The Basics

How to make a million dollars

Forget the joke about starting with $2 million. These people had better ideas. Here are nine stories -- and tips -- about making that first million.  By Kiplinger's Personal Finance Magazine Being a millionaire isn't what it used to be -- but it sure beats not being one. Just ask the 8.2 million U.S. households -- an all-time record -- that had a net worth of more than $1 million in 2004, excluding the value of their primary residence. That was a 33% increase over the previous year, reports a survey by TNS Financial Services. The surge was driven mostly by consistent investing in the stock market. But there are other ways to make a million -- start a business, invest in real estate, put yourself in the right place at the right time. Kiplinger's sought out people who did all those things and more. We found that although they had taken different routes, they followed a pattern; you might call that pattern the nine habits of highly successful millionaires. And all of them had a 10th trait in common: They never lost sight of their goal.

'Do whatever it takes'
Marco and Sandra Johnson started out saving lives in their community of Lancaster, Calif., and ended up running a multimillion-dollar business whose customers come from across the United States.

The idea was born on the job. Marco, a full-time firefighter and paramedic, would come home from an incident and complain to Sandra that lives might have been saved if bystanders had been able to administer first aid. At the time, the Johnsons were trying to have a second child, and Marco was particularly upset when "children died unnecessarily because no one at the scene knew CPR," says Sandra.

In 1997, they began offering CPR and first-aid classes to local businesses. Sandra handled scheduling and other arrangements, and Marco taught classes between shifts at the firehouse. At first they borrowed material and equipment and brought it to each site; after a few months they scraped together enough money to rent a 400-square-foot office.

The business started to take off when workers whose jobs require CPR certification, such as schoolteachers and bus drivers, sought them out. Then students asked them to start training emergency medical technicians because local junior colleges had a two-year waiting list for EMT classes. Within a few years, the Johnsons had become accredited for EMT training and moved their Antelope Valley Medical College to bigger quarters. "Everything was happening fast," says Marco.

Riding the momentum took seven-day-a-week stamina. Marco alternated shifts at the firehouse with classroom duty, and Sandra was "always on the phone" setting up appointments. The couple didn't want to take out a business loan, so they plowed their own income into the school and sometimes put off making mortgage payments on their house to pay their employees. Says Marco: "There were times when it was a gut check. We looked at each other and said, 'What did we get ourselves into?'"

Now the Johnsons can breathe easier. In 2004, their school was expected to pull in revenues of $7.5 million, and their corporate clients have included businesses from Boeing to Burger King. That boom in business has given the couple the means to own several houses and to treat their extended family -- a group of 12 -- to vacations in Hawaii.

Even more rewarding, says Sandra, is the example they can set for their children: To accomplish your dream, "do whatever it takes." As for herself, "We're saving lives. It's awesome to know I was part of that with my husband." And Marco is finally planning to retire his fire helmet.

TIP #1: Go flat out. Between shifts at the firehouse, Marco Johnson, with his wife, Sandra, started a school to teach emergency medical techniques.

'I put my money where my mouth is'
Elmo Shropshire had a day job as a veterinarian in Marin County, Calif., and a side gig as a bluegrass singer when he recorded the holiday song that put him on the map -- and put his vet business out to pasture. The song, "Grandma Got Run Over by a Reindeer," has sold 10 million copies, inspired a music video and a movie, and made Shropshire a millionaire five times over.

Shropshire first heard the saga of the tipsy grandma and the renegade reindeer after bumping into songwriter Randy Brooks, who wrote the piece, at a bluegrass performance. Convinced that the ballad suited his twangy voice and comic singing style, he shelled out $500 to record it himself and another $700 to make 500 singles. "Grandma" aired on a San Francisco radio station in 1979 and caused an instant ruckus. "Kids were calling in and saying, 'Play it, play it,'" says Shropshire.

Despite the enthusiastic reception, he couldn't find a record company to take "Grandma" national. Nevertheless, the song was frequently requested over the next several holiday seasons. Says Shropshire, "It was one of the few songs in history where public clamor rather than company hype drove demand."

Shropshire went for broke in 1983, investing $30,000 to produce his own "Grandma" music video and $10,000 to make an album featuring the song. The gamble paid off when MTV picked up the video (it still appears regularly) and Columbia Records offered him a distribution deal. In the three weeks before Christmas, the company sold 500,000 "Grandma" singles and 100,000 albums. Shropshire got a royalty check for $50,000.

The singer retired from his veterinary practice in 1995 and now works full-time on "Grandma"-related enterprises, which include sheet music, a stuffed singing reindeer and a recently released album called "Christmas in the U.S.A." Says Shropshire of his unlikely success, "I had this blind belief in the project. I put my money where my mouth is."

TIP #2: Support your idea. Elmo Shropshire, who recorded a hit holiday tune, invested over $40,000 of his own cash to produce a music video and an album.

'Figure out your strengths'
Soon after Scott and Mandi Leonard were married in 1996, they took a big risk. Scott quit his job as a stockbroker and started his own financial-planning business. He had no clients, no income and a big mortgage -- the Leonards had just put a 10% down payment on a $320,000 house in Redondo Beach, Calif.

For three years, Scott and Mandi lived on the income from Mandi's jobs with technology companies. Employed by Oracle and PeopleSoft, she earned valuable stock options during the go-go years of the late 1990s.

By 2000, Mandi wanted to quit working: Son Griffin was a year old and Jacob was on the way. Her PeopleSoft stock, for which she had paid $6 per share, had risen to $43, and Scott was getting nervous. They decided to sell the stock, trade up to a bigger house and stash some of the money in the bank. Says Scott, "Having a safety net was more important to us than trying to get an extra $10 per share on the stock." And a good thing, too. Within a year, the price had dropped into the teens.

The Leonards also made a smart real-estate investment. They sold their first house for about $500,000 and moved up to an $800,000 house in Hermosa Beach. With an ocean view and a rooftop deck, the house was recently appraised for $1.45 million.

Meanwhile, Scott's business began to take off -- he now manages about $100 million in assets for his clients -- and once again the Leonards decided to invest in real estate. About two years ago they paid $1.25 million for a historic but dilapidated house overlooking the water in Redondo Beach. They spent about $250,000 -- mostly in cash -- to renovate the property for Scott's business. That building was recently appraised for $1.8 million.

Having astutely ridden California's real-estate surge, the Leonards have enough home equity plus savings to put them comfortably in millionaire territory. They also have about $175,000 in 401(k) and IRA retirement funds invested in stocks, which they plan to beef up now that they have renovated their business property. "I'm very much in favor of diversifying investments," says Scott. But if the real estate market turns soft, he'll take the opportunity to "look hard at picking up another property."

The Leonards owe their success to knowing the difference between a calculated risk and a gamble. They felt more confident about starting a business and investing in real estate than about hanging on to their tech stocks. "Stand back and figure out your strengths and weaknesses," says Scott, "and keep your eye on your long-term goal."

TIP #3: Know what you do best. Scott and Mandi Leonard ditched their tech stocks to concentrate on real estate.

'Sometimes a big risk pays off'
When most kids are seniors in college, they're writing résumés and cruising toward graduation. Not Kevin Plank. Nine years ago, when Plank was in his last year at the University of Maryland, he began developing sportswear that now outfits most professional and college sports teams and makes a fashion statement on high-school playing fields. As the founder of Under Armour, Plank, 32, presides over a Baltimore company that employs 450 people and grossed more than $200 million last year.

Plank owes a debt to sweat. As a player on the Maryland Terrapins' football team, he wore a cotton undershirt that turned into a soggy liability during games. Already an entrepreneur (he was running a thriving floral-delivery service out of his dorm), Plank began searching fabric stores for a lightweight material that would fit snugly, wick away moisture and replace the undershirt.

Once he had found the perfect fabric, Plank paid a tailor $400 to come up with several prototypes and asked his teammates to try them out. "They said the shirt was great for football -- and baseball and lacrosse, too," says Plank. "I realized this wasn't just a shirt but a marketing opportunity."

Plank hit New York City's garment district and returned with enough fabric to make 500 undershirts, which he promoted to players on major college and NFL teams. "I would ask them to try this product, and if they liked it to give one to the guy in the next locker," says Plank. Eventually, teams on both sides of the field were wearing Plank's "compression apparel" -- and showing it off on TV.

After graduation, Plank raised start-up money by maxing out his credit cards to the tune of $40,000. He tried to patent his idea, but gave up after racking up $7,000 in legal fees. For the next several years he took no salary from the business, and he lived and worked rent-free in a house owned by his grandmother. He later got a $250,000 loan from the Small Business Administration and used almost half of it to repay debts.

Under Armour is now the official supplier of compression apparel to Major League Baseball and Major League Soccer, and its garments are worn by about 30 NFL teams and nearly 100 Division I-A college football teams. It was a high-stakes gamble for a kid barely out of college, but Plank thinks youth worked in his favor. "When you're 22 or 23, there's no better time to take a big risk. Sometimes it pays off." In his case, the rewards have included buying a Cadillac at age 26 and gaining VIP access to major sporting events, such as the Super Bowl. "For someone who is passionate about sports, that's a big part of my payoff."

TIP #4: Go for broke. Just out of college, Kevin Plank ran up $40,000 in credit card debt to launch Under Armour, his sports-apparel company.

'I knew I would have to earn this'
Scott Patterson, star of the "Gilmore Girls" TV series, worked for years to get into the big leagues, honing his craft in small towns and throwing a curveball or two to keep things interesting. And that was just his baseball career.

Patterson pitched in the minor leagues during the 1980s, and came tantalizingly close to the majors. He was traded to the Yankees and then cut from the team.

Undaunted, he started a second long-shot career, moving to New York in 1986 to study acting. He worked with members of the Actors Studio and appeared in a couple of commercials a year to earn money to pay the rent. "I knew I would have to really, really earn this," says Patterson. "It turned out to be an endurance game."

He made a short-lived breakthrough in 1991, when ABC flew him to Los Angeles to audition for a TV movie, but that "crumbled very quickly." Back in New York, Patterson landed a few theater credits and then returned to L.A. He crashed on friends' couches and slept in his car -- a 1966 Pontiac Le Mans -- as he made connections that led to small movie roles and TV appearances. Eight years later, he says, he read for the part of Luke Danes, the male lead in "Gilmore Girls," and "I felt like I was home."

He didn't get rich the first year. "The money was good," he says, "though not as good as you'd think." But his salary has risen with the series' popularity, and as his character has grown. With a net worth in the millions, thanks to some astute investing, Patterson says he "can parachute out of this series and be pretty comfortable for the rest of my life."

Now Patterson shares his wealth by helping raise funds for a new pediatrics wing at Johns Hopkins Hospital in Baltimore and for the National Children's Alliance. His advice: "Even when you've been pounded for 20 years, don't give up. If you stay in the game long enough, you get lucky."

TIP #5: Don't let setbacks get you down. It took actor Scott Patterson of "Gilmore Girls" 14 years and several big disappointments to become a Hollywood star.

 

<>'I was trained to work hard'
Petro "Pete" Kulynych made his millions the old-fashioned way: He started at the bottom, as the bookkeeper for a small hardware store in North Wilkesboro, N.C. Eventually, that store grew into the Lowe's hardware chain and he ended up a top executive.

Actually, Kulynych, 83, started below the bottom. The son of Ukrainian immigrants, he left Pennsylvania's coal-mining country after high school to work for the Civilian Conservation Corps and helped build the Blue Ridge Parkway through the Appalachians. "I earned $21 to $25 a month, and sent part of it home to feed other family members," says Kulynych. "I was trained to work hard."

He later moved to the National Park Service, attended the Merchant Marine Academy, got married, served in World War II, then used his GI benefits to pay for accounting school. In 1946, he was hired by two brothers-in-law, named Lowe and Buchan, who owned what was then North Wilkesboro Hardware. His starting salary was $25 a week.

As the first employee of the Lowe's chain, Kulynych was always on the executive team -- "We were all CEOs," he says. He became a managing director in 1978 and retired in 1983. Spending his entire career with one company never got boring, says Kulynych, because the company was growing by leaps and bounds, and because he did so many different things -- such as running the company's foundation and working on its retirement plan. "I enjoyed fulfilling our dream of expanding from coast to coast," he says of Lowe's, which now has more than 1,000 stores nationwide, with annual sales of more than $30 billion. "The man I went to work for in 1946 said, 'Stick with me and I'll make you rich.'" That might not be as easy to do today, but "you have that guy who started Microsoft in his college dorm room."

Kulynych's fortune grew with the company. When he retired, he not only benefited from the profit-sharing plan, but also had accumulated "lots of stock options from the early days." Because of splits and dividends, one share of Lowe's stock bought for $12.25 when the company went public in 1961 is now worth $28,000.

Like many members of his generation, Kulynych has always been cautious with money. "I never bought a Cadillac until I could write a check for it," he says. "I live in a small town and I don't stick out any more than the guy down the street who works in the service station."

One of his proudest accomplishments has been paying for the education of his two daughters, six grandchildren and five great-grandchildren. And he has spent lavishly on philanthropy, donating millions to two family foundations run by his daughters, Brenda and Janice. When he was told that teens in the North Wilkesboro area needed activities to keep them busy, he financed a teen center and theater and helped create a soccer field and skateboard park.

Being able to distribute considerable income "makes you get up in the morning and go to work," says Kulynych. "It's been a good life."

TIP #6: Take the long view. Over his 37-year career, Pete Kulynych rose from bookkeeper to a top executive of the Lowe's hardware chain.
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'Invest a little and let it grow'
Neil McCarthy started investing in the stock market when he was 34, in the depths of the 1970s bear market. "It got scary for a while," he recalls, "but my philosophy was to invest a little bit and let it grow. When stocks went down, I would buy more."

McCarthy contributed the maximum to both his IRA and his 401(k) at Union Carbide, where he started as a research chemist and got a boost from a 100% employer match. He and his wife, Maureen, who worked as a teacher for several years, continued to save for retirement, even while they were paying for their two sons' college educations.

Their big payoff came with the 1990s bull market. "Everything kept adding up and compounding, and then it doubled in three or four years," says Neil. "It was $500,000, and suddenly it was $1 million."

The McCarthys invested mostly in stock funds, but avoided technology companies. "People were going wild with Internet stocks, but it didn't make sense to me," says Neil, who did financial analysis when he worked in marketing for Union Carbide. "When I saw P/E ratios of 200 to 300, I thought it was absolute nonsense."

Their practical investing style preserved their millionaire status when the market crashed. They also benefited from a bit of fortuitous timing when Neil, who spent the last 14 years of his career working for BP Amoco, retired in 2000. He took his retirement payout as a lump sum and invested part of the money in an immediate annuity just before interest rates started to fall, getting a bigger payout than if he had chosen the company's pension annuity.

Neil, 65, and Maureen, 61, have $1.3 million in savings, which they haven't had to touch. Counting the annuity and Neil's pension from his 20 years with Union Carbide, they have a net worth of about $2.1 million. And that doesn't include their house in Roswell, Ga., valued at about $525,000, which is almost paid off.

The McCarthys are classic stock-market millionaires, reaping the benefit of steady investing through bull and bear markets. But one piece of simple advice made all the difference: "If you wait to save out of what's left over from your salary, it's not going to happen. Pay yourself first."

TIP #7: Don't cut and run. Steady investing through bull and bear markets helped Neil and Maureen McCarthy build a comfortable retirement kitty.
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'Take desperate measures'
A year and a half ago, Chip and Kim McAllister of Coto de Caza, Calif., were paddling furiously to stay afloat in their real-world version of "Survivor." Their company, an information-technology firm, had just gone bust, victim of a bad business partnership. Their house was in foreclosure. They had two kids at home and no jobs.

"In desperate times, you need to take desperate measures," says Chip, who came up with the idea of vying for a spot on "The Amazing Race," a reality show in which 12 couples take part in a stunt-packed race round the world. With time on their hands and nothing to lose, the McAllisters embarked on a six-week, country-hopping expedition that won them a cool million at the finish line.

Not bad for a pair of middle-aged desk jockeys. But their biggest challenge was competing against 9,000 other applicants to get on the show in the first place. To qualify, the McAllisters submitted a video that was eye-catching enough to make the cut. They also survived several tiers of interviews, culminating in a weeklong vetting by a team of producers. "They liked my husband's personality," says Kim. "He likes to talk."

Once chosen, the McAllisters spent $1,000 of their own money on equipment, then grabbed their new backpacks and set off on an adventure that included scaling cliffs, luging down mountains, trekking up ski slopes and scarfing down a stomach-churning two pounds-plus of caviar in one sitting. They won the race by booking a flight that got them to their final destination 10 minutes ahead of the second-place team.

Chip and Kim each got a check for $500,000, so they held a million bucks in their hands before paying about $350,000 in taxes. The rest of the money spared their house, valued at $1.8 million, from foreclosure, and they now have more than $1 million in home equity. They donated a portion of their winnings to their church and invested the rest in their business enterprises. Considered the most likable of the participants, the McAllisters have parlayed their TV exposure into a career as "inspirational speakers," giving lectures (for a starting fee of $7,500) on teamwork and how to build a successful marriage. (Learn more at www.chipandkim.tv.)

Aside from winning the money, Chip says he and Kim "enjoyed every single second we were on 'The Amazing Race.'" Even the caviar? "I enjoyed that after it was over."

TIP #8: Make your luck. Chip and Kim McAllister beat out 9,000 other contestants to win a million bucks on "The Amazing Race," a reality TV show.
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'Be in love with your idea'
In 1980, when the younger of her two daughters started kindergarten, Doris Christopher "started feeling this urge to get back to work." But not just any work. "I wanted to do something meaningful that had responsibility attached to it."

After months of deliberation, Christopher came up with a concept that accomplished her aim, and eventually put her at the helm of a $700-million business. She founded the Pampered Chef, a Chicago-area company with a sales force of 70,000 "kitchen consultants," who sell kitchen tools to guests during in-home demonstrations. Her company went big-time when it was sold to the Berkshire Hathaway investment group (Christopher remains as chairman), but she cooked up the idea around her kitchen table.

Christopher, a former home-economics teacher, loved cooking and teaching, but was wary of the demands of a full-time job. While brainstorming ideas with her husband, Jay, she noticed that friends often didn't have the small kitchen tools that she considered essential. "When people were in my kitchen, they'd ask, 'Where did you get this? Can you get one for me?' That was the notion that finally clicked."

Selling kitchen tools suited Christopher's background and her desire for flexibility, but her husband's entrepreneurial experience was critical. "My husband had the idea that you could try something and it might work, or it might not," says Christopher. "That was very helpful."

Borrowing $3,000 against a life-insurance policy, Christopher prowled the Merchandise Mart in downtown Chicago, picking up good-quality kitchen tools at wholesale prices. At her first home show, in October 1980, she sold $175 worth of vegetable peelers, kitchen shears and other gadgets. By year's end, she had grossed about $7,000.

The business grew slowly. Says Christopher: "You have to be in love with your idea because you're going to spend a lot of time with it." It wasn't until 1987 that the Pampered Chef surpassed $1 million in annual sales. But "I was as busy as I wanted to be, and I was successful."

TIP #9: Enjoy what you're doing. Doris Christopher's affinity for cooking led her to found the Pampered Chef, a purveyor of kitchen tools.