, it was, you know, which I fully respect now. As opposed to You know, constantly being in the newest, latest, greatest model and, and like you said, just being a slave to the lender kind of thing. And the fact he was a banker too, I think also kind of shaped a lot of that too he was recognized the, the weight of of debt kind of thing and how it affects you. You know, I, there was a blurb in the book, I remember and it was it was talking about, I mean, here you were asking kind of the question is how much is enough kind of thing there was there was a an equation kind of thing that I remember and just refresh my memory here just a bit about how to determine if you’re wealthy. And there was essentially there was a calculation of if you take your age times your your annual income divided by 10. Right. And I was kind of curious because it was funny in my book, there was like a weathered page and I can’t tell you because I think I’ve read this thing, a couple of times how recent it was that I was doing them the calculations, but I’d asked you given the recent times and just all the economic differences we’ve been through. If Do you think that measurement still holds?
Bill Danko 19:16
Yeah, I do. Look, when you’re on the tails of the age distribution, it kind of falls apart. But if you’re between 30 and 60, basically prime working years, that’s tended to be a pretty good predictor. In fact, the way it’s used is, you know, your age times income times 10% are divided by 10. That gives you the number of expected net worth. And if you’re four times that amount, you’re designated a prodigious accumulator of wealth. And if you’re one quarter of that amount, you’re considered to be an under accumulator of wealth. So it’s it’s pretty robust But it’s uh, it certainly was a very useful device in the book to contrast and compare the pause and the odds. And you know, there’s some good illustrations for example, Dr. North and Dr. South in the book, for example, Dr. North and and these were actual surveys but Dr. North meaning Well, you’re, you’re, you’re, you’re you’re going in then above and beyond direction, he would buy used cars. Whereas Dr. South, on the other hand had the equivalent income, but every year or every other year, he would take time out and do a lot of shopping for a luxury car. So you look at how you allocate your time. And Dr. North says, Look, I just need transportation. In fact, having a good luxury car that I bought used, having somebody else give me the gift of early depreciation is probably one of the best gifts I could ask. Whereas Dr. South when he has his new baby goes into a parking lot of a shopping center and gets as first ding kinda takes it personally. Right so it just changes your mindset all together in terms of you know what you expect your money to do for you. And Dr. North says Look, I have good cars but they’re good used cars. And I’m not a slave to that car. It’s already paid for and I don’t want to abuse it but at the same time if it does get damaged, I’m not bent out of shape. Okay, that’s just one illustration, take to heart.
J Darrin Gross 21:43
Yeah, no, no pain and agony for the door ding if it’s, you know, if it’s already got a scratch on it, you’re, you know, you’re not worried about it like you would be if it has got it’s got no scratches and you get the first
Bill Danko 21:56
but it really comes down to also the time value of money doesn’t Right, it’s, you know, like, I used to drive a Mercedes. And it was great. But, you know, then I, you know, I was a sinner, what can I say? But the Mercedes was a wonderful car. But now I drive a Subaru. And it’s great in the snow in upstate New York, I can tell you that. And the point is, I look at the car as just a mode of transportation. And the Subaru is a very reliable mode of transportation, quite frankly. And my wife drives an 11 year old Volvo. It’s, it’s wonderful. But what do we do that, you know, we have these older cars, so we’re not paying for car payments. And so you can take that extra money and start accumulating and investing in a diverse set of assets. And that’s another key here.
J Darrin Gross 22:54
Right. Now, speaking of the asset, I did want to ask you a little bit about some of the diversification that some of the the people you interviewed in the first step, or the first edition there. Can you describe the percentage of people you interviewed that were invested in real estate?
Bill Danko 23:18
Well, I could can’t give you exact percentages. But I remember a graph that I had created, or one of my talks that looked at the greater your net worth, the greater the probability that you had investment, real estate. Right now, those folks who are below the median net worth in America, the vast majority of their net worth is their home value. Those who are the millionaires and living in these, you know, $300,000 houses, which is relatively modest in many respects, are also invested in office buildings.
In my own example, if If I could share this with you?
J Darrin Gross 24:01
Bill Danko 24:02
I have some standing timber in the Adirondack Mountains. And you know, you have to wait every 20 years to do a harvest. But the point is, you know it, there are cherry trees. There’s there’s some good lumber there as well as some pulp lumber I understand that. And interestingly, once you own a profit property like that acreage, I got a letter the other day from a solar panel company, saying we would like to lease about 40 acres of your property to put up solar panels. Well, I don’t even know if that’s legal on the Adirondack Park, whether you can do that. But the point is, I am not inclined to let somebody clear cut 40 acres to put up solar panels. It’s just not a good stewardship. I mean, I love the mountains. And I think I have an obligation to help preserve the mountains and doing selective timbering is one thing clear cutting 40 acres is quite another. So it’s but it’s an investment piece of real estate that I own as well as a rental property and as well as some other things besides my primary house. But the point is, you know, more things to keep track of right? More than zero. Well, that’s for sure. But, but it’s good to have each one of these elements as a purpose of my portfolio. Some is enjoyment, some is timbering and the other is a rental property.
J Darrin Gross 25:34
Right. It kind of diversification there, too. It sounds like, you know, in just the, I think the chart that you described there about, you know, the percentage of people that that had some, some wealth attached to real estate, I think is is one of the things that I’ve come to recognize and it’s it’s not exactly buy low, you know, hit the hit the you know.com stock or whatever the newest latest greatest stock is, but it’s it’s a slow path to pretty sure thing I mean, depending on how you do it, I mean it’s obviously if you if you buy in a, in a super depressed market at a low price, your chances of, of having a significant win are greater but but just across the the, you know, all of time. There’s there is some, you know, kind of the the boring. I think the other thing I took away from your book was just how many of the, the occupations were boring. You know, they were
Bill Danko 26:47
Dull normal boring. Yes, like, okay, like owning standing timber. Every 20 years do a harvest. Yeah, you know, there’s a long lead time, but you can keep it in the family. And it’s protecting nature as well. So, right
J Darrin Gross 27:04
in, but just that whole thing and it’s not a flash in the pan kind of thing. It’s, it’s, you know, you basically you put your nose down and you do your work and you, you know, kind of be smart about it, disciplined.
Bill Danko 27:23
I mean, there’s so much talk about, of course, the stock market, especially this past month, but, you know, the stock market portfolio is less and less important, the richer you are, because you have these other diverse assets. Yeah, whether it be artwork, whether it be timber, whether it be rental properties and office buildings, like I’m not minimizing the stress, our economy’s under right now. I mean, everybody is feeling the pinch, that’s for sure. You know, these are unprecedented times.
But at the same time, if we Your wealth is not in the stock market. But you have other assets like physical properties, you can tend to weather the storm somewhat easier.
J Darrin Gross 28:12
Right? And if you if you’ve been able to achieve some sort of equilibrium where you’re not totally beholden to debt, you know, if there are some rough times you’ve got a much better chance to withstand, you know, whatever,
Bill Danko 28:29
Not only that, I can go hunting I my property if I if it comes down to that, and I have a lifetime supply of firewood. I mean, it’s Right, right. I hope it doesn’t come to that. But you can go into survival mode if you have the resources, that’s for sure.
J Darrin Gross 28:48
No, I certainly hope we don’t get to that point. But it is certainly comforting to know that you’ve got that option available to you. So let me ask you, the The newer book Richer Than a Millionaire. I kind of described to you what I considered the the summary and I want to give away your you know, the book I want to urge everybody to go out and and get your book but the this balance Can you describe what, you know, how would you summarize it and specifically that because I think I read a little bit in the, the, some of the stuff I was reading about is kind of like this recognition of the the younger people that basically rudderless not really having that they want to be rich, but they don’t have at least
Bill Danko 29:40
They don’t know what it means. That’s right. You know, well, first of all, the, you know, Richer Than a Millionaire came out in 2017. And that’s readily available on Amazon.com. So I encourage your folks to look into that.
The again being a marketing researcher, there’s a psychology professor, Ed Diener, who made a life work out of looking at subjective well being or happiness. And he put is reliable and valid scale on measuring your subjective well being or happiness, he put it into the public domain. And he has five statements that you respond to on a seven point scale. And the details of course are of a book. But if you score low like a five out of a possible 35 points, you are very unhappy with your lot in life. And if you score high, close to 35, you are very satisfied you have achieved your goals. Well, what we have found when we send out thousands of questionnaires and we look at net worth, whether you’re between 100,000 and a million or a million and above, we’ve purposely left off the under the less than hundred thousand because it would confound me it’s kind of hard scramble when you don’t have any money, and yet there’s something going on. So 100,000 to a million as one group called the near millionaires, and then the millionaires and above what we found using Diener’s scale, that 73% of the near millionaires are pretty satisfied with their lot in life. And 88% of the Millionaire’s are pretty satisfied. Well, the point is, we have a minority in each group, but what makes the happy, different from the unhappy and what we found is a number of correlates.
We go back to the writings of Benjamin Franklin. He wrote an essay and 1758 titled The Way to Wealth. It’s about a 3500 word essay that can be found on the internet. He wrote it under the pseudonym Richard Saunders. As in poor Richard’s Almanack. In his lessons, he talks about the need to be industrious and frugal and prudent. And all the things we talked about the Millionaire Next Door. But he also says, being prudent and frugal, and industrious, is all wonderful. But it’s all blasted, unless we’re also charitable. And so we’d looked at this notion of, well, what does charity have to do with?
Well, you look at the great religions in the world, and Judaism. In Isaiah, specifically, it talks about giving your coat to the to those who have no coats, feeding the hungry. In Christianity in Matthew 25, that what you’ve done to the least of these you’ve done on to me, you know, Lord, when did we see you hungry or thirsty or naked? That what you’ve done to the poor? You’ve done un to me. In Islam, one of the five pillars of Islam is almsgiving being charitable. In the Hindu tradition, being charitable is part of the mindset. So we have the religions, indicating that being charitable is important. We have Benjamin Franklin saying, You must be charitable to your fellow man. Let’s measure it. Let’s measure how much do you give to charity and dollars? How much time do you volunteer to charity? So we have a couple of metrics now, as well as our satisfaction scale. And so we’re then able to look at these As correlates, and then with pre testing and various psychologists and clergy looking at the questionnaire, you know, they come up with good suggestions. So you got to ask questions like, well, is God really important in your life? Are you at peace with your soul? Are you anxious about the future?
What we find is the millionaires and near millionaires, who are satisfied with life are not anxious about the future. They are God centered. They are at peace with their soul. And in contrast, we have those who are dissatisfied with life, or just the opposite of all these. There’s something wrong, you know, and these are very anxious times, especially with this COVID virus thing. You know? I don’t know what the implications are on the long term. But at the same time, you have to look at Well, what’s really important in your life? Is it your love of family, caring for your brother, for example, you know, realizing that the stock market tends to fluctuate anyway. And we do have things like the plague of polio and things like that have come around. And somehow civilization has survived. What kind of lessons do we want to impart to the next generation? And that’s really the motivation for the book. The What do we tell our students? What do we tell our children? What do we tell our grandchildren about how to live? Sure, save 20% of whatever you make, don’t live beyond your means. Buy a good depreciated car. Yeah, I get all that, but at the same time, be charitable. Don’t be anxious about the future. Try to develop a peace with your Soul. So it really, I think is an important life lesson that we’re trying to impart with this new research on Richer Than a Millionaire.
J Darrin Gross 36:12
Now, that’s a definitely some time tested, you know, mottos or four ways of living I, you referenced all the different religious teachings that have certainly made that a kind of a cornerstone of, of, you know, their belief and just the recognition of kind of the golden rule.
Bill Danko 36:32
Exactly. It is the golden rule doing on others. Right, right, but have them do unto you. You know, some cynical people say, well, the golden rule is He who has the gold rules. Yeah, that is so cynical. But this is the kind of stuff that goes on in our culture, our so called culture Yeah, some some basic values that made this country wonderful. And we’ve been slipping away.
J Darrin Gross 37:04
Yeah. You know, I it’s troubling when you look around and you see, and and I think, you know, part of it is just that level of, of satisfaction. And I think that, you know, maybe if you go back and you look at how, how many people don’t have enough, or, you know, have that ability to feel like you’ve mentioned, you know, you if you have under 100,000, you’re not, you know, we didn’t consider you and then you know, to skew so you would skew the results, but, you know, I think really if you if you look at it even in that broader term, how you know, the percentage of people that don’t have that, which creates kind of that anxiety and then there’s you know, I think there’s, there’s all sorts of interesting things playing out right now. I mean, you know, if you’ve been to the grocery store lately, on your your You know, a provisional run to try and, you know, stay out of the public way and not get sick. You’ve been down the toilet paper aisle and notice that there’s, you know, if there is something there, it’s, you know, very, very little interest you see as people that are, you know, taking all the toilet paper, and kind of that fear thing, as opposed to I’ve got enough and I’ll be okay. Everybody needs some kind of thing. And
Bill Danko 38:27
it is it is fear. And it isn’t an anxiety and I know it’s real thing. It doesn’t have to be that way. If you just get down to some basic values. I mean, one of the problems I think we’ve developed in America is the way our higher education system works. I mean, somehow, we’ve convinced everybody that you must go to college. Well, you know, I just think that’s a mistaken idea. You know how Having been a professor for 31 years. Some of my students shouldn’t have been there, that’s for sure. And the point is, they’re accumulating debt with their tuition and all that and didn’t belong there in the first place, but they still have this obligation and what’s wrong with getting a trade? What’s wrong with being a skilled plumber? What’s wrong with being a skilled Carpenter? You know, all these things are, I think, better paths for so many of our young people where they can build a career without incurring this huge expense that we have in the university and college system.
J Darrin Gross 39:41
Yeah, no, I think there is a little bit of momentum behind that. Kind of rethink that. And I see people asking, you know, that that very question. I mean, if you’re, if you’re looking at coming out of a, you know, for a year and that’s, that’s a hope that you can get it done in four years, based on Just all the people that are that are in line ahead of you. And I know my son, he’s a junior in high school and we’re, we’re in the line and kind of, you know, looking at our options and stuff and just come to the realization of how many people there are in the education system, how available the money is and how willing they are to sign up for the debt that it can really prohibit you from, from accomplishing your education fin four years, which then adds to your your time and costs. And then to come out of college with such an enormous load of debt. before you’ve even gotten started. It just really does make you question. You know, the value of that or, you know, the cost benefit. I mean, I know when I was going, I could basically work a summer job and pay for my way through the year. Fortunately, my parents were able to help and pay for my education. But still, if if it had come to that it was still, it was now out of reach.
Bill Danko 41:06
And, you know, and Warren Buffett gave some pretty good advice about how much help should you give your children. You know, he says, give them enough so that they can do anything, but not so much they can do nothing. And so, you know, get them on the right path of economic self sufficiency. You know, one of the problems and it’s highlighted more in the Millionaire Next Door, one of the chapters, highlights the issue of economic outpatient care. What does it mean to subsidize an adult child and paying for tuition or extraordinary medical bills might be very good use of a parent’s money. However, when you start buying cars, and down payments on houses, and subsidizing a lifestyle, you’re creating something that can’t be sustained without the input of the parents. And that can be really dangerous, really dangerous. So I think every responsible parent wants to see their child become economically self sufficient. I can’t imagine any responsible. Yeah, but but it’s also a matter of, but I’m just trying to help. I’m just trying to enhance what you’re doing is creating an economic cripple.
J Darrin Gross 42:28
Yep. You’re making them dependent on it. And now it is a you know, as a parent, I, I look at that, and I hope that I’ve never faced with that, but I do recognize that we go to great lengths to try and minimize the potential for pain. But yeah, the we teach a lesson without burying them in some sort of painful, you know, situation, but it’s it’s a challenge and I think that everybody has to navigate that as best they can. And you know, Who am I to say you’re doing it wrong? Or I’m doing it right. But I do. I do recognize that there’s value in pain. There’s there’s a lesson to be learned in pain. And
Bill Danko 43:12
You know what, in fact, Ben Franklin in that essay that way to wealth, he says, This is not from Nike, he says the actual line in there, there is no gain without pain. It’s he wrote that 250 years ago. And I think he’s right. Yeah,
J Darrin Gross 43:31
no, absolutely. Absolutely. Hey, Bill, if we could. I’d like to shift gears here for a second. I mentioned you before we had to try and rig this thing up that by day, I’m an insurance broker. And one of the things we do is risk management. And we try and assess the risk and try and determine what you know what to do with the risk. There’s a couple of strategies We look at the first is can we avoid the risk? If we can avoid it and we look to see Is there a way we can minimize the risk? And if we can’t avoid or minimize and we look to transfer the risk, and that’s where an insurance policy comes in, which is basically, you know, a risk transfer vehicle. And I like to ask my, my guest if they can take a look at their view of the world. And, you know, specifically I’m not looking for an insurance related answer. Anything you can see think and frame this it would be would be welcome. But if you’re willing, I’d like to ask you, Bill Danko. What is the BIGGEST RISK?
Bill Danko 44:46
Yeah, I think when people are just so blind to well, for example, in Miami Beach right now. There are a lot of people with very beautiful houses on a flood plain or a rising ocean. And one of the things that they’re doing in Miami is raising the roadways and creating culverts to drain off the water. What seemed like a good idea at the time to build a house next to the ocean is, in retrospect, not a very good idea. So sometimes we bring this on ourselves. And, you know, I remember reading a book from the 1950s, how to build your dream house for $3,500. And it was kind of a classic and chapter one talks about first select the building site on a hill as opposed to on a floodplain. Okay. People walk into these problems, I think in a, in a naive way, saying, oh, there’s land available on the build. Okay, so that’s one thing being just not being prudent, okay. But also in minimizing risks. If you do have some pretty good assets, you know, one thing that I have seen with some high net worth individuals and one thing that I use myself is that for example, my timber, my rental property and a lakeside property, I have not my primary house, they’re all individual limited liability companies freestanding, then all three of them are held in a limited partnership. So my physical assets are divorced from my my might, my liquid assets and so having some good legal structure is certainly very good in terms of minimizing the risk as well as having your umbrella policy from your insurance company, but having the ability to separate your assets through like the LLC s and then that limited partnership. That is something that is Well, one thing I use And I endorse. And it works for me. My accountant likes it because he gets to do all these extra tax forms every year. Right? I don’t. But but but it’s okay. It gives me peace of mind. And then in terms of, there’s a societal risk. You know, we talked about a lot of lessons here you know about frugality and the 20% and living below your means and all that stuff. And that’s all important. Those are good, solid lessons. But at the end of Franklin’s essay on the way to wealth, he really summarizes it so well. The people heard the message, agreed with it, and then practice the contrary. The problem is change is hard. People are going to walk into traps. They don’t understand the risk they’re getting into. What we have to do is be better students. And let’s take on some personal responsibility and don’t expect the government to bail us out. But build, don’t build in a floodplain. You know, don’t drive recklessly. You know, a lot of things depend on how our society behaves. And that’s going to be the thing that minimizes risk. So I think risk is all the stuff that we take on ourselves. Because we just don’t do the homework.
J Darrin Gross 48:30
No, I it’s hard to argue with any of them. You know, definitely. You know, do what you can to prevent yourself from hurt, prevent yourself or prevent putting yourself in harm’s way I think is definitely a
Bill Danko 48:45
Yeah, it’s also from a personal risk. You know,one of the references and Richer Than a Millionaire we alluded to a study from the Centers for Disease Control They did a study of death certificates and marital status of people who died after the age of 50. And they found that those who were married at the time of death lived the longest. Those who never married were in between and those who are divorced, lived the least long. And so, when we look at our behavior, and we outlined this more in the book, The benefits of a positive social relationship, a positive household, a harmonious household, really adds to your longevity, that’s for sure. You know, we have a local attorney, the TV commercial, his marriage, his grand in divorce is 20 grand. You get the proportions, right. In terms of the emotional and financial problems you bring on when you have it dissolved marriage. So, you know, go into marriage for the right reasons, build a nuclear family that is stable and loving. And what we have done so many, you know.
One of our senators from New York that the late great Daniel Patrick Moynihan wrote a he was a very good scholar, he wrote a white paper called defining deviancy down. And he was complaining about all the out of wedlock births that we tolerate in society, and all of the burdens that the government then has to take on to solve these problems of you know, welfare and homelessness and things of that nature. He says if we just got back to some basic values, and built the society that says okay, this is how we build the nuclear family. This is how, you know we got a proper education that can build a career. And this is how we do things like, save 20% of whatever you make, and then invest in a diversified portfolio. Boy, we would all be better off, that’s for sure.
Is that enough sermonizing?
J Darrin Gross 51:19
Well, it’s it’s, yeah, it. I welcome the sentiments there. And I think that they’re, they certainly have proven their, their worth over time. You know, it’s just, it is sad when you look and you see the you know, how people are trying and just, you know, not not understanding that there’s, there’s a lot of work that goes into it.
Bill Danko 51:45
Yeah. I mean, the, the metaphor that I think draws us all together. When you ask, how does a train run best when it’s on its tracks? Right. We have a lot of train wreck stuff. We got a lot of train wrecks out there, right. Had I known all this tuition, these tuition dollars we’re going to go for not and now I have this debt. But I’d like to learn have a fancy new car. I wanted to have Lakeside or ocean side property. Right? It’s nice to be there. I
J Darrin Gross 52:17
I want to be on vacation all the time. Right?
Bill Danko 52:19
That’s right, let’s just be a little more prudent in our life and what we expect of the next generation. And, and again, these are the kind of lessons that we try to drive home in Richer Than a Millionaire. You know, you know, Richard Van Ness. He has three grandkids, I have five grandkids. And you know, we would have these discussions as to what kind of lessons do we want to impart before we depart? What lessons do we want to impart before we depart? And so we put it in writing. And hopefully it’ll resonate not only with our grandchildren, but also Well, millions of others who are struggling on the high seas of life like ships without rudders. Just Just trying to give them some direction. That’s all we’re trying to do.
J Darrin Gross 53:12
Well, I am on my way to get my own copy of your latest book and look forward to reading it and recommend that others consider the same and also again, your your first one they The Millionaire Next Door, I highly, highly recommend that.
Bill Danko 53:29
Yeah, that’s what they’re looking for there. How’s that? Yeah.
J Darrin Gross 53:34
Bill Danko 53:36
Richer Than a Millionaire. I gotta gotta gotta plug it. You got it?
J Darrin Gross 53:41
Absolutely. You got to toot your own horn. Now.
Bill Danko 53:44
I’m a I’m a I’m a book salesman. What can I say? But, you know, it’s been a very good life. I’m glad I’m able to help those who can’t help themselves or being like, no matter What your net worth for all your listeners out there, no matter what your net worth. Never forget to be charitable. Because there’s always somebody worse off than you who could benefit from your time treasure and talent. I am absolutely convinced of that. And not only being charitable, you know, is the right thing to do. It’ll also truly make you happier. It’s it’s one of the key correlates here of being a giver instead of a taker. So my question is, why not be richer than a millionaire? By having these things internalized in your life?
J Darrin Gross 54:39
No, that’s a great way to wrap this up. Hey, Bill, Where can the listeners go if they’d like to learn more connect with you?
Bill Danko 54:47
Yeah, you can go to our website, Richer Than a Millionaire all as one word richerthanamillionaire.com. And you know, We maintain our own website. And we used to just have the word welcome when you signed on to the website. And Rich Van Ness and I and our spouses were down in Marco Island this past winter. And so there’s a shot of these two guys, namely yours truly and Rich Van Ness with a couple of palm trees in the back and a bottle of wine. That’s the opening picture about Riher Than a Millionaire. Grade. So we enjoy it. It’s a boy Marco Island is a wonderful place to be if you haven’t been there. I encourage people to think about it. So it’s a wonderful vacation spot. That’s great. But you know, it snowed yesterday in New York. And so that was a nice springtime surprise.
J Darrin Gross 55:55
The spring I suppose the spring storm. That’d be a big news story. It snowed on Marco Island.
Bill Danko 56:03
Yeah, yeah. So, yeah, so our BIOS are there and plus various articles that we have written, that are in the press, and it’s all good. It’s, uh, you know, what we we have, we have really been blessed to be able to, you know, bring our message out to the public and we’ve, we’re in a good place in our lives. We enjoy, we enjoy good health, but both of us, all of us, our spouses to so far we’re enjoying good health, despite this virus thing in New York State especially.
J Darrin Gross 56:39
Well, I hope that you can continue to enjoy good health, especially in these times.
Bill Danko 56:46
And I wish very same for you Darrin, really you and your family. It’s absolutely critical to, you know, to really assess what is important in life. That’s what’s important in life. You know, being Being this family unit I can continue to serve others in a very positive way. Okay,
J Darrin Gross 57:07
You got it. Hey, Bill, I cannot say thanks enough. This has been an absolute pleasure. I appreciate you taking the time and, and your patience and trying to do this kind of the Frankenstein way we’ve been doing it. But I’ve truly enjoyed it learned a lot. And I hope we can do it again soon.
Bill Danko 57:27
Yeah, I hope so too. We can have a follow up. And let me show you a big fish that I caught here.Can you see that big fish?
J Darrin Gross 57:38
Oh, wow. What is that a brown?
Bill Danko 57:39
Not it’s a rainbow trout.
J Darrin Gross 57:43
Hello. We’re set up there in New York or we’re to
Bill Danko 57:46
Yeah, right. That was up. In fact, there’s a picture of me and Tom Stanley. We were fishing up in ampersand Bay at the Adirondacks and catch that big
J Darrin Gross 58:00
That’s awesome. That’s awesome.
Bill Danko 58:03
Yeah. So it’s, it’s, it’s everything is wonderful. Really is I wish good health continues for you and in the let’s continue to do the right thing. All right.
J Darrin Gross 58:17
All right. All right. All right. Thanks, Bill.
Bill Danko 58:21
All right, my brother Take care of yourself. Bye bye.
J Darrin Gross 58:23
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