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Personal Finance > Real People
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Real People:
Secrets of the millionaires
Some people make it look easy. Here's how they did it.
November 8, 2002: 10:55 AM EST
By Annelena Lobb, CNN/Money Staff Writer

NEW YORK (CNN/Money) – Go ahead. Ask a few people what springs to mind when they hear the word "millionaire." They'll no doubt describe the usual suspects - Wall Street types, CEOs or trust fund kids sipping apple martinis on a yacht.

What most forget, though, is that many ordinary people have the proverbial "green thumb," too. Indeed, a few winning strategies have turned some of your friends and neighbors into future millionaires, while you barely saved the minimum in your 401(k). From saveaholics, to real estate investors to those who started a business of their own, they've all got advice to share. Here are their stories.

Being your own boss

Depending on yours truly isn't for the faint of heart. But many who have decided to start businesses on their own have been handsomely rewarded for taking the chance.

For one thing, generous tax breaks give the self-employed a leg up on savings. A SEP-IRA (self-employed person's IRA) lets you put aside roughly 20 percent of your annual pretax salary. An employee's 401(k) lets you put away a max of $11,000, or $12,000 if you're 50 or older.

Best of all, you're still allowed to contribute to the SEP if you have a 401(k) elsewhere. Overall, the law lets you save an amount equal to 100 percent of your compensation from the business or $40,000, whichever is less, said Frank Degen, an enrolled agent in Setauket, N.Y.

"Imagine someone making a large salary and running their own business on the side," Degen said. "It can really add up."

The Kemnitz family  
The Kemnitz family

The Feds give entrepreneurs other tax breaks as well. Tom and Mary Kemnitz decided to incorporate their own Xerox sales business, Xerographics of Northern Arizona, in 1994. Now, medical insurance comes from their pretax dollars, as well as repairs on the building that they own and rent to the business.

If your business turns into a cash cow, the sky's the limit on what you bring home. Forget the salary that inches higher just once a year and the raises that look like rounding errors. For their part, the Kemnitzes set fixed annual salaries for themselves, no matter how well their business did, and put any windfalls toward their mortgage. Their bottom line today? $781,000.

Becoming a landlord
Rick, Lisa and Derrick Chetram  
Rick, Lisa and Derrick Chetram

Coping with tenants isn't easy, admits Rick Chetram, who bought his first rental property in 1992. The New York City resident refurbished the two-family home and rented out each floor. He ran into a few deadbeat tenants along the way, but overall, the purchase helped grow his pot of gold: he watched the home appreciate from $150,000 to $350,000 in 7 years.

That took some of the sting out of being a landlord. So did the fact that the sale funded Chetram's wedding and two more down payments on rental properties. He ultimately sold those and bought a 23-unit rental building that just sold for $1.2 million.

"Ideally, you want a property that generates several incomes," said Scott Kahan, a New York City certified financial planner. "That way, if one person moves out, you still have cash coming in from the others."

More Millionaires
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The Franklins: $730,000
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Hillary and Mike Bernier did just that. The Atlanta couple owns three properties and manages two others for friends, helping them screen renters, sign contracts, collect rent and maintain the homes.

She says having the right mindset is the key to real estate success.

"Do your due diligence," Hillary said. "Get credit checks, references, and have a system in place so that if checks are late, you can send out warnings. You also have to let go of the love affair you have with the property. It's an asset, an investment, end of story."

Buying a fixer-upper

For real estate speculators, distressed properties (a home seized by the lender when the borrower failed to make mortgage payments) present another potential goldmine.

Foreclosed properties, for example, can often be had for a bargain since banks need to move them fast, said Kahan. But they're also usually in a state of distress -- and they're most lucrative as an investment when you have the skills to fix up the place yourself.

Chetram's first rental property, for example, which doubled in value, had been a foreclosure. During the refurbishing process, he learned to love Home Depot, where he took classes that let him save on costly repairs.

"You lose money if you have to pay for everything," he said. "You have to learn to do little things like paint, plaster a hole in the wall and repair a faucet leak."

The Bernier's rental property, while not a foreclosure, was also a fixer-upper in a transitioning neighborhood in Atlanta. The couple spent seven months on home improvement. But it paid off. The property, originally worth $160,000, doubled in value.

Becoming a saveaholic

As strategies go, saving diligently might be the safest bet of them all.

Ryan Thompson  
Ryan Thompson

It can be something of an extreme sport, if you ask people like Ryan Thompson, who has saved close to $100,000 at the ripe old age of 22, mostly from the lawn and landscaping work he's done since junior high.

He graduates college in December and hopes to save about $25,000 a year once he begins a new job in management at Messer Construction Co. in Ohio. Based on his projected entry-level salary, he plans to shovel $22,000 in taxable accounts and $3,000 into his Roth every year.

The millionaire mentality
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What are you worth?
You think like a million bucks

Not all of us have that kind of discipline. But it might be worth nurturing: Kahan said aggressive saving really can pay off, especially if the money is invested well over the years. If you scrape out another $100 every month and put it in a savings vehicle with an 8 percent annualized rate of return, your savings will grow to nearly $60,000 in 20 years.

"One day the S&P 500 will bounce back," Kahan said. "At that point, you could be looking at 10 percent annualized returns or more."

Of course, it's easier said than saved. To put more aside each month, consider having a certain amount directly deposited from your paycheck to a savings or money market account -- so the money never actually crosses your path. Click here for innovative and pain-free ways to save a little more each month.

Oh, and if you decide to become an extreme saver, you'll have to forget about keeping up with the Joneses. Just remember: They'll be struggling to keep up with you when they see you put your feet up for good.  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.